Fourth Quarter Net Sales of $68.5 million, Up 19% Year-Over-Year

Fourth Quarter Continuing Operations – GAAP Net Loss of $7.2 Million,
$5.4 Million on an Adjusted Basis

Fourth Quarter Adjusted EBITDA from Continuing Operations of $5.1
Million, A 53% Year-Over-Year Increase

Cash of $20.3 million, Available Revolver of $20.0 million, Available
Liquidity of $40.3 million at Year End

Call scheduled for Wednesday, March 6, 2019 at 9:00 a.m. Eastern Time

LITTLETON, Colo.–(BUSINESS WIRE)–CPI Card Group Inc. (Nasdaq: PMTS; TSX: PMTS.TO) (“CPI Card Group” or
the “Company”) today reported financial results for the fourth quarter
and full year ended December 31, 2018.

Scott Scheirman, President and Chief Executive Officer of CPI, stated,
“Fourth quarter financial results reflect the continued progress we are
making towards strengthening our business and fostering changes that we
believe will help us to achieve long-term success. Our fourth quarter
performance was highlighted by top-line growth of 19% year over year,
marking our fourth consecutive quarter of year-over-year net sales
growth. During the quarter, we saw continued top line momentum across
the business, particularly in our emerging products and solutions.”

Scheirman continued, “As we enter 2019, we remain committed to our
strategy of deep customer focus, providing market-leading quality
products and customer service, developing a market-competitive business
model and continuous innovation. Through continued thoughtful,
disciplined execution of these highly targeted initiatives, we believe
we can achieve our vision of being the partner of choice for our
customers by providing market-leading quality products and customer
service with a market competitive business model.”

Financial results, including non-GAAP measures, discussed in this
press release for all periods reflect continuing operations unless
otherwise noted. The sale of CPI U.K., which had historically been
reported as the U.K. Limited segment, has been accounted for as
discontinued operations, and comparative financial information has been
restated in accordance with U.S. GAAP (“GAAP”) requirements. All
earnings per share amounts reflect the one-for-five reverse stock split,
which occurred in December 2017.

Fourth Quarter and Full Year 2018 Consolidated Financial Highlights
from Continuing Operations

Net sales were $68.5 million in the fourth quarter of 2018, an increase
of 19.2% from the fourth quarter of 2017. For the full year ended
December 31, 2018, net sales were $255.8 million, an increase of 14.3%
over the prior year. Loss from operations was $0.4 million in the fourth
quarter of 2018 compared with a loss from operations of $21.5 million in
the fourth quarter of 2017. As a reminder, the Company recorded a
non-cash impairment charge of $19.1 million in the fourth quarter of
2017, of which $17.2 million related to the U.S. Debit and Credit
segment, and the remaining $1.9 million related to the Other segment.
The Company generated income from operations of $4.6 million during the
full year 2018 compared with a loss from operations of $19.3 million
during the full year 2017. Net loss was $7.2 million, or $0.65 per
diluted share, and $14.8 million, or $1.33 per diluted share, for the
fourth quarter and full year 2018, respectively. This compares with a
net loss of $14.4 million, or $1.29 per diluted share, and $23.1
million, or $2.08 per diluted share, for the fourth quarter and full
year 2017, respectively. The Company’s net loss was impacted by a
reduction in the effective tax rate for the year ended 2018 compared to
the prior year, which lowered the income tax benefit by $12.2 million,
due primarily to U.S. tax reform legislation.

Adjusted EBITDA for the fourth quarter of 2018 was $5.1 million, up
52.7% compared with $3.3 million in the prior year fourth quarter. For
the full year 2018, adjusted EBITDA increased 16.6% to $27.1 million
compared to the full year 2017. These year-over-year improvements are
primarily the result of net sales growth and lower costs resulting from
cost optimization initiatives implemented throughout 2018.

Fourth Quarter and Full Year 2018 Segment Information from Continuing
Operations

U.S. Debit and Credit:

Net sales increased 23.9% to $49.6 million in the fourth quarter of 2018
compared with the fourth quarter of 2017. The increase in U.S. Debit and
Credit segment net sales was driven primarily by increased sales from
our emerging products and solutions, including CPI Metals™,
dual-interface EMV® cards, and Card@Once®. Full year 2018 segment net
sales were $178.6 million, an increase of 10.1% compared to 2017. EMV
card volumes, excluding metal and dual interface, were up 17% and 5%
during the fourth quarter and full year 2018, respectively, compared
with the fourth quarter and full year 2017, while average selling prices
declined on a year over year basis.

U.S. Prepaid Debit:

Net sales increased 6.0% to $17.1 million in the fourth quarter of 2018
compared with the fourth quarter of 2017, driven by additional sales
volumes from our existing customer base. Full year 2018 segment net
sales were $69.2 million, an increase of 21.4% compared to 2017.

Balance Sheet, Liquidity, and Cash Flow from Continuing Operations

Cash provided by operating activities for the fourth quarter of 2018 was
$8.9 million and capital expenditures totaled $0.6 million, yielding
free cash flow of $8.3 million during the fourth quarter. For the full
year ended December 31, 2018, cash provided by operating activities was
$7.0 million, capital expenditures totaled $5.6 million and free cash
flow was $1.4 million.

At December 31, 2018, the Company had $20.3 million of cash and cash
equivalents and a $40.0 million revolving credit facility, of which
$20.0 million was available for borrowing.

Total debt principal outstanding, comprised of the Company’s First Lien
Term Loan, was $312.5 million at December 31, 2018, unchanged from
December 31, 2017. Net of debt issuance costs and discount, recorded
debt was $305.8 million as of December 31, 2018. The Company’s First
Lien Term Loan matures on August 17, 2022 and includes no financial
covenants.

John Lowe, Chief Financial Officer, stated, “We continued to deliver
solid top-line performance in the fourth quarter of 2018, which helped
boost our fourth quarter adjusted EBITDA performance by more than 50%
compared with the fourth quarter of last year. Our continued disciplined
approach of driving revenue growth and operational efficiency yielded
positive free cash flow generation from continuing operations for the
full year 2018. We continue to believe we have adequate cash and
liquidity to support our business plans.”

EMV® is a registered trademark or trademark of EMVCo LLC in the
United States and other countries.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with U.S.
generally accepted accounting principles (GAAP), we have provided the
following non-GAAP financial measures in this release, all reported on a
continuing operations basis: Adjusted Net Income (Loss), Adjusted
Diluted Earnings (Loss) per Share, EBITDA, reconciliation of US Debit
and Credit segment EBITDA excluding impairments, Adjusted EBITDA, and
Free Cash Flow. These non-GAAP financial measures are utilized by
management in comparing our operating performance on a consistent basis
between fiscal periods. We believe that these financial measures are
appropriate to enhance an overall understanding of our underlying
operating performance trends compared to historical and prospective
periods and our peers. Management also believes that these measures are
useful to investors in their analysis of our results of operations and
provide improved comparability between fiscal periods. Non-GAAP
financial measures should not be considered in isolation from, or as a
substitute for, financial information calculated in accordance with
GAAP. Our non-GAAP measures may be different from similarly titled
measures of other companies. Investors are encouraged to review the
reconciliation of these historical non-GAAP measures to their most
directly comparable GAAP financial measures included in Exhibit E to
this press release.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per
Share

Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per
Share are presented on a continuing operations basis and exclude the
impact of impairments, amortization of intangible assets; litigation and
related charges incurred in connection with certain patent and
shareholder litigation; stock-based compensation expense; restructuring
and other charges; and other non-operational, non-cash or non-recurring
items, net of their income tax impact. In 2017, an income tax rate of
35% was used to calculate the related tax impact on adjustments noted
above. Beginning in the first quarter of 2018, a 21% tax rate is used to
calculate Adjusted Net Income (Loss) and Adjusted Diluted Earnings
(Loss) per Share. In conjunction with U.S. government comprehensive tax
reform, there was a reduction of the U.S. federal tax rate from 35.0% to
21.0% effective in 2018. We believe that Adjusted Net Income (Loss) and
Adjusted Diluted Earnings (Loss) per Share are useful in assessing our
financial performance by excluding items that are not indicative of our
core operating performance or that may obscure trends useful in
evaluating our results of operations.

EBITDA

EBITDA represents earnings before interest, taxes, depreciation and
amortization, all on a continuing operations basis. EBITDA is presented
because it is an important supplemental measure of performance, and it
is frequently used by analysts, investors and other interested parties
in the evaluation of companies in our industry. EBITDA is also presented
and compared by analysts and investors in evaluating our ability to meet
debt service obligations. Other companies in our industry may calculate
EBITDA differently. EBITDA is not a measurement of financial performance
under GAAP and should not be considered as an alternative to cash flow
from operating activities or as a measure of liquidity or an alternative
to net (loss) income or net (loss) income from continuing operations as
indicators of operating performance or any other measures of performance
derived in accordance with GAAP. Because EBITDA is calculated before
recurring cash charges, including interest expense and taxes, and is not
adjusted for capital expenditures or other recurring cash requirements
of the business, it should not be considered as a measure of
discretionary cash available to invest in the growth of the business.
Reconciliation of US Debit and Credit segment EBITDA excluding
impairments are presented to show EBITDA without the effects of
impairment charges. We feel this measurement is important to show the
comparison for periods with and without impairment charges to better
reflect comparability between periods.

Adjusted EBITDA

Adjusted EBITDA is presented on a continuing operations basis and is
defined as EBITDA adjusted for impairments, litigation and related
charges incurred in connection with certain patent and shareholder
litigation; stock-based compensation expense; restructuring and other
charges; foreign currency gain or loss; and other items that are unusual
in nature, infrequently occurring or not considered part of our core
operations, as set forth in the reconciliation on Exhibit E. Adjusted
EBITDA is also a defined term in our existing credit agreement, which
generally conforms to the definition above, and impacts certain credit
measures and compliance targets within the credit agreement. Adjusted
EBITDA is intended to show our unleveraged, pre-tax operating results
and therefore reflects our financial performance based on operational
factors, excluding non-operational, non-cash or non-recurring losses or
gains. Adjusted EBITDA has important limitations as an analytical tool,
and you should not consider it in isolation, or as a substitute for,
analysis of our results as reported under GAAP. For example, Adjusted
EBITDA does not reflect: (a) our capital expenditures, future
requirements for capital expenditures or contractual commitments; (b)
changes in, or cash requirements for, our working capital needs; (c) the
significant interest expenses or the cash requirements necessary to
service interest or principal payments on our debt; (d) tax payments
that represent a reduction in cash available to us; (e) any cash
requirements for the assets being depreciated and amortized that may
have to be replaced in the future; (f) the impact of earnings or charges
resulting from matters that we and the lenders under our credit
agreement may not consider indicative of our ongoing operations; or (g)
the impact of any discontinued operations. In particular, our definition
of Adjusted EBITDA allows us to add back certain non-cash, non-operating
or non-recurring charges that are deducted in calculating net (loss)
income, even though these are expenses that may recur, vary greatly and
are difficult to predict and can represent the effect of long-term
strategies as opposed to short-term results.

In addition, certain of these expenses can represent the reduction of
cash that could be used for other purposes. Further, although not
included in the calculation of Adjusted EBITDA, the measure may at times
allow us to add estimated cost savings and operating synergies related
to operational changes ranging from acquisitions to dispositions to
restructurings and/or exclude one-time transition expenditures that we
anticipate we will need to incur to realize cost savings before such
savings have occurred. Further, management and various investors use the
ratio of total debt less cash to Adjusted EBITDA, or “net debt
leverage,” as a measure of our financial strength and ability to incur
incremental indebtedness when making key investment decisions and
evaluating us against peers. The metric “total debt less cash” includes
borrowed long term debt and capital lease obligations, less cash.
Adjusted EBITDA margin percentage as shown in Exhibit E is computed as
Adjusted EBITDA divided by total net sales.

Free Cash Flow

We define Free Cash Flow as cash flow from continuing operations less
capital expenditures from continuing operations. We use this metric in
analyzing our ability to service and repay our debt. However, this
measure does not represent funds available for investment or other
discretionary uses since it does not deduct cash used to service our
debt, nor does it reflect the cash impacts of our discontinued
operations.

About CPI Card Group Inc.

CPI Card Group is a leading provider in payment card production and
related services, offering a single source for credit, debit and prepaid
debit cards including EMV® chip and dual interface, personalization,
instant issuance, fulfillment and digital payment services. With more
than 20 years of experience in the payments market and as a trusted
partner to financial institutions, CPI’s solid reputation of product
consistency, quality and outstanding customer service supports our
position as a leader in the market. Serving our customers from locations
throughout the United States and Canada, we have a large network of high
security facilities in North America, each of which is certified by one
or more of the payment brands: Visa, Mastercard®, American Express,
Discover and Interac in Canada. Learn more at www.cpicardgroup.com.

Conference Call and Webcast

CPI Card Group Inc. will hold a conference call on March 6, 2019 at 9:00
a.m. ET to review its fourth quarter and full year 2018 results. To
participate in the Company’s conference call via telephone or online:

Participant Toll-Free Dial-In Number: (800) 860-2442
Participant
International Dial-In Number: (412) 858-4600
Webcast Link: https://services.choruscall.com/links/pmts190306.html

Participants are advised to login for the live webcast 10 minutes prior
to the scheduled start time.

A replay of the conference call and webcast will be available until
March 20, 2019 at:

Replay: (877) 344-7529 or (412) 317-0088;
Conference ID: 10127909
Webcast
replay: http://investor.cpicardgroup.com

Forward-Looking Statements

Certain statements and information in this earnings release may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of
the Securities Exchange Act of 1934, as amended (the “1934 Act”). The
words “believe,” “estimate,” “project,” “expect,” “anticipate,” “plan,”
“intend,” “foresee,” “should,” “would,” “could” or other similar
expressions are intended to identify forward-looking statements, which
are generally not historical in nature. These forward-looking statements
are based on our current expectations and beliefs concerning future
developments and their potential effect on us, and other information
currently available. Such statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. We are making investors aware
that such forward-looking statements, because they relate to future
events, are by their very nature subject to many important factors that
could cause actual results to differ materially from those contemplated.
These risks and uncertainties include, but are not limited to: our
substantial indebtedness, including inability to make debt service
payments or refinance such indebtedness; the restrictive terms of our
credit facility and covenants of future agreements governing
indebtedness and the resulting restraints on our ability to pursue our
business strategies; our limited ability to raise capital in the future;
system security risks, data protection breaches and cyber-attacks and
possible exposure to litigation and/or regulatory penalties under
applicable data privacy and other laws for failure to prevent such
incidents; interruptions in our operations, including our IT systems, or
in the operations of the third parties that operate the data centers or
computing infrastructure on which we rely; our failure to maintain our
listing on the NASDAQ Capital Market; our inability to adequately
protect our trade secrets and intellectual property rights from
misappropriation or infringement, claims that our technology is
infringing on the intellectual property of others, and risks related to
open source software; defects in our software; problems in production
quality and process; our failure to retain our existing customers or
identify and attract new customers; a loss of market share or a decline
in profitability resulting from competition; our inability to recruit,
retain and develop qualified personnel, including key personnel; our
inability to sell, exit, reconfigure or consolidate businesses or
facilities that no longer meet with our strategy; our inability to
develop, introduce and commercialize new products; the effect of legal
and regulatory proceedings; developing technologies that make our
existing technology solutions and products less relevant or a failure to
introduce new products and services in a timely manner; quarterly
variation in our operating results; infringement of our intellectual
property rights, or claims that our technology is infringing on
third-party intellectual property; our inability to realize the full
value of our long-lived assets; our failure to operate our business in
accordance with the PCI Security Standards Council (“PCI”) security
standards or other industry standards such as Payment Card Brand
certification standards; costs relating to the obligatory collection of
sales tax and claims for uncollected sales tax in states that impose
sales tax collection requirements on out-of-state companies; disruption
or delays in our manufacturing operations or supply chain; a decline in
U.S. and global market and economic conditions and resulting decreases
in consumer and business spending; costs relating to product defects and
any related product liability and/or warranty claims; maintenance and
further imposition of tariffs and/or trade restrictions on goods
imported into the United States; our dependence on licensing
arrangements; risks associated with international operations;
non-compliance with, and changes in, laws in the United States and in
foreign jurisdictions in which we operate and sell our products; risks
associated with the controlling stockholders’ ownership of our stock;
and other risks that are described in Part I, Item 1A – Risk Factors
of our Form 10-K and our other reports filed from time to time with the
Securities and Exchange Commission (the “SEC”).

We caution and advise readers not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
These statements are based on assumptions that may not be realized and
involve risks and uncertainties that could cause actual results to
differ materially from the expectations and beliefs contained herein. We
undertake no obligation to publicly update or revise any forward-looking
statements after the date they are made, whether as a result of new
information, future events or otherwise.

For more information:

CPI encourages investors to use its investor relations website as a way
of easily finding information about the company. CPI promptly makes
available on this website, free of charge, the reports that the company
files or furnishes with the SEC, corporate governance information and
press releases. CPI uses its investor relations site (http://investor.cpicardgroup.com)
as a means of disclosing material information and for complying with its
disclosure obligations under Regulation FD.

CPI Card Group Inc. Earnings Release Supplemental Financial
Information

Exhibit A					Condensed Consolidated Statements of Operations and Comprehensive Loss – Unaudited for the three months and full years ended December 31, 2018 and 2017
Exhibit B					Condensed Consolidated Balance Sheets – Unaudited as of December 31, 2018 and 2017
Exhibit C					Condensed Consolidated Statements of Cash Flows – Unaudited for the years ended December 31, 2018 and 2017
Exhibit D					Segment Summary Information – Unaudited for the three months and full years ended December 31, 2018 and 2017
Exhibit E					Supplemental GAAP to Non-GAAP Reconciliations – Unaudited for the three months and full years ended December 31, 2018 and 2017

EXHIBIT A
CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
			Three Months Ended December 31,										Year Ended December 31,
			2018					2017					2018					2017
Net sales:
Products			$	34,158				$	24,815				$	125,069				$	104,459
Services				34,358					32,674					130,745					119,285
Total net sales				68,516					57,489					255,814					223,744
Cost of sales:
Products (exclusive of depreciation and amortization shown below)				23,034					16,803					82,110					70,527
Services (exclusive of depreciation and amortization shown below)				21,706					20,605					82,697					74,315
Depreciation and amortization				2,797					2,634					12,417					10,697
Total cost of sales				47,537					40,042					177,224					155,539
Gross profit				20,979					17,447					78,590					68,205
Operating expenses:
Selling, general and administrative (exclusive of depreciation and amortization shown below)				19,895					18,405					68,014					62,206
Impairments				—					19,074					—					19,074
Depreciation and amortization				1,475					1,446					5,988					6,225
Total operating expenses				21,370					38,925					74,002					87,505
Income (loss) from operations				(391	)				(21,478	)				4,588					(19,300	)
Other expense, net:
Interest, net				(6,188	)				(5,318	)				(23,431	)				(20,850	)
Foreign currency (loss) gain				(63	)				(3	)				(311	)				517
Other income, net				1					1					16					12
Total other expense, net				(6,250	)				(5,320	)				(23,726	)				(20,321	)
Loss before income taxes				(6,641	)				(26,798	)				(19,138	)				(39,621	)
Income tax benefit (expense)				(594	)				12,382					4,339					16,536
Net loss from continuing operations				(7,235	)				(14,416	)				(14,799	)				(23,085	)
Discontinued operations:
Net (loss) income from discontinued operation, net of taxes				(112	)				(191	)				(22,663	)				1,075
Net loss			$	(7,347	)			$	(14,607	)			$	(37,462	)			$	(22,010	)
Basic and Diluted Loss per Share:
Continuing operations			$	(0.65	)			$	(1.29	)			$	(1.33	)			$	(2.08	)
Discontinued operations				(0.01	)				(0.02	)				(2.03	)				0.10
			$	(0.66	)			$	(1.31	)			$	(3.36	)			$	(1.98	)
Weighted-average shares outstanding:
Basic and dilutive				11,160,377					11,134,633					11,149,554					11,117,454
Dividends declared per common share			$	—				$	—				$	—				$	0.45
Comprehensive loss
Net loss			$	(7,347	)			$	(14,607	)			$	(37,462	)			$	(22,010	)
Reclassification adjustment from discontinued operations				—					—					3,983					—
Currency translation adjustment				(118	)				56					(205	)				1,277
Total comprehensive loss			$	(7,465	)			$	(14,551	)			$	(33,684	)			$	(20,733	)

Contacts

CPI Card Group Inc. Investor Relations:
Jennifer Almquist
(877)
369-9016
[email protected]

CPI
Card Group Inc. Media Relations:
[email protected]

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