CPI Card Group (NASDAQ:PMTS) reported a record fourth quarter and solid full-year 2025 results, highlighting accelerating revenue growth, improved adjusted profitability, and strong cash generation, while also outlining a new reporting structure that will separate its technology-driven offerings into a standalone segment beginning in 2026.
Fourth-quarter results: record revenue and higher adjusted margins
For the fourth quarter of 2025, CPI reported revenue of $153 million, up 22% year over year, which management described as a record quarter. Interim CFO Terra Grantham said the result reflected an $18 million contribution from Arroweye, along with double-digit organic growth from CPI’s debit and credit portfolio.
Prepaid revenue declined 27% from what management called an “exceptionally high” prior-year quarter, when prepaid sales increased 59% to $33 million. Grantham said prepaid revenue rose 4% sequentially versus the third quarter and reiterated that CPI had expected tougher comparisons in 2025 after a strong 2024. She added that the prepaid business ended 2025 down 3% when adjusting for the impact of a revenue recognition accounting change implemented in the second quarter.
Profitability trends were mixed on a GAAP basis. Fourth-quarter gross margin declined to 31.5% from 34.1% a year earlier, though it improved from 29.7% in the third quarter. Grantham said the year-over-year decline was driven by higher production costs (including increased depreciation and tariffs) and an unfavorable sales mix, partially offset by operating leverage. She quantified quarter-over-quarter production cost items, including $2 million of higher depreciation related primarily to Arroweye and CPI’s new secure card production facility, and $1.6 million of tariff expenses.
SG&A increased $3.3 million year over year, primarily due to Arroweye-related integration costs of $1.8 million and the inclusion of Arroweye operating expenses, partially offset by lower medical benefit expense versus a high prior-year level, the company said.
Net income increased 9% to $7.4 million. Grantham said sales growth was partly offset by Arroweye integration costs and a higher tax rate; CPI’s tax rate was 27% for the quarter.
Adjusted EBITDA rose 34% to $29.4 million, and adjusted EBITDA margin expanded 170 basis points to 19.2%, which management attributed to operating leverage from sales growth.
Full-year 2025: growth despite tariffs and acquisition-related costs
For 2025, CPI said revenue increased 13%, supported by double-digit growth in contactless cards and instant issuance solutions, as well as the contribution from Arroweye following its May 6 acquisition. Adjusted EBITDA increased 5% to $96.5 million, as profitability on higher revenue was partially offset by unfavorable sales mix and $4.4 million of tariff expenses.
Net income declined 23% to $15 million. Grantham said the decrease reflected $6 million of acquisition and integration costs and a higher tax rate, partially offset by lower debt retirement costs compared with the prior year. The company’s full-year effective tax rate was 31%, which Grantham said was higher than anticipated due primarily to nondeductible expenses related to the Arroweye acquisition.
Cash flow, leverage, and capital allocation
CPI emphasized cash generation in 2025. Cash provided by operating activities rose to $59.5 million from $43.3 million in the prior year, including $40 million generated in the fourth quarter. Grantham attributed the increase to lower working capital usage (including improved receivables and inventory management) and cash tax benefits from the U.S. Budget Reconciliation bill.
Free cash flow increased to $41 million from $34 million the prior year, driven by lower working capital usage and partially offset by higher capital spending. CPI spent $18 million on capital expenditures in 2025—about double the prior year—primarily tied to the new Indiana secure card production facility and advanced machinery supporting operating efficiency, capacity expansion, and new capabilities such as closed-loop prepaid.
At year-end, CPI reported $22 million of cash, $25 million of borrowings on its ABL revolver, and $265 million of senior notes outstanding. Net leverage was 3.1x at year-end, which Grantham said reflected cash flow generation largely offsetting the funding of the Arroweye acquisition.
Management also highlighted several capital allocation items completed during 2025, including:
- Acquiring Arroweye for $46 million
- Investing in Australian prepaid fintech and program manager Karta
- Completing the new secure card production facility in Indiana
- Retiring $20 million principal of its 10% senior notes in July
Strategic updates: new segments, Arroweye integration, and prepaid expansion
CEO John Lowe framed CPI as a “payment technology company” providing a mix of physical and digital solutions, citing the company’s network of integrations into the U.S. payments ecosystem and growth in digital capabilities such as instant issuance and mobile wallet enablement.
Beginning with first-quarter 2026 reporting, CPI will reorganize its reporting segments into:
- Secure Card Solutions (debit and credit production and personalization, including Arroweye’s on-demand solutions)
- Prepaid Solutions (open-loop gift cards and secure packaging, healthcare payment solutions, and closed-loop offerings)
- Integrated PayTech (technology-driven, recurring-revenue solutions including SaaS-based instant issuance and growing digital services)
Lowe said Integrated PayTech now represents more than 20% of CPI’s profitability. Management described the unit as having roughly 55% gross margins, approximately 40% EBITDA margins, and customer retention above 95%, with an expected growth rate of more than 15% in coming years as CPI invests to accelerate digital solutions beyond instant issuance.
In operational updates, Lowe said CPI completed the transition to its new secure card production facility in Indiana and invested in automation in its Colorado facility. He also said the company made improvements in personalization operations to increase capacity and maintain quality while driving efficiency.
On prepaid, CPI said it began closed-loop prepaid shipments in the fourth quarter of 2025 and expects this business to ramp significantly in 2026. Lowe characterized the prepaid market as “choppy” but potentially favorable for CPI as fraud drives demand for higher-value packaging and greater adoption of chip-embedded gift cards. Lowe also discussed CPI’s investment in Karta, noting CPI owns 20% with an option to purchase an additional 31%, and described Karta’s SafeToBuy technology as reducing fraud by eliminating the need to print data on cards. Lowe said CPI is in a “second stage” pilot with a large national retailer across hundreds of U.S. locations and is seeing encouraging results.
2026 outlook: revenue growth with increased investment in digital
For 2026, CPI projected high single-digit revenue growth, with growth across its portfolio led by expected double-digit growth from Integrated PayTech. The company forecast low- to mid-single-digit growth in adjusted EBITDA, reflecting benefits from sales growth and cost savings, partially offset by roughly $4 million in incremental spending to drive Integrated PayTech growth and other technology investments.
The outlook assumes $6 million of tariff expenses. Grantham said there is uncertainty regarding newly announced tariffs and how they may be applied, and CPI is pursuing potential refunds for 2025 tariffs based on a recent Supreme Court ruling.
CPI expects a 2026 tax rate between 30% and 35%, with capital spending likely similar to 2025 levels as reductions in physical capital spending are replaced by increased technology capital spending. Management also expects free cash flow conversion similar to 2025 and improvement in net leverage to a range of 2.5x to 3.0x by year-end 2026.
Grantham said CPI expects approximately $5 million to $7 million of final Arroweye integration costs in the first half of 2026, and noted that adjusted EBITDA in the first half of the year could be flat to down slightly due to digital and technology investments and a slow start in prepaid. Management reiterated expectations that the fourth quarter will again be the largest quarter of 2026.
About CPI Card Group (NASDAQ:PMTS)
CPI Card Group, Inc (NASDAQ: PMTS) is a leading provider of payment, identification and related credential solutions for financial institutions, governments and private enterprises. The company specializes in the design, manufacturing and personalization of secure plastic and metal cards, including EMV chip, magnetic-stripe and contactless cards. CPI Card Group also offers digital credentialing services and cloud-based card management tools that enable real-time controls, mobile wallet integration, fraud monitoring and analytics.
With a focus on security and innovation, CPI Card Group integrates advanced features such as holograms, microprinting, RFID/NFC technology and laser-engraved artwork into its card products.
