A Boom in Contactless Cards Helps Drive a Record Quarter for CPI Card Group

Increasing issuance of contactless cards, along with stronger demand from instant-issuance platforms, are generating tailwinds for at least one of the companies that produce payment cards. CPI Card Group Inc. early Monday cited these factors in reporting record sales for the June quarter, leading top executives at the Littleton, Colo.-based company to forecast sales growth percentages in the high teens for all of 2022. That’s up from CPI’s prior forecast of low double-digit growth.

Another trend helping out sales is steady combined growth in Visa and Mastercard credit, debit, and prepaid cards, CPI officials said. The number of these cards in circulation has grown at a compound annual rate of 9% over the three years ended March 31, the company said, basing its calculation on numbers released by the networks.

For the June quarter, sales of debit and credit cards grew 29% year-over-year, to $94.2 million. For the first half of the year, these sales totaled $186.2 million, up 31% over the same time last year. Demand for contactless cards continues to grow, a trend that pleased company officials, particularly as these products carry higher margins for the manufacturer. Officials also cited growing demand for the company’s instant-issuance technology, Card@Once, which bank branches use to produce payment cards for new customers.

Prepaid card sales, however, dropped 6% in the quarter, to $19.2 million, and were down 3% for the first half, to $38.7 million. Officials said the product faced an unfavorable comparison to the same periods in 2021, when new customers were added and issuers looked to bulk up inventory. Still, CPI clearly sees plenty of momentum left in the general industry trend toward contactless cards and to what they refer to as “eco-focused” cards, or cards made with renewable materials.

As a result of the higher sales, CPI reported gross profit for the quarter of $40.6 million, up 9%. Gross profit margin, however, slid to 35.8% from 39.8% in the same period last year, a result the company blamed on inflation’s impact on costs. Much the same was true of the first half, with a 10% rise in gross profit but a margin squeeze from 39.9% to 35.5%.

“We delivered sound profitability despite persistent inflationary pressures on costs,” said chief financial officer Amintore Schenkel, in a statement. “For the second half of the year, we expect margin improvement relative to the second quarter and strong cash flow generation.”