IPO Report: CPI Card Group (PMTS)

Francis Gaskins  |

CPI Card Group (PMTS) is a leading provider of comprehensive Financial Payment Card solutions in North America. The company is based in Littleton, CO.

Six other companies are scheduled to IPO for the week of Oct. 5. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: BMO Capital Markets, Goldman Sachs, and CIBC

Co-managers: Baird, William Blair, Raymond James, Scotiabank, and GMP Securities

End of lockup (180 days): Tuesday, April 5, 2016

End of 10-day quiet period: Sunday, October 18, 2015

PMTS scheduled a $300 million IPO with a market capitalization of $858 million at a price range midpoint of $17 for Thursday, Oct. 8, 2015 on Nasdaq.

CPI Card Group (PMTS) IPO Summary

PMTS is a leading provider of comprehensive Financial Payment Card solutions in North America.

PMTS defines Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada).

CPI Card Group (PMTS) IPO Valuation

Pre-IPO grade-score summary
Many IPOs in today’s environment are graded C+ and scored 7.
If the pre-IPO grade is below C+ or the score is below 7,
then our analysts may have some concerns about the company’s
outlook and/or its market segment.
If the pre-ipo grade is above C+ or the score is above 7,
then our analysts believe the company’s overall business outlook is very favorable.
C = unprofitable, C+ = profitable

Accumulated earnings (mm)





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Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

CPI Card Group (PMTS)







Annualizing June 6 mos


CPI Card Group (PMTS) IPO Conclusion

Neutral, C+. 7.5

Rev +80%, gross profit +138%, 35% gross profit

65% products, 35% services

Net income +408%, Net income % of rev 10.5%

Adj EBITDA 24%

P/E 23.8, Price to sales 2.5

Price to book -8.2 (PMTS doesn't need a lot of assets)

Note:  once the replacement card market is saturated growth will slow, obviously

50% from selling shareholders

CPI Card Group (PMTS) Business

PMTS is a leading provider of comprehensive Financial Payment Card solutions in North America.

PMTS defines Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada).

In 2014, PMTS produced over 360 million Financial Payment Cards, provided integrated card services to over 3,200 card-issuing banks and Prepaid Debit Card issuers and personalized more than 130 million Financial Payment Cards. PMTS has established a leading position in the Financial Payment Card market through more than 20 years of experience and are focused primarily on this growing subsector of the financial technology market.

CPI Card Group (PMTS) Market

According to First Annapolis, on a dollar basis, the U.S. Financial Payment Card market (excluding services) more than doubled from $180 million in 2013 to $371 million in 2014, and the conversion of U.S. Financial Payment Cards to the EMV standard is expected to further increase this market size by more than three-fold to $1.2 billion by 2019.

EMV Conversion

The EMV standard for Financial Payment Cards, which is named after Europay, MasterCard and Visa, is a technologically advanced high security protocol that features a Financial Payment Card with an embedded microprocessor, commonly known as a "chip card."

Depending on the features required by the issuer, EMV cards may sell for 5 to 10 times the average selling price of the magnetic stripe cards they are replacing.

PMTS's estimate based on experience that the industry-wide average selling prices per card, exclusive of services, are approximately as follows: magnetic stripe—$0.20 per card; Contact EMV—$1.00 per card; and Dual-Interface EMV—$2.00 per card.

Comparing our costs to selling prices, PMTS achieves similar gross margin percentages across these three card types.

#1 Market Position by Unit Volume

PMTS estimates that it produces approximately 35% of all Financial Payment Cards in the United States, which PMTS believes gives it the #1 market position by unit volume.

PMTS believes it has:
the #1 position in the U.S. prepaid debit market (which represents the fastest growing subset of the Financial Payment Card market in the United States), serving the top five U.S. Prepaid Debit Card program managers;

a leading position in the U.S. large issuer market, serving the majority of the top 20 U.S. debit and credit card issuers; and

the #1 position in the highly attractive U.S. small issuer market, which includes independent community banks and credit unions, driven by its strong relationships, capabilities and technologies.

PMTS has grown its business significantly over the past decade, both organically and through acquisitions.

CPI Card Group (PMTS) Customers

PMTS’s customers are primarily leading national and regional banks, independent community banks, credit unions, managers of prepaid debit programs, Group Service Providers and card processors.

PMTS serves a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express, as well as thousands of independent community banks, credit unions, Group Service Providers and card processors.

Card Production

PMTS serves its customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands and Interac (in Canada) and, where required by its customers, the PCI Security Standards Council.

PMTS has the largest such network of high-security production facilities in North America, allowing PMTS to optimize its solutions offerings to serve the needs of is diverse and long-term customer base.

Six Recent Acquisitions

Over that time period, PMTS has completed six acquisitions, significantly increasing its geographic and market coverage, solutions offerings and capacity.

On March 9, 2010, PMTS purchased certain assets of Premier Card Solutions, a leading provider of Financial Payment Cards, data personalization services and tamper-evident security packaging for Prepaid Debit Cards that utilize the payment networks of the Payment Card Brands.

The Premier Card Solutions transaction significantly enhanced PMTS’s offering to Prepaid Debit Card customers.

On September 2, 2014, PMTS acquired EFT Source, a recognized leader in the financial technology industry that was named to American Banker and BAI's FinTech Forward 100 in both 2013 and 2014.

The acquisition of EFT Source significantly enhanced PMTS’s card services offering, added Card@Once® to its instant issuance card offering and expanded its end-to-end Financial Payment Card solutions.

Acquisition of EFT Source, Inc. Improves Income Statement

On September 2, 2014, we acquired 100% of the stock of EFT Source. EFT Source provides data personalization services and instant issuance systems and services to issuers of Financial Payment Cards in the United States for $69 million.

The financial results of EFT Source from September 2, 2014 through December 31, 2014 are included in PMTS's 2014 financial results.

CPI Card Group (PMTS) Intellectual Property

As of August 25, 2015, PMTS had 22 registered U.S. and foreign trademarks, 18 existing U.S. patents, as well as 27 pending U.S. and foreign patent applications. PMTS’s patents have an average remaining maturity of 14.5 years, and its trademarks will be due for renewal for additional ten or fifteen-year periods on an ongoing basis over the next 11.5 years.

CPI Card Group (PMTS) Competition

PMTS believe its primary competitors are Oberthur Technologies S.A., Giesecke & Devrient GmbH, Valid S.A. and Gemalto NV. Certain existing and potential financial institution customers also have the ability to personalize Financial Payment Cards in-house.

In addition, PMTS competes with customers that offer transaction processing products and services to financial institutions.

CPI Card Group (PMTS) 5% Shareholders Pre-IPO

Tricor Pacific Capital Partners (Fund IV), Limited Partnership       52.6%

Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership 31.1%

CPI Card Group (PMTS) Dividends

PMTS expects to pay quarterly cash dividends on its common stock beginning in the first quarter of 2016 in an initial amount of approximately $0.05 per share, subject to the sole discretion of its board of directors and the considerations discussed below.

Annualized dividend rate of 1.2% at $17, price range mid-point.

CPI Card Group (PMTS) IPO Use of Proceeds

PMTS expects to receive $140 million from its IPO and use it for the following

$11.8 million of the net proceeds from this offering to redeem the remaining outstanding shares of its preferred stock, approximately $13.3 million of the net proceeds to terminate its phantom stock plan and to satisfy all liabilities due thereunder and the remainder of the net proceeds to repay outstanding indebtedness under PMTS’s New Term Loan Facility incurred in connection with the Partial Preferred Redemption.

No proceeds going to company operations.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer



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