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Date

Tuesday, Nov. 4, 2025, at 9 a.m. ET

Call participants

  • President and Chief Executive Officer — John Lowe
  • Chief Financial Officer — Jeff Fox

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Risks

  • Gross profit margin — Declined to 29.7% from 35.8% year-over-year in the third quarter due to unfavorable sales mix, lower selling prices, and increased production costs.
  • Adjusted EBITDA — Decreased 7% to $23.4 million, and the adjusted EBITDA margin contracted from 20.1% to 17.0% primarily from tariffs and sales mix.
  • Free cash flow — Fell to $100,000 for the first nine months of 2025 from $12.5 million in the same period of 2024 as a result of higher capital expenditures.
  • Tax rate — Increased to 38% for the third quarter and to 34% year-to-date due to nondeductible ArrowEye acquisition expenses; annual rate projected at 30%-35%.

Takeaways

  • Net sales -- Net sales rose 11% in the third quarter, with the ArrowEye addition as the main driver, partially offset by a 7% decline in prepaid segment sales.
  • Debit and credit segment sales -- Debit and credit segment sales rose 16%, with $15 million contributed by ArrowEye and growth in Card at Once instant issuance solutions.
  • Contactless card volumes -- Increased, but average selling prices declined due to sales mix; overall contactless card sales were flat against a high comparison period.
  • Prepaid sales year-to-date -- Decreased 5% on a reported basis for the first nine months of 2025 but increased 8% excluding the revenue recognition accounting change.
  • Production costs -- Included $1.6 million in tariffs and $1.7 million in depreciation related chiefly to ArrowEye and the new Indiana production facility.
  • Segment profits -- Income from operations for the debit and credit segment decreased for the quarter and year-to-date due to lower gross margins and increased SG&A; prepaid debit segment income from operations decreased due to lower net sales and, year-to-date, the revenue recognition accounting change, even as sales grew in debit and credit.
  • Operating cash flow -- Operating cash flow reached $19.9 million for the first nine months of 2025, up from $16.7 million in the same period of 2024, primarily from lower working capital usage.
  • Capital spending -- Increased nearly $10 million in the first nine months of 2025 compared to the same period in 2024, primarily for the Indiana facility and new machinery supporting production efficiency and closed-loop prepaid offerings.
  • Carta investment -- CPI acquired a 20% equity stake in Carta, an Australia-based prepaid program manager, for $10 million, including $2.5 million in upfront cash and the remainder tied to commercial arrangements, following the third quarter.
  • Debt activity -- $20 million of 10% coupon senior notes were redeemed at a 3% premium in July 2025; quarter-end balances stood at $16 million in cash, $47 million drawn on the ABL revolver, and $205 million of senior notes outstanding.
  • Net leverage ratio -- Ended the third quarter at 3.6x; management aims to reduce leverage with future cash flow.
  • 2025 outlook -- Updated to low double-digit to low teens net sales growth and flat to low single-digit adjusted EBITDA growth (non-GAAP) for full-year 2025, versus prior mid- to high single-digit EBITDA guidance, reflecting ongoing margin pressures.
  • Tariff guidance -- Full-year tariff impact expected to be $4 million–$5 million in 2025, down from previous estimates as China reduced rates by 45%.
  • Instant issuance business -- Tracking toward a record year in 2025, with faster growth than the overall company and higher margins, supported by expansion in financial and new non-financial verticals.
  • Closed-loop prepaid -- Now operational, with initial shipments expected in the fourth quarter and investments underway to expand beyond existing customers.
  • Carta partnership -- CPI is the exclusive U.S. provider of Carta’s digital card validation, now piloting contactless prepaid cards with chip technology through a large national retailer.
  • Inventory position -- Increased chip inventory held to manage potential supply challenges, a short-term mitigation for possible semiconductor tariff risk.

Summary

CPI Card Group (PMTS 20.76%) reported 11% net sales growth in the third quarter of 2025, mainly from the ArrowEye acquisition and instant issuance expansion. Margins contracted as unfavorable product mix, price pressure, higher tariffs, and increased depreciation led to lower year-over-year adjusted EBITDA. Management revised full-year 2025 guidance downward for adjusted EBITDA (non-GAAP), citing continued mix and margin headwinds, but emphasized ongoing cost initiatives, supplier negotiations, automation, and expanded ArrowEye synergies. The company advanced several strategic initiatives, including exclusive U.S. rights to new chip-based prepaid card technology through a $10 million investment in Carta, launch of closed-loop prepaid offerings, and transition to the fully operational Indiana facility for efficiency gains.

  • The company increased sales in its debit and credit business by leveraging ArrowEye capabilities and continued to expand its software-as-a-service instant issuance offerings, which are on track for a record year.
  • CPI's partnership with Carta aims to introduce secure, chip-enabled prepaid cards and digital validation solutions, actively piloted with a leading U.S. retailer.
  • Capital investments and acquisition integration drove up spending, resulting in higher SG&A and lower free cash flow for the first nine months of 2025, while strategic cost reductions are targeted for margin recovery in 2026 and beyond.
  • Management characterized prepaid order cadence as "lumpy," according to John Lowe, attributing it to more complex fraud prevention requirements and innovation cycles, with select prepaid orders expected to shift into 2026.
  • Chip inventory levels have been deliberately raised to help mitigate possible supply constraints if semiconductor tariffs take effect, yet ongoing uncertainty may persist depending on government policy decisions.

Industry glossary

  • ArrowEye: A digital card production platform acquired by CPI, providing on-demand payment card printing and personalization solutions.
  • Card at Once: CPI's instant issuance solution enabling financial institutions to deliver payment cards directly to customers onsite.
  • Closed-loop prepaid: Prepaid cards that can only be used at specific retailers or merchants, as opposed to open-loop prepaid which are widely accepted.
  • Digital card validation solution: Technology enabling verification and security of digital and physical cards, reducing fraud risks by removing sensitive static card data.
  • Open-loop prepaid: Prepaid cards usable across multiple merchants or platforms, typically network-branded by Visa or Mastercard.

Full Conference Call Transcript

John Lowe, President and Chief Executive Officer, and Jeff Fox, Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined in the Private Securities Litigation Reform Act of 1995. Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC. 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 occurred after this call.

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, free cash flow, and net sales growth excluding the impact of the accounting change implemented in the second quarter. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the press release slide presentation we issued this morning. 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 third quarter will be available on CPI's Investor Relations website.

For today's call, all growth rates refer to comparisons with the prior year period unless otherwise noted. The agenda for today's call can be found on slide three. After our remarks, we will open the call for questions. We can start on Slide four. And I'll turn the call over to John.

John Lowe: Thanks, Mike, and good morning, everyone. As we come closer to wrapping up the year, I am going to spend some time updating you on our strategic initiatives. We are making great progress growing our core businesses and diversifying, including in our digital solutions. But first, let me touch on the highlights of our third quarter performance. Overall, the third quarter results were largely in line with our expectations. Our software as a service instant issuance business once again delivered strong growth, and ArrowEye continued to perform well. In our debit and credit segment, we believe we gained market share as contactless card volumes increased nicely.

Card revenue, though, was impacted by a mix shift to higher volume orders and lower average selling prices. This mix, combined with tariff impacts and other in-year investments, has continued to impact margins. Overall, sales increased 11% for the quarter due to the addition of ArrowEye, compared to a very strong level the prior year, which benefited from strong growth across our portfolio. Adjusted EBITDA decreased 7% in the quarter primarily due to the unfavorable sales mix and tariff expenses. We continue to work on various initiatives to counter these margin pressures in 2026 and beyond, including key supplier negotiations, driving automation and operational efficiencies in production, achieving ArrowEye synergies, and general overhead cost reductions.

We have already obtained future savings on key components in our supply chain, and our new Indiana facility is now fully operational, with all work moved over from the previous facility, which should aid efficiencies in 2026. For 2025, we have updated our full-year outlook to low double-digit to low teens net sales growth and flat to low single-digit adjusted EBITDA growth, as we expect margin impacts in debit and credit to continue in the fourth quarter. We anticipate certain prepaid orders may move into '26. Our prepaid business remains a clear market leader, and as the pace of package innovation rises to combat fraud, order timing has been a bit uneven.

That's more prepaid complexity, including the potential for the use of chip technology, is a positive over the long term, as this increases value and demand for our solutions. We still expect strong year-on-year growth in the fourth quarter for both net sales and adjusted EBITDA, but at levels significantly higher than the third quarter. Jeff will give you more details on the quarter and our outlook in a few minutes. But first, I want to update you on our strategy. Our vision and strategy can be seen on Slide five.

With everything we do, our organization is focused on the customer, quality and efficiency, innovation and diversification, and our people and culture as we strive to be the most trusted partner for innovative payment technology solutions. We have made great progress on multiple strategy initiatives in 2025, including our efforts to expand our addressable markets to enhance growth for the future, and I'll highlight some of the most recent developments on Slide six. We are starting to provide tours to customers in our new Indiana production facility, and we believe we should be able to leverage our innovation and automation investment across our debit and credit portfolio to drive share gains and do so even more efficiently.

We are continuing to expand and cross-sell our ArrowEye solutions and are very excited about the initial progress and interest from new and existing customers. We believe our software as a service instant issuance business is headed to a record year, with growth in new verticals and from additional financial institution penetration. The value proposition of our integrations into the U.S. Payments ecosystem continues to drive our share growth and is starting to show realization in our other digital solutions too. Although revenue in our other digital solutions is small today and will still take time to build, we continue to sign more issuers and build out even more integrations to broaden our addressable market.

When we provide our full-year 2025 results, we look forward to sharing more on our higher margin digital solutions performance. Healthcare payment card expansion is also progressing. We share gains of additional programs with existing customers and advances into new areas. Our value-based metal card offerings are also generating good interest, with incremental sales again in the third quarter. In closed-loop prepaid, we are now in production and expect shipments in the fourth quarter. We've also invested in go-to-market for this space to expand beyond existing program managers we work with for Opeloop and are in discussions with several potential new customers.

As I mentioned before, complexity continues to rise for open-loop packages, which not only further solidifies our position as a market leader but also benefits our go-to-market plans for closed-loop. Our most recent expansion initiative builds on this growth in prepaid complexity, as we have entered into a strategic relationship with Carta, an Australia-based prepaid program manager and digital technology provider. We will be Carta's exclusive US supplier of its digital card validation solution, producing contactless prepaid cards with chip technology, embedding cards as safe-to-buy applets. Carta's solution eliminates the need for data to be printed on cards, significantly reducing the risk of prepaid fraud.

As a reminder, prevention of prepaid gift card fraud can be accomplished through more complex packaging or through the adoption of chip technology in prepaid gift cards. CPI is uniquely positioned in our market with deep expertise in both areas. We believe this can be a great complement to our secure prepaid solutions and will provide more choice for prepaid customers in the market. We are already piloting the solution with a large national retailer in the US and look forward to further developing our relationship with Carta. Many of these growth initiatives are starting to yield tangible results, and we look forward to continuing to update you on the progress as we move forward.

I will now turn the call over to Jeff to cover the third quarter results and 2025 outlook in more detail. Jeff?

Jeff Fox: Thanks, John. Good morning, everyone. Let's start on Slide eight with the third quarter results. Third quarter net sales increased 11%, which was primarily driven by the addition of ArrowEye and growth in our instant issuance business, partially offset by a decline in prepaid sales. Debit and credit segment sales increased 16% as ArrowEye contributed $15 million of sales, and our Card at Once instant issuance business delivered strong growth led by solution sales. Contactless card sales were flat in the quarter compared to a very strong prior year sales level, which included some large eco-focused card orders. Contactless volumes increased, but average selling prices were down due to sales mix.

Personalization services were also flat in the quarter, an improvement from the first half trend. Prepaid sales declined 7%, largely due to timing and comparisons to large sales in the prior year period. Similar to the second quarter, gross profit margin in the third quarter decreased from 35.8% in the prior year to 29.7%, driven by unfavorable sales mix resulting in lower selling prices and increased production costs. Production costs in the quarter included $1.6 million of tariff expenses and $1.7 million of increased depreciation, which was primarily related to the ArrowEye acquisition as well as the new Indiana production facility.

SG&A expenses in the third quarter, including depreciation and amortization, increased approximately $1 million from the prior year, primarily due to acquisition and integration costs of $1.8 million and the inclusion of ArrowEye operating expenses, partially offset by reduced employee performance-based incentive compensation and lower severance costs. Our tax rate for the quarter was 38%, which brought our year-to-date rate to 34%, higher than anticipated coming into the year due primarily to nondeductible expenses related to the ArrowEye acquisition. For the full year, we expect an effective rate between 30-35%.

Net income increased 78% in the quarter as the prior year quarter included debt retirement costs related to the full redemption of our previous senior notes and replacement of our previous ABL revolving credit facility. Third quarter adjusted EBITDA decreased 7% to $23.4 million, and margins declined from 20.1% to 17.0%, as the impact of higher sales was offset by unfavorable sales mix and tariffs. Year-to-date results and variance explanations can be found on Slide nine. Year-to-date variances generally reflect the same factors that impacted the third quarter, with year-to-date reported sales also negatively impacted by the revenue recognition change implemented in the second quarter, which primarily affected the prepaid segment.

Prepaid sales decreased 5% through the first nine months on a reported basis, increased 8% excluding the accounting change. A reconciliation of the accounting change impact on sales can be found in the exhibit of our earnings press release. Turning to segment results on Slide 10, income from operations for the debit and credit segment decreased for the quarter and year-to-date as sales growth, including the addition of ArrowEye, was offset by lower gross margins and increased SG&A expenses, including the impact of additional headcount from the ArrowEye acquisition.

Debit and credit gross margins were impacted by sales mix and higher production costs, including tariffs, which primarily impacted the debit and credit segment, and increased depreciation related to ArrowEye, the new Indiana production facility, and other capital equipment purchases. Prepaid debit segment income from operations decreased in the quarter and year-to-date due to decreased net sales. On a year-to-date basis, the decline was a direct result of the revenue recognition accounting change. Turning to the balance sheet, liquidity, and cash flow on Slide 11, our cash flow generated from operating activities for the first nine months increased from $16.7 million last year to $19.9 million in the current year, driven by lower working capital usage.

As we have discussed previously, 2025 has been a major investment year, including spending for our new Indiana production facility and other advanced machinery to support operating efficiency, capacity expansion, and new capabilities such as closed-loop prepaid. Year-to-date, our capital spending has increased almost $10 million compared to the prior year, resulting in free cash flow of $100,000 in the first nine months of this year, down from $12.5 million in the prior year. Following the third quarter, as John mentioned, we finalized a strategic relationship with the Australian prepaid technology firm Carta. This relationship also included an equity investment of $10 million to acquire 20% of the company, which is also backed by the Commonwealth Bank of Australia.

For the investment, we paid $2.5 million in upfront cash, with the remaining $7.5 million expected to be settled through performance of commercial arrangements as we work together to bring new digital technology to prepaid cards in the US market. Turning to the balance sheet, at quarter end, we had $16 million of cash, $47 million of borrowings on our ABL revolver, and $205 million of senior notes outstanding. As we mentioned last quarter, in July, we exercised an optional redemption feature on our 10% coupon senior notes and retired $20 million of notes at a redemption price of 103% of par value.

We have utilized our $100 million ABL facility to help fund the ArrowEye acquisition and the senior notes redemption and plan to pay down the borrowing over time as we generate cash flow. Our net leverage ratio at quarter end was 3.6 times, which we also plan to work down as cash flow is generated. Before we move on to our 2025 outlook, we have provided the latest US cards in circulation trends from Visa and Mastercard on Slide 12. For the three years ended June 30, card circulation in the US increased at a 7% CAGR. Large issuers have reported card and account growth in their latest earnings report, which indicate card issuance remains healthy.

I will now turn to our 2025 outlook on Slide 13. We have updated our 2025 outlook to reflect sales mix in our debit and credit segment and timing of orders in our prepaid segment. Our net sales outlook is now low double digits to low teens growth, which compares to low double digit to mid teens growth in our prior outlook. Our adjusted EBITDA outlook is now flat to low single digit growth, down from our previous range of mid to high single digits due to the margin impact of sales mix trends.

Our current outlook reflects existing tariff rates and does not reflect potential impacts from the proposed semiconductor chip tariffs, which have not been enacted and details on implementation timing and exemption criteria remain unclear. I'll now turn the call back to John for some closing remarks.

John Lowe: Thanks, Jeff. Turning to Slide 14 to summarize before we open the call for Q&A. The third quarter was largely what we expected, with good sales contribution from ArrowEye and good demand from our core solutions. While we still face margin pressures, which we are working to counter, we've updated our outlook and we expect strong sales and adjusted EBITDA growth in the fourth quarter. We continue to execute our strategy and are pleased to have transitioned our new Indiana production facility and advanced multiple long-term growth initiatives, including entry into closed-loop prepaid and our agreement to bring new prepaid chip-enabled technology solutions to the US prepaid market with Carta.

We have faced many challenges this year, but we are confident in our core business growth moving forward and are excited to see many of our growth initiatives begin to yield results. Operator? We will now open the call up for any questions. Thank you.

Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer session. To ask a question, you may press 1 on your touch tone phone. And to withdraw your question, please press 1 again. Our question comes from the line of Andrew Scutt from ROTH Capital Partners. Please go ahead.

Andrew Scutt: Good morning, guys, and thank you for taking my questions. First one for me is just if you could provide some more details around the impact of tariffs. I know this is kind of tough for you guys to parse out, but following your previous call, you said you expected around $5 million in charges on the year. I believe it was a $1 million headwind to EBITDA in the second quarter. So any further details around that in the third quarter would be great.

Jeff Fox: Morning, Andrew. I'll let Jeff cover that.

Jeff Fox: Hey, Andrew. Yeah. We said $1 million, and you're right, in Q2, we mentioned about $1.6 million of tariffs. So we did think in Q2 it was going to be closer to $5 million. China did reduce, we did get a reduction. The China rate was reduced by 45% recently. And just we're still trying to push back every single day on our suppliers to mitigate some of that tariff impact. So we're actually thinking more in the range of $4 to $5 million now. We're hoping it's closer to $4. But every day, we're trying to push back on our suppliers to try to reduce the impact on us.

Andrew Scutt: Perfect. Well, appreciate the color. Second one for me, and then I'll hop back in the queue. Your prepaid segment, you guys have added a bunch of additional programs now. Healthcare, some payroll cards, and whatnot. So previously, kind of analyzing the segment, it was just gift cards. So can you kind of give us the puts and takes in prepaid among your different sales verticals?

John Lowe: Yeah. Let me cover the overview of what we're doing in prepaid because it has changed a little bit. And Jeff can give any color on the numbers. Our prepaid business, just as a reminder, we're the market leader in prepaid packaging solutions in the United States. And so as fraud rises within the prepaid market, the complexity of what our customers are asking for, what we're innovating with our customers, continues to rise. That's actually created lumpiness in orders, I would say, for this year within our open-loop packages. But that's a good thing. It creates greater value over the longer term of what we're producing. And then we're also investing in closed-loop, which is operational.

We expect to have orders shipping in Q4. And that's again because fraud impacts are bleeding into the closed-loop side of the prepaid market. But additionally, I think you saw the announcement a couple of days ago. We issued a press release, we talked about it this morning on the call. We invested in an innovative technology company based in Australia. They're a program manager, they're backed by the largest bank in Australia as well. That's another one of their big investors. And they've got unique technology that we're working with our program managers to actually chip-enable payment cards in the prepaid space. We're already piloting that with a large national retailer in the US.

So you look at the prepaid space, you look at our unique position to both lead in the packaging side, lead in our unique chip capabilities, and we believe our strategic initiatives entering into closed-loop as well as expanding our capabilities in the open-loop side are going to benefit us over the longer term. So we're happy about the prepaid performance, but definitely this year, a little bit lumpy on the revenue side.

Jeff Fox: Yeah. And Andrew, I'll just add a little bit of color on the revenue side. Last year, a lot of our clients were looking to increase the security of the packaging. So we did a lot of innovation. We actually rolled out new security measures and fraud prevention packaging last year, and you saw a pretty strong second half. So as John said, it can be a little bit lumpy. But we do have pretty strong comps to grow over this year. I mean, we still feel really good with the prepaid business. That does in the second half, has some strong comps year over year.

Andrew Scutt: Great. Well, the color. Carta certainly sounds like an exciting opportunity, and I'll jump back in the queue.

Operator: Thank you. Again, should you have a question, please press 1 on your touch tone phone. We have a question from Jacob Stephan from Liq Street Capital Markets. Sir? Please go ahead.

Jacob Stephan: Hey. Good morning, guys. Appreciate you taking the questions. First, I just wanted to ask on the Visa and Mastercard data. Obviously, the graph in your chart or in your presentation shows prepaid actually decreasing, but credit being up. And, you know, most recent guidance here talks about timing of prepaid shipments. I guess, maybe kind of help us think through what the timing in prepaid, what that portion of guidance was and maybe, do you expect that in 2026? Or are these pushed out indefinitely?

John Lowe: Hey, Jacob. Let me comment on that first, then I'll let Jeff add color. You know, the credit side actually went up quarter to quarter. The debit side, not prepaid, actually reduced a little bit. Debit is one quarter. You look back over the last three years, CAGR is still 7%. What we're seeing within our markets, what we're hearing from banks opening new accounts continue to see growth. So we're pretty confident on card growth and what we hear from banks opening new accounts continue to see growth. So we're pretty confident on card growth and what we hear from our customers still seeing growth and new programs coming on board.

You know, this year, our card volumes were actually up, so we're winning share. So winning share in a growing market, we're happy about it.

Jeff Fox: Yeah. And I would just say, I don't think that the chart is correlated necessarily to delay in order. It's just as John mentioned, prepaid ordering can be lumpy at times, and if something does get pushed off, then to early 2026, it would be more delayed to early 2026. Not necessarily going away. So it's really we're just talking about the timing. Is it going to hit in December, is it going to hit in January, February? That's kind of more of what we're talking about.

Jacob Stephan: Okay. That's helpful. And then also one, touch on Carta a little bit. You know, I guess my perception of them is that they're kind of a credit card provider. I know they have a kind of a travel a premium travel card launch, but you know, help us kind of think through the safe to buy technology. You know, what overall I know fraud preventative packaging has been a big growth driver for you. But you know, what is the adding the chip capability do for you in prepaid? Along with the fraud preventative packaging.

John Lowe: Well, let me cover the first part. I think you're mixing them up with another company that has a similar name based in Southern Florida. That's a different company that we're investing in. This company is based in Australia. They're a prepaid program manager there. But just to touch on why the capability is unique and why it will benefit our markets as well as our company over the long term. They have the ability to essentially enable chips in a payment card and create a payment card where the PANSS 16 digit number is constantly changing.

So your fraud inability to kind of pull a 16 digit number off of the card and steal it, if you will, is significantly reduced through putting their technology onto a chip into a payment card. Why that's good for a market is because the fraud volumes, the amount of fraud, significantly increased in the prepaid market. It hurts the reputation of our customers, hurts the reputation of those retailers out there, the 100,000 plus points of distribution that have to deal with it every day.

But additionally, if you think about our debit and credit market, you think about the transition in our debit and credit market from MagStripe to chip-enabled cards and now fully to contactless, the value grows. And that's exactly what we're starting to see hints of in the prepaid market, and we want to be on the front end of it. So that's why we made this investment. We have a right to buy a majority share of the company if we choose to. They're great partners of ours. And like I said, we're already piloting this with a large national retailer.

So to the extent that this is successful, and to the extent that the market moves more towards chips and prepaid payment cards, not only does it help our customers, help our market, but it also rises the value of what we're selling into that prepaid market and benefits our prepaid business.

Jacob Stephan: Very helpful. Maybe just kind of a quick last one. The adding the chip to prepaid, how significantly does that change kind of the ASP?

John Lowe: Yeah. I wouldn't comment on the exact ASP, but just for context. If you're on the debit and credit side, you know, a MagStripe card versus a chip-enabled card. I mean, a chip-enabled card is generally more than two times the cost. It's a little bit different on the prepaid side, but the price is higher. We'll try to put more pen to paper and get more color as we get more color on how the pilot's going. We'll release in March.

Jacob Stephan: Okay. Appreciate all the color, guys. Thank you.

Operator: Thank you. Our last question comes from the line of Peter Heckmann from D.A. Davidson. Sir, your line is open.

Peter Heckmann: Good morning, gentlemen. I have some follow-ups. In terms of thinking about the potential for tariffs on semiconductors and thinking about your suppliers and whether or not they have any thoughts facilities in the US. I guess any additional thoughts and then how you're positioned, how you might be positioning inventories ahead of this? And potentially depending upon the timing and whether it's retroactive or a date in the future, do you think that's the potential to pull forward some larger projects ahead of a ahead of a

Jeff Fox: Fair question. You know, everything we hear today in the market about semiconductors, you know, we thought we would hear something late, you know, late summer. It hasn't happened. The administration really hasn't come out with anything new in the last several months that we've been aware of. Our providers are pretty confident that, you know, if there was a tariff, that they would be exempt just because of their production facilities in the US and their investment in the US. No one can be certain at this point. We also know if semiconductor tariffs do go into effect, it's going to affect the entire industry equally. So we're aware of that.

We're really hoping, you know, either they're exempt or it doesn't impact the industry. But we'll just see. We're just waiting like everyone else. So we don't really have any more color than we did three months ago. So with that said, if you look at our balance sheet, we did have a high inventory balance. So we've been buying chips at a little bit higher rate than we normally would have just knowing what could potentially happen. I mean, that could help us for a little bit of time. You know, if we had a higher balance of them. Inventory. It's not, you know, completely sustainable, but it would help us in the short term.

So we have been purchasing things just at a higher rate so far this year. We do expect just the timing of chips that inventory balance may come down a little bit in Q4. But we do have a higher than average amount of chips on hand right now. So we've been kind of, you know, taking a little bit aggressive approach on it, on keeping that balance relatively high.

Peter Heckmann: Did we lose it? Sorry. Yep. I was on mute. I was gonna say just as regards to the instant issuance business, in terms of thinking about other use cases there outside of the financial institution channel. We talked about a public sector customer last quarter. Any additional thoughts there in terms of opportunities to roll that out? And remind us, you know, is that subset of revenue in 2025, would you expect Card at Once to grow faster than the overall company?

John Lowe: Yeah. Card at Once, our instant issuance business, is growing faster. Just as a reminder, Pete, it's a higher margin business than the rest of our business. It goes hand in hand with our other digital solutions, and the value proposition there is really the solution, the technology, and the fact that we're integrated to most all processors and cores that support that payments ecosystem. That's the exact same value proposition that we're using to win with our other digital solutions where we've been signing a number of issuers and growing, again, with higher margin products. But our other digital solutions are fairly small right now. That said, our instant issuance business, we're on track to have a record year.

You're exactly right. There's a value proposition not only in the FIC space but in any location where you'd want to issue a payment card on the spot. And so we are continuing to push to expand that market and diversify. And we're happy with our issuance business performance. They've done a great job this year, and we expect them to have a record year and look forward to what they're going to do in the coming years. Just as a reminder, we said this in the call, our instant issuance business historically has been roughly 10% of the business. It's a little bit more now.

Our digital solutions that we're adding continue to add to kind of our broader digital solutions suite, if you will. And so we plan for on first performance. More metrics, if you will, when we release in March going into next year. So I look forward to sharing more on those businesses, and especially given the value they create for CPI.

Peter Heckmann: Okay. Great. That's helpful. Alright. I appreciate it. Have a great day.

John Lowe: Thanks, Pete.

Operator: Thank you. As there are no further questions in the queue, I would now like to turn the call back to John Lowe for closing remarks.

John Lowe: Thanks, operator. As we head into the holiday season, I want to thank all of our CPI employees for their contributions and dedication to the company and our customers and wish everyone a safe and happy holiday. Thank you all for joining our call this morning, and we hope you have a great day.

Operator: Thank you for joining the call today. You may now disconnect.