CPI Card Group Inc (NASDAQ:PMTS) Announces $20 Million Buyback, But Trims 2016 Outlook


After reporting a quarter that missed expectations, CPI Card Group Inc. (NASDAQ: PMTS) went on trim financial performance expectations for 2016. But in a move aimed at soothing investors, the company announced a $20 million buyback plan for the next 12 months. However, the market refused to buy the stock repurchase overture, sending the shares tumbling.

What about the buyback program for CPI Card Group Inc. (NASDAQ: PMTS)?

The board of CPI Card Group Inc. (NASDAQ: PMTS) authorized management to return $20 million to shareholders in the form of shares repurchases over the next 12 months. A maximum of 2.83 million of common shares are expected to be repurchased under the newly approved buyback program that is expected to run from May 17, 2016 to May 16, 2017.

Management has the freedom to repurchase the shares in the open market or through private transactions.

Weaker 2016 guidance clouds buyback program

Despite the announcement of a buyback plan, investors appeared to pay more attention to the lowered 2016 guidance. CPI Card Group Inc. (NASDAQ: PMTS) trimmed revenue guidance for 2016 to a range of $335 to $355 million, down from the previous guidance of $431 to $445 million. The midpoint of the new guidance indicates a 21% pullback from the midpoint of the earlier guidance.

As for the bottom-line, CPI Card Group Inc. (NASDAQ: PMTS) lowered adjusted EPS guidance to a range of $0.50 from $0.58. The company previously guided EPS in the band of $0.92 to $0.97. The midpoint of the fresh guidance trails the midpoint of the earlier guidance by 43%.

What’s the reason for the upset?

According to CPI Card Group, a number of its large customers overstocked cards last year and that suggests that sales for 2016 will not grow as fast as 2015. Additionally, the company said that a number of small and medium issuers are dragging their feet in transitioning their card portfolio to chip-based cards and that is expected to limit growth in 2016.

CPI Card Group Inc. (NASDAQ: PMTS) is a maker of debit and credit cards embedded with EMV chips, which are deemed more secure for transactions.

What transpired in 1Q2016?

In 1Q2016, CPI Card Group Inc. (NASDAQ: PMTS) generated revenue of $86.4 million, falling short of consensus estimate of $88.2 million. Adjusted EPS of $0.13 also fell short of the consensus target of $0.14.


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