Segment Reporting

9 Months Ended

Sep. 30, 2023

Segment Reporting

Segment Reporting

13. Segment Reporting

The Company has identified reportable segments that represent 10% or more of its net sales, EBITDA (as defined below) or total assets, or when the Company believes information about the segment would be useful to the readers of the financial statements. The Company’s chief operating decision maker is its Chief Executive Officer, who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures, such as net sales and EBITDA.

EBITDA is the primary measure used by the Company’s chief operating decision maker to evaluate segment operating performance. As the Company uses the term, “EBITDA” is defined as income before interest expense, income taxes, depreciation and amortization. The Company’s chief operating decision maker believes EBITDA is a meaningful measure and is useful as a supplement to GAAP measures as it represents a transparent view of the Company’s operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company’s chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and to identify strategies to improve the allocation of resources amongst segments.

As of September 30, 2023, the Company’s reportable segments were as follows:

●    Debit and Credit

●    Prepaid Debit

●    Other

Debit and Credit Segment

The Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services for card-issuing financial institutions primarily in the United States. Products produced by this segment primarily include EMV and non-EMV Financial Payment Cards, including contact and contactless cards, and Earth Elements^TM Eco-Focused Cards. The Company also sells Card@Once instant card issuance solutions, and private label credit cards that are not issued on the networks of the Payment Card Brands. The Company provides print-on-demand services, where images, personalized payment cards, and related collateral are produced on a one-by-one, on demand basis for customers. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The Debit and Credit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands.

Prepaid Debit Segment

The Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card program managers primarily in the United States, including tamper-evident security packaging. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages. The Prepaid Debit segment facilities and operations are audited for compliance with the standards of the PCI Security Standards Council by multiple Payment Card Brands.

Other

The Other segment includes corporate expenses.

Performance Measures of Reportable Segments

Net sales and EBITDA of the Company’s reportable segments, as well as a reconciliation of total segment EBITDA to income from operations and net income for the three and nine months ended September 30, 2023 and 2022, were as follows:

	Three Months Ended September 30, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total
	(dollars in thousands)
Net sales	$	83,780	$	22,335	$	—	$	(252)	$	105,863
Cost of sales		55,399		14,564		—		(252)		69,711
Gross profit		28,381		7,771		—		—		36,152
Operating expenses		7,590		1,140		14,461		—		23,191
Income (loss) from operations	$	20,791	$	6,631	$	(14,461)	$	—	$	12,961
EBITDA by segment:
Income (loss) from operations	$	20,791	$	6,631	$	(14,461)	$	—	$	12,961
Depreciation and amortization		2,322		675		1,008		—		4,005
Other expense, net		(27)		(2)		(24)		—		(53)
EBITDA	$	23,086	$	7,304	$	(13,477)	$	—	$	16,913
	Nine Months Ended September 30, 2023
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total
	(dollars in thousands)
Net sales	$	278,959	$	63,286	$	—	$	(570)	$	341,675
Cost of sales		179,356		42,818		—		(570)		221,604
Gross profit		99,603		20,468		—		—		120,071
Operating expenses		23,705		2,532		42,783		—		69,020
Income (loss) from operations	$	75,898	$	17,936	$	(42,783)	$	—	$	51,051
EBITDA by segment:
Income (loss) from operations	$	75,898	$	17,936	$	(42,783)	$	—	$	51,051
Depreciation and amortization		6,836		2,003		3,031		—		11,870
Other expense, net		(1)		(1)		(243)		—		(245)
EBITDA	$	82,733	$	19,938	$	(39,995)	$	—	$	62,676
	Three Months Ended September 30, 2022
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total
	(dollars in thousands)
Net sales	$	99,512	$	25,335	$	—	$	(270)	$	124,577
Cost of sales		61,441		14,966		—		(270)		76,137
Gross profit		38,071		10,369		—		—		48,440
Operating expenses		8,653		1,260		15,082		—		24,995
Income (loss) from operations	$	29,418	$	9,109	$	(15,082)	$	—	$	23,445
EBITDA by segment:
Income (loss) from operations	$	29,418	$	9,109	$	(15,082)	$	—	$	23,445
Depreciation and amortization		2,271		529		1,037		—		3,837
Other expense, net		(14)		—		(49)		—		(63)
EBITDA	$	31,675	$	9,638	$	(14,094)	$	—	$	27,219

	Nine Months Ended September 30, 2022
	Debit and Credit		Prepaid Debit		Other		Intersegment Eliminations		Total
	(dollars in thousands)
Net sales	$	285,708	$	64,010	$	—	$	(409)	$	349,309
Cost of sales		181,319		40,130		—		(409)		221,040
Gross profit		104,389		23,880		—		—		128,269
Operating expenses		25,542		3,487		42,760		—		71,789
Income (loss) from operations	$	78,847	$	20,393	$	(42,760)	$	—	$	56,480
EBITDA by segment:
Income (loss) from operations	$	78,847	$	20,393	$	(42,760)	$	—	$	56,480
Depreciation and amortization		6,202		1,711		3,105		—		11,018
Other expense, net		(7)		(3)		(464)		—		(474)
EBITDA	$	85,042	$	22,101	$	(40,119)	$	—	$	67,024

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Total segment EBITDA	$	16,913	$	27,219	$	62,676	$	67,024
Interest, net		(6,714)		(7,323)		(20,235)		(22,334)
Income tax expense		(2,337)		(4,149)		(9,318)		(9,609)
Depreciation and amortization		(4,005)		(3,837)		(11,870)		(11,018)
Net income	$	3,857	$	11,910	$	21,253	$	24,063