Executive Summary

Q2 net sales grew 9% to $129.8M (15% ex one-time accounting change); Adjusted EBITDA rose 3% to $22.5M while diluted EPS fell to $0.04 as acquisition, restructuring, higher interest, and tariff/mix pressures weighed on GAAP earnings .
Guidance: 2025 net sales growth raised to low double-digit to mid-teens; Adjusted EBITDA growth outlook maintained at mid-to-high single digits; outlook excludes proposed chip tariffs announced Aug 6 .
Consensus context: Q2 missed Wall Street on revenue ($129.8M vs $133.0M est*) and EPS ($0.04 vs $0.50 est*); EBITDA also trailed ($14.9M vs $23.7M est*). Management noted tariffs and dual-facility transition costs as headwinds, with Arroweye outperforming early .
Key drivers/catalysts: Arroweye delivered ~~$10M revenue in <2 months and is tracking above expectations; tariff headwinds (~~$5M 2025) and ~$3M duplicative costs from facility transition; narrative hinges on executing Arroweye synergies, Card@Once growth, and clarity on chip tariffs .

What Went Well and What Went Wrong

What Went Well
- Arroweye acquisition outperformed early: “Arroweye delivering approximately $10 million of net sales in less than 2 months,” with customer feedback strong and synergy plans under way .
- Card@Once and contactless (incl. metal) drove Debit & Credit strength; segment net sales +16% YoY to $110.8M (18% ex accounting change) .
- Management raised full-year net sales outlook on Arroweye contribution while reaffirming secular demand (Visa/Mastercard U.S. cards in circulation +8% 3-yr CAGR) .
What Went Wrong
- Gross margin compressed to 30.9% (from 35.7%) on mix, tariffs, depreciation, and facility transition costs; gross profit -5% YoY to $40.1M .
- Prepaid Debit net sales fell 19% to $19.2M on reported basis (would be +4% ex accounting change), pressuring consolidated mix and margins .
- GAAP earnings headwinds: diluted EPS $0.04 (down 91%) with acquisition/integration and restructuring charges and higher interest expense; consensus EPS and revenue misses underscore magnitude of non-GAAP/temporary headwinds* [GetEstimates Q2 2025*].

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue/Net Sales ($M)	$125.10	$122.76	$129.75
Gross Profit ($M)	$42.62	$40.70	$40.12
Gross Margin (%)	34.1%	33.2%	30.9%
Income from Operations ($M)	$15.94	$14.10	$9.42
Adjusted EBITDA ($M)	$21.91	$21.16	$22.49
Adjusted EBITDA Margin (%)	17.5%	17.2%	17.3%
Net Income ($M)	$6.77	$4.77	$0.52
Diluted EPS ($)	$0.57	$0.40	$0.04

Q2 actual vs S&P Global consensus (Q2 2025)

Metric	Actual	Consensus*	Surprise
Revenue ($M)	$129.75	$132.96*	-$3.21M (~-2.4%)*
Primary EPS ($)	$0.04	$0.5025*	-$0.4625*
EBITDA ($M)	$14.94 (EBITDA)	$23.66*	-$8.72M*

Values retrieved from S&P Global for consensus and related surprises.

Segment performance (Net Sales)

Segment	Q2 2025 ($M)	Q2 2024 ($M)	YoY
Debit & Credit	$110.76	$95.62	+15.8%
Prepaid Debit	$19.22	$23.82	-19.3%
Total	$129.75	$118.82	+9.2%

Select KPIs and balance sheet

KPI/Item	Q2 2025
Card@Once installations	>17,000 across >2,000 FIs
U.S. debit + credit cards in circulation	2.2B; ~8% 3-yr CAGR (Visa/Mastercard data)
Cash & cash equivalents	$17.1M
Net Leverage Ratio	3.6x (LTM Adj. EBITDA basis)
CFO outlook on tariff expense (FY25)	~$5M (management on call)

Non-GAAP/accounting change note: In Q2 the company shifted certain WIP revenue from over-time to point-in-time recognition, creating a one-time, non-cash negative timing impact (~$7.7–$8.0M) to reported Q2 revenue and GAAP profitability; cash flow and Adjusted EBITDA were not impacted .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales growth (YoY)	FY 2025	Mid-to-high single-digit growth (organic; excl. Arroweye)	Low double-digit to mid-teens growth (reflects Arroweye; accounting timing negative)	Raised
Adjusted EBITDA growth (YoY)	FY 2025	Mid-to-high single-digit growth	Mid-to-high single-digit growth (unchanged; Arroweye benefits offset by tariffs/mix)	Maintained
Tariff assumption	FY 2025	Reflects known tariffs	Reflects currently announced tariffs; excludes proposed Aug 6 chip tariffs	Clarified (excludes proposed)

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Arroweye acquisition/synergies	Announced in Q1; strategy to diversify and expand capabilities	~$10M revenue in <2 months; outperforming early; pursuing revenue and operating synergies	Positive momentum
Card@Once SaaS growth	>16,000 installs (Q4/Q1) with recurring revenue	>17,000 installs and strong momentum	Strengthening
Tariffs and cost inflation	Known tariff risk reflected; mitigation actions underway	Tariffs ~ $5M in 2025; Q2 impact >$1M; mix and depreciation also pressured margins	Headwind persists
Facility transition (Indiana)	Investment ramp referenced	Duplicative costs (~$3M FY25) during transition; efficiencies expected post-ramp	Near-term drag, medium-term tailwind
Prepaid/closed-loop packaging	Strong Q4’24; Q1 growth	Reported Q2 Prepaid -19% (ex accounting +4%); secured closed-loop packaging commitments for Q4 deliveries	Mixed (timing + pipeline)
Macro/industry demand	U.S. cards in circulation up 8% 3-yr CAGR	8% CAGR reiterated; secular growth intact	Supportive backdrop

Management Commentary

CEO John Lowe: “We are excited about Arroweye’s performance and continued growth from our portfolio of payment solutions, with especially strong momentum from our SaaS-based instant issuance solution” .
CEO John Lowe: “Our other strategic investments in healthcare payments, the closed-loop Prepaid business, and digital solutions are also creating incremental growth opportunities… while investment in our new production facility should provide increased capacity, capabilities, and efficiencies” .
CFO Jeff Hochstadt: “We’re pleased with the growth… while… managing operating expenses tightly to help counter gross margin pressures, including the impact of tariffs… We plan to utilize future free cash flow over time to drive down net leverage” .
CFO elaboration on call: tariffs expected to be about $5M for 2025; dual production facilities introduce ~$3M incremental costs this year (transition), with efficiencies expected thereafter .

Q&A Highlights

Tariffs and cost headwinds: Management quantified FY25 tariff expense at ~$5M, with >$1M in Q2; mitigation efforts include partnering with customers and operational efficiencies .
Facility transition costs: Indiana facility ramp driving ~$(3)M duplicative costs in 2025; efficiencies expected as operations consolidate .
Arroweye: Early contribution near $10M revenue in <2 months and better-than-expected profitability; synergy capture a focus .
Prepaid/closed-loop: Secured customer commitments for closed-loop prepaid packages; first deliveries targeted for Q4, supporting FY trajectory despite Q2 reporting impacts from accounting change .
Outlook clarity: Guidance excludes proposed chip tariffs pending details; company cites ample chip inventories and stable macro assumption .

Estimates Context

Q2 vs consensus: Revenue miss (~$129.8M vs $133.0M est*), EPS miss ($0.04 vs $0.50 est*), EBITDA miss ($14.9M vs $23.7M est*). The gap reflects non-cash accounting timing (WIP), acquisition/integration and restructuring charges, tariffs, and higher interest, with Adjusted EBITDA holding firmer than GAAP EBITDA [GetEstimates Q2 2025*].
Estimate revision setup: Raised sales outlook (Arroweye contribution) vs margin headwinds (tariffs/mix/depreciation and transition) suggest near-term EPS/EBITDA estimate pressure until cost headwinds abate and synergies/efficiencies materialize .

Values retrieved from S&P Global for consensus and surprise metrics (marked with *).

Key Takeaways for Investors

Mix/tariff-driven margin compression masked solid demand; Adjusted EBITDA growth (+3%) alongside a large GAAP EPS decline highlights the importance of focusing on non-GAAP drivers near term .
Arroweye is outperforming early and lifted the FY sales guide; synergy capture and cross-sell into CPI’s FI base are key to re-accelerating profit growth in 2026+ .
Prepaid weakness is largely timing/accounting; underlying demand (ex accounting change) shows growth, with closed-loop packaging deliveries slated for Q4 .
Cost headwinds (~$5M tariffs; ~$3M dual-facility costs FY25) should moderate as the new plant ramps and mitigation actions flow through; watch gross margin trajectory each quarter .
Balance sheet: Net leverage at 3.6x after Arroweye; post-quarter $20M note redemption supports gradual deleveraging as FCF improves with lower capex and normalized working capital .
Catalysts: tariff policy clarity (chip tariffs), facility transition milestones, Arroweye synergy updates, and Q4 closed-loop execution; these will drive estimate revisions and stock narrative .

Appendix: Additional Context

Prior quarters snapshot: Q4’24 revenue $125.1M, Adj. EBITDA $21.9M; Q1’25 revenue $122.8M, Adj. EBITDA $21.2M; Q2’25 revenue $129.8M, Adj. EBITDA $22.5M, showing resilient top line and stable adjusted profitability despite GAAP margin headwinds .
Accounting change detail: shift from over‑time to point‑in‑time for certain WIP orders created a one-time, non-cash negative Q2 revenue/GAAP earnings impact (~$7.7–$8.0M); does not affect cash or Adjusted EBITDA .

Sources: PMTS Q2’25 press release and exhibits; Q2’25 8‑K and investor presentation; Q1’25 and Q4’24 press releases; third‑party transcripts/highlights for Q&A items where internal transcript retrieval was unavailable.
and external: .

CPI Card Group Inc. (PMTS)·Q2 2025 Earnings Summary