CPI CARD GROUP INC., 10-Q filed on 5/9/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
Apr. 23, 2018
Document and Entity Information    
Entity Registrant Name CPI Card Group Inc.  
Entity Central Index Key 0001641614  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   11,134,714
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 20,196 $ 23,205
Accounts receivable, net 42,277 37,537
Inventories 8,603 16,237
Prepaid expenses and other current assets 4,261 3,960
Income taxes receivable 8,926 8,435
Total current assets 84,263 89,374
Plant, equipment and leasehold improvements, net 50,244 49,300
Intangible assets, net 40,303 41,472
Goodwill 53,859 53,611
Other assets 234 248
Total assets 228,903 234,005
Current liabilities:    
Accounts payable 15,344 16,545
Accrued expenses 14,972 13,820
Income taxes payable 678  
Deferred revenue and customer deposits 403 4,177
Total current liabilities 31,397 34,542
Long-term debt 304,355 303,869
Deferred income taxes 11,209 12,286
Other long-term liabilities 5,361 2,882
Total liabilities 352,322 353,579
Commitments and contingencies (Note 12)
Stockholders' deficit:    
Common Stock; $0.001 par value—100,000,000 shares authorized; 11,134,714 shares issued and outstanding at March 31, 2018 and December 31, 2017 11 11
Capital deficiency (112,740) (113,081)
Accumulated loss (5,861) (1,366)
Accumulated other comprehensive loss (4,829) (5,138)
Total stockholders' deficit (123,419) (119,574)
Total liabilities and stockholders' deficit $ 228,903 $ 234,005
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Dec. 31, 2017
Condensed Consolidated Balance Sheets    
Common shares, par value (in dollars per share) $ 0.001 $ 0.001
Common shares, authorized shares (in shares) 100,000,000 100,000,000
Common shares, issued shares (in shares) 11,134,714 11,134,714
Common shares, outstanding shares (in shares) 11,134,714 11,134,714
v3.8.0.1
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Net sales:    
Total net sales $ 59,070 $ 56,008
Cost of sales:    
Depreciation and amortization 3,630 2,784
Total cost of sales 44,628 39,913
Gross Profit 14,442 16,095
Operating expenses:    
Selling, general and administrative (exclusive of depreciation and amortization shown below) 16,815 16,155
Depreciation and amortization 1,595 1,749
Total operating expenses 18,410 17,904
Loss from operations (3,968) (1,809)
Other expense, net    
Interest, net (5,519) (5,062)
Foreign currency gain 207 73
Other income, net 4 1
Total other expense, net (5,308) (4,988)
Loss before income taxes (9,276) (6,797)
Income tax benefit 1,985 2,291
Net loss $ (7,291) $ (4,506)
Basic and diluted loss per share:    
(Loss) earnings per share (in dollars per share) $ (0.65) $ (0.40)
Basic (in shares) 11,134,714 11,084,875
Diluted (in shares) 11,134,714 11,084,875
Dividends declared per common share   $ 0.225
Comprehensive loss    
Net loss $ (7,291) $ (4,506)
Currency translation adjustment 309 201
Total comprehensive loss (6,982) (4,305)
Products    
Net sales:    
Total net sales 27,560 29,764
Cost of sales:    
Products (exclusive of depreciation and amortization shown below) 19,082 19,688
Services    
Net sales:    
Total net sales 31,510 26,244
Cost of sales:    
Services (exclusive of depreciation and amortization shown below) $ 21,916 $ 17,441
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating activities    
Net loss $ (7,291) $ (4,506)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization expense 5,225 4,533
Stock-based compensation expense 395 546
Amortization of debt issuance costs and debt discount 486 484
Deferred income tax (1,622) (351)
Other, net (195) (39)
Changes in operating assets and liabilities:    
Accounts receivable 2,074 (2,375)
Inventories 681 (4,551)
Prepaid expenses and other assets (282) (485)
Income taxes 194 (2,005)
Accounts payable (1,423) 1,751
Accrued expenses 421 (1,794)
Deferred revenue and customer deposits (142) 3,424
Other liabilities (306) 357
Cash used in operating activities (1,785) (5,011)
Investing activities    
Acquisitions of plant, equipment and leasehold improvements (1,161) (3,283)
Cash used in investing activities (1,161) (3,283)
Financing activities    
Payments on capital lease obligations (129)  
Dividends paid on common stock   (2,527)
Taxes withheld and paid on stock-based compensation awards   (336)
Cash used in financing activities (129) (2,863)
Effect of exchange rates on cash 66 108
Net decrease in cash and cash equivalents (3,009) (11,049)
Cash and cash equivalents, beginning of period 23,205 36,955
Cash and cash equivalents, end of period 20,196 25,906
Supplemental disclosures of cash flow information    
Cash paid during the period for: Interest 4,760 4,488
Cash paid during the period for: Income taxes, net (refunds) payments (88) 65
Capital lease obligations incurred for certain machinery and equipment leases 3,734  
Accounts payable for acquisitions of plant, equipment and leasehold improvements $ 400 $ 536
v3.8.0.1
Business Overview and Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Business Overview and Summary of Significant Accounting Policies  
Business Overview and Summary of Significant Accounting Policies

CPI Card Group Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)

(Unaudited)

 

1. Business Overview and Summary of Significant Accounting Policies

 

Business Overview

 

CPI Card Group Inc. (which, together with its subsidiaries, is referred to herein as “CPI” or the “Company”) is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards which the Company defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express, Discover and Interac (in Canada)) in the United States and Canada. The Company also is engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards (primarily in Europe and Canada).  

 

As a producer and provider of services for Financial Payment Cards, each of the Company’s secure facilities must be certified by one or more of the Payment Card Brands and is therefore subject to specific requirements and conditions. Noncompliance with these requirements would prohibit the individual facilities of the Company from producing Financial Payment Cards for these entities’ payment card issuers.

 

During February 2018, the Company made the decision to consolidate three personalization operations in the United States into two facilities to better enable the Company to optimize operations and achieve market-leading quality and service with a cost-competitive business model.  In conjunction with this decision, the Company accelerated the depreciation of certain related assets, which totaled $800 for the three months ended March 31, 2018, and recorded a severance charge of $329 for this same time period.

 

Basis of Presentation

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2017 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

On December 20, 2017, the Company effected a one-for-five reverse stock split of its common stock, whereby each lot of five shares of common stock issued and outstanding immediately prior to the reverse stock split was converted into and became one share of common stock. Share and per share amounts reflect the one-for-five reverse stock split for all periods presented.

Use of Estimates

 

Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, valuation allowances for inventories and deferred tax assets, debt, revenue recognized for period-end work in process and stock-based compensation expense. Actual results could differ from those estimates.

 

Machinery and Equipment Financing

 

The Company leases certain machinery and equipment under capital leases. The assets and liabilities under these capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. Once ready for their intended use, the assets are depreciated over the lower of their related lease term or their estimated productive lives.

 

Adoption of New Accounting Standard

 

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, as amended (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Condensed Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use, and the Company has the right to payment for work completed on such items.  This accelerates the timing of revenue recognition for these arrangements, as revenue will be recognized as goods are produced rather than upon shipment or delivery of goods. In addition to accelerating the timing of recording revenue, the Company has recorded decreases in deferred revenue, work in process and finished goods inventories, and an increase to accounts receivable. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

See Note 2 “Revenue” for revenue recognition timing and methodology under ASU 2014-09.

The cumulative effects of the adjustments made to the Company’s January 1, 2018 Condensed Consolidated Balance Sheet upon adoption of ASU 2014-09 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

Balance Sheet

 

2017

 

Adjustments

 

2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

37,537

 

$

6,708

 

$

44,245

 

Inventories

 

 

16,237

 

 

(7,003)

 

 

9,234

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

4,177

 

 

(3,659)

 

 

518

 

Deferred income taxes

 

 

12,286

 

 

540

 

 

12,826

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

 

In accordance with ASU 2014-09, the impact on the Company’s Condensed Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Balance Sheet

 

2018

 

Adjustments

 

ASU 2014-09

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

42,277

 

$

(7,039)

 

$

35,238

 

Inventories

 

 

8,603

 

 

5,861

 

 

14,464

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

403

 

 

725

 

 

1,128

 

Deferred income taxes

 

 

11,209

 

 

(540)

 

 

10,669

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(5,861)

 

 

(1,363)

 

 

(7,224)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Statement of Operations and Comprehensive Income (Loss)

 

2018

 

Adjustments

 

ASU 2014-09

 

Net sales:

 

 

 

 

 

 

 

 

 

 

Products

 

$

27,560

 

$

(725)

 

$

26,835

 

Services

 

 

31,510

 

 

223

 

 

31,733

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

19,082

 

 

(841)

 

 

18,241

 

Services (exclusive of depreciation and amortization)

 

 

21,916

 

 

179

 

 

22,095

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

14,442

 

 

160

 

 

14,602

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

1,985

 

 

(34)

 

 

1,951

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(7,291)

 

 

126

 

 

(7,165)

 

 

Recently Issued Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (“ASU 2016-02”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets.  ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The new standard is required to be adopted using a modified retrospective approach. The Company is in the process of assessing the impact of ASU 2016-02 on its results of operations, financial position and consolidated financial statements.

During 2017, the Company early adopted ASU 2017-04,  Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) in conjunction with its annual impairment testing effective October 1, 2017. In accordance with ASU 2017-04,  an entity should perform its goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value.

v3.8.0.1
Revenue
3 Months Ended
Mar. 31, 2018
Revenue  
Revenue

2. Revenue

 

The Company disaggregates its revenue by major source as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

Products

 

Services

 

Total

 

U.S. Debit and Credit

 

$

23,720

 

$

13,428

 

$

37,148

 

U.S. Prepaid Debit

 

 

 -

 

 

15,512

 

 

15,512

 

U.K. Limited

 

 

2,816

 

 

1,397

 

 

4,213

 

Other

 

 

1,375

 

 

1,324

 

 

2,699

 

Intersegment eliminations

 

 

(351)

 

 

(151)

 

 

(502)

 

Total

 

$

27,560

 

$

31,510

 

$

59,070

 

 

For periods after January 1, 2018, the Company accounts for its revenue as follows:

Products Revenue

Product revenue is recognized when obligations under the terms of a contract with a customer are satisfied. In most instances, this occurs over time as cards are manufactured for specific customers and have no alternative use and the Company has an enforceable right to payment for work performed. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts. Items included in Products revenue are manufactured Financial Payment Cards, including in contact-EMV®, Dual-Interface EMV®, contactless and magnetic stripe cards, private label credit cards and retail gift cards. Card@Once® printers and Consumables are also included in Products revenue, and their associated revenues are recognized at the time of shipping.

 

Services Revenue

 

Revenue is recognized for Services as the services are performed. Items included in Services revenue include the personalization and fulfillment of Financial Payment Cards, providing tamper-evident secure packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. For work performed but not completed and unbilled, the Company estimates revenue by taking actual costs incurred and applying historical margins for similar types of contracts.

 

Customer Contracts

The Company often enters into Master Services Agreements (“MSAs”) with our customers. Generally, an MSA requires a customer to place subsequent purchase orders or statements of work to obtain goods or services, thus creating enforceable rights and obligations for goods and services for the parties. The contract term as defined by ASU 2014-09 is the length of time it takes to deliver the goods or services promised under the purchase order or statement of work. As such, the Company's contracts are generally short term in nature.

 

v3.8.0.1
Accounts Receivable
3 Months Ended
Mar. 31, 2018
Accounts Receivable  
Accounts Receivable

3. Accounts Receivable

 

Accounts receivable consisted of the following:

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Trade accounts receivable

 

$

35,291

 

$

37,590

 

Unbilled accounts receivable

 

 

7,039

 

 

 —

 

 

 

 

42,330

 

 

37,590

 

Less allowance for doubtful accounts

 

 

(53)

 

 

(53)

 

 

 

$

42,277

 

$

37,537

 

 

v3.8.0.1
Inventories
3 Months Ended
Mar. 31, 2018
Inventories  
Inventories

4.  Inventories

 

Inventories are summarized below:

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Raw materials

 

$

6,282

 

$

6,498

 

Work-in-process

 

 

 —

 

 

6,557

 

Finished goods

 

 

2,321

 

 

3,182

 

 

 

$

8,603

 

$

16,237

 

 

v3.8.0.1
Plant, Equipment and Leasehold Improvements
3 Months Ended
Mar. 31, 2018
Plant, Equipment and Leasehold Improvements  
Plant, Equipment and Leasehold Improvements

5. Plant, Equipment and Leasehold Improvements

 

Plant, equipment and leasehold improvements consisted of the following:

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Buildings

 

$

2,363

 

$

2,318

 

Machinery and equipment

 

 

63,640

 

 

62,318

 

Machinery and equipment under capital leases

 

 

3,734

 

 

 —

 

Furniture, fixtures and computer equipment

 

 

7,626

 

 

7,585

 

Leasehold improvements

 

 

19,782

 

 

19,754

 

Construction in progress

 

 

1,393

 

 

1,980

 

 

 

 

98,538

 

 

93,955

 

Less accumulated depreciation

 

 

(48,294)

 

 

(44,655)

 

 

 

$

50,244

 

$

49,300

 

 

Depreciation of plant, equipment and leasehold improvements, including depreciation of assets under capital leases, was $4,004 and $3,310 for the three months ended March 31, 2018 and 2017, respectively.

v3.8.0.1
Goodwill and Other Intangible Assets
3 Months Ended
Mar. 31, 2018
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

6. Goodwill and Other Intangible Assets

 

The Company’s goodwill by reportable segment at March 31, 2018 and December 31, 2017 was as follows:

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

U.S. Debit and Credit

 

$

47,150

 

$

47,150

U.K. Limited

 

 

6,709

 

 

6,461

 

 

$

53,859

 

$

53,611

 

The change in goodwill from December 31, 2017 to March 31, 2018 was a result of foreign currency translation adjustments.

 

Intangible assets consist of customer relationships, technology and software, non-compete agreements and trademarks. The changes in the cost basis of the intangibles from December 31, 2017 to March 31, 2018 were related to foreign currency translation adjustments. Intangible amortization expense was $1,221 and $1,223 for the three months ended March 31, 2018 and 2017, respectively. 

 

At March 31, 2018 and December 31, 2017, intangible assets, excluding goodwill, were comprised of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

 

 

Average Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

 

Accumulated

 

Net Book

 

 

 

(Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

   

12

to

20

  

$

59,026

  

$

(25,329)

 

$

33,697

   

$

58,895

   

$

(24,373)

 

$

34,522

 

Technology and software

 

 7

to

10

 

 

7,101

 

 

(3,327)

 

 

3,774

 

 

7,101

 

 

(3,095)

 

 

4,006

 

Trademarks

 

7.5

to

10

 

 

3,330

 

 

(584)

 

 

2,746

 

 

3,330

 

 

(487)

 

 

2,843

 

Non-compete agreements

 

 5

to

 8

 

 

491

 

 

(405)

 

 

86

 

 

491

 

 

(390)

 

 

101

 

Intangible assets subject to amortization

 

 

 

 

 

$

69,948

 

$

(29,645)

 

$

40,303

 

$

69,817

 

$

(28,345)

 

$

41,472

 

 

The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of March 31, 2018 was as follows:

 

 

 

 

 

2018 (remaining 9 months)

 

$

3,666

2019

    

 

4,868

2020

 

 

4,828

2021

 

 

4,585

2022

 

 

4,100

Thereafter

 

 

18,256

 

 

$

40,303

 

v3.8.0.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2018
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

7. Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

    Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2— Observable inputs other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the assets or liabilities.

 

    Level 3— Valuations based on unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

 

The Company’s financial assets and liabilities that are not required to be remeasured at fair value in the Condensed Consolidated Balance Sheets were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value as of

 

Fair Value as of 

 

Fair Value Measurement at March 31, 2018

 

 

 

March 31, 

 

March 31, 

 

 (Using Fair Value Hierarchy)

 

 

 

2018

 

2018

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

First Lien Term Loan

 

$

312,500

 

$

217,188

 

$

 

$

217,188

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value as of 

 

Fair Value as of

 

Fair Value Measurement at December 31, 2017

 

 

 

December 31, 

 

December 31, 

 

 (Using Fair Value Hierarchy)

 

 

 

2017

 

2017

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

First Lien Term Loan

 

$

312,500

 

$

228,125

 

$

 

$

228,125

 

$

 —

 

 

The aggregate fair value of the Company’s First Lien Term Loan, as defined in Note 8, “Long-Term Debt and Credit Facility,” was based on bank quotes.

 

The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable each approximate fair value.

v3.8.0.1
Long-Term Debt and Credit Facility
3 Months Ended
Mar. 31, 2018
Long-Term Debt and Credit Facility  
Long-Term Debt and Credit Facility

8. Long-Term Debt and Credit Facility

 

At March 31, 2018 and December 31, 2017, long-term debt and credit facilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

    

Interest

    

March 31,

    

December 31,

 

 

 

Rate (1)

 

2018

 

2017

 

First Lien Term Loan (1)

 

6.36

%  

$

312,500

 

$

312,500

 

Unamortized discount

 

 

 

 

(2,954)

 

 

(3,122)

 

Unamortized deferred financing costs

 

 

 

 

(5,191)

 

 

(5,509)

 

Long-term debt

 

 

 

$

304,355

 

$

303,869

 


(1)   Interest rate at March 31, 2018.  Interest rate at December 31, 2017 was 5.96%.

 

First Lien Credit Facility

 

On August 17, 2015, the Company entered into a first lien credit facility (the “First Lien Credit Facility”) with a syndicate of lenders providing for a $435,000 first lien term loan (the “First Lien Term Loan”) and a $40,000 revolving credit facility (the “Revolving Credit Facility”). The First Lien Term Loan and the Revolving Credit Facility have maturity dates of August 17, 2022 and August 17, 2020, respectively.

 

The First Lien Credit Facility is secured by a first-priority security interest in substantially all of the Company’s assets constituting equipment, inventory, receivables, cash and other tangible and intangible property.

 

Interest rates under the First Lien Credit Facility are based, at the Company’s election, on a Eurodollar rate, subject to an interest rate floor of 1.0%, plus a margin of 4.50%, or a base rate plus a margin of 3.50%.  

 

The First Lien Credit Facility contains customary nonfinancial covenants, including among other things, restrictions on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equity holders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of the Company’s assets and affiliate transactions. The First Lien Credit Facility also contains a requirement that, as of the last day of any fiscal quarter, if the amount the Company has drawn under the Revolving Credit Facility is greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, the Company maintain a first lien net leverage ratio not in excess of 7.0 times trailing twelve month Adjusted EBITDA, as defined in the agreement. As of March 31, 2018, the Company was in compliance with all covenants under the First Lien Credit Facility.

 

The First Lien Credit Facility also requires prepayment in advance of the maturity date upon the occurrence of certain customary events, including based on an annual excess cash flow calculation, pursuant to the terms of the agreement, with any required payments to be made after the issuance of the Company’s annual financial statements.  As of March 31, 2018, the Company did not expect to have a required excess cash flow payment related to 2018.

 

At March 31, 2018, the Company did not have any outstanding amounts under the Revolving Credit Facility and has $19,950 available for borrowing. Additional amounts may be available for borrowing under the term of the Revolving Credit Facility, up to the full $40,000, to the extent the Company’s net leverage ratio does not exceed 7.0 times Adjusted EBITDA, as defined in the agreement. The Company has one outstanding letter of credit for $50 relating to the security deposit on a real property lease agreement. The Company pays a fee on outstanding letters of credit at the applicable margin, which was 4.50% as of March 31, 2018 and December 31, 2017, in addition to a fronting fee of 0.125% per annum. In addition, the Company is required to pay an unused commitment fee ranging from 0.375% per annum to 0.50% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as the Company’s total net leverage ratio declines.  The Company recorded accrued interest of $4,526 and $4,296 within “Accrued expenses” on the Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017, respectively.

 

Deferred Financing Costs

 

Certain costs incurred with borrowings or the establishment or modification of credit facilities are reflected as a reduction to the long-term debt balance.  These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method.      

v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Taxes  
Income Taxes

9. Income Taxes

 

During the three months ended March 31, 2018, the Company recognized an income tax benefit of $1,985 on a pre-tax loss of $9,276, representing an effective income tax rate of 21.4%, compared to an income tax benefit of $2,291 on a pre-tax loss of $6,797, representing an effective tax rate of 33.7% during the three months ended March 31, 2017. 

 

On December 22, 2017, the U.S. government enacted comprehensive tax reform legislation ( the “Tax Act”). In conjunction with the Tax Act, the U.S. federal tax rate reduced from 35.0% in 2017 to 21.0% in 2018.  The effective tax rate differs from the federal U.S. statutory rate in 2018 primarily due to the impact of state income taxes. 

 

On March 30, 2018, the Company received a proposed determination regarding a previously unrecognized tax benefit related to state income tax matters. Based on this proposal, the Company expects to pay $678 in the next 12 months and has reclassified this item from “Other long-term liabilities” to “Income taxes payable” in its Condensed Consolidated Balance Sheet as of March 31, 2018.

 

2017 Tax Reform

 

The Tax Act includes significant changes to taxation of business entities. These changes include, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) elimination of deduction for income attributable to domestic production activities and (iv) a partial shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with a transitional rule that taxes certain historic foreign accumulated earnings and certain rules that aim to prevent erosion of U.S. income tax base). In conjunction with the Tax Act’s reduction of the U.S. federal tax rate from 35.0% to 21.0%, the Company accrued a $7,057 tax benefit during the year ended December 31, 2017 related to the net change in deferred tax liabilities.

   

Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 118 requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act on earnings to the extent such reasonable estimate has been determined. Accordingly, the Company is currently estimating a zero tax liability on foreign unremitted earnings due to a net earnings and profits (“E&P”) deficit on accumulated post-1986 deferred foreign income. Therefore, the Company has not accrued any amount of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings going back to 1986 for the quarter ended March 31, 2018.  The Company will continue to analyze historical E&P on accumulated post-1986 deferred foreign income and will record any resulting tax adjustment during 2018. All other accounting as required by the Tax Act has been completed. 

 

v3.8.0.1
Stockholders' Deficit
3 Months Ended
Mar. 31, 2018
Stockholders’ Deficit  
Stockholders’ Deficit

10. Stockholders’ Deficit

 

During the three months ended March 31, 2017, the Company paid dividends of $2,527, representing $0.225 per share. During August 2017, the Company discontinued its quarterly dividend of $0.225 per share.

 

v3.8.0.1
Loss per Share
3 Months Ended
Mar. 31, 2018
Loss per Share  
Loss per Share

11. Loss per Share

 

Basic and diluted loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.

 

The following table sets forth the computation of basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

 

2018

 

2017

 

Numerator:

 

 

    

    

 

    

    

Net loss

 

$

(7,291)

 

$

(4,506)

 

Denominator: 

 

 

 

 

 

 

 

Basic-weighted-average common shares outstanding

 

 

11,134,714

 

 

11,084,875

 

Diluted-weighted-average common shares outstanding

 

 

11,134,714

 

 

11,084,875

 

Loss per share:

 

 

 

 

 

 

 

Basic

 

$

(0.65)

 

$

(0.40)

 

Diluted

 

$

(0.65)

 

$

(0.40)

 

 

The Company reported a net loss for the three-month periods ended March 31, 2018 and 2017. Accordingly, the potentially dilutive effect of 952,706 and 465,174 stock options and 48,509 and 37,352 restricted stock units were excluded from the computation of diluted earnings per share as of March 31, 2018 and 2017, respectively, as their inclusion would be anti-dilutive.

v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies.  
Commitments and Contingencies

12. Commitments and Contingencies

 

Commitments

 

The Company incurred rent expense under non-cancellable operating leases of $934 and $953 for the three months ended March 31, 2018 and 2017, respectively. During the first quarter of 2018, the Company leased certain machinery and equipment under capital lease obligations, which consisted of the following at March 31, 2018:

 

 

 

 

 

 

March 31, 

 

 

2018

 

Machinery and equipment

$

3,561

 

Less current portion of capital lease obligations

 

(699)

 

Total long-term capital lease obligations

$

2,862

 

 

In its Condensed Consolidated Balance Sheet at March 31, 2018, the Company has recorded the current portion of capital lease obligations in “Accrued expenses” and the long-term capital lease obligations in “Other long-term liabilities”.

 

Contingencies 

 

In accordance with applicable accounting guidance, the Company establishes an accrued liability when loss contingencies are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. As a matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. Once the loss contingency is deemed to be both probable and estimable, the Company will establish an accrued liability and record a corresponding amount of litigation-related expense. The Company expenses professional fees associated with litigation claims and assessments as incurred.

 

In Re CPI Card Group Inc. Securities Litigation, Case No. 1:16-CV-04531 (S.D.N.Y.) (the “Class Action”)

On June 15, 2016, two purported CPI stockholders filed putative class action lawsuits captioned Vance, et al. v. CPI Card Group Inc., et al. and Chipman, et al. v. CPI Card Group Inc. in the United States District Court for the Southern District of New York (the “Court”) against CPI, certain of its former officers and current and former directors, along with the sponsors of and the financial institutions who served as underwriters for CPI’s October 2015 initial public offering (“IPO”). The complaints, purportedly brought on behalf of all purchasers of CPI common stock pursuant to the October 8, 2015 Registration Statement filed in connection with the IPO, assert claims under §§11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) and seek, among other things, damages and costs. In particular, the complaints allege that the Registration Statement contained false or misleading statements or omissions regarding CPI’s customers’ (i) purchases of Europay, MasterCard and VISA chip cards (collectively, “EMV cards”) during the first half of fiscal year 2015 and resulting EMV card inventory levels; and (ii) capacity to purchase additional EMV cards in the fourth quarter of fiscal year 2015, and the remainder of the fiscal year ended December 31, 2015. The complaints allege that these actions artificially inflated the price of CPI common stock issued pursuant to the IPO.

 

On August 30, 2016, the Court consolidated the Vance and Chipman actions and appointed lead plaintiff and lead counsel pursuant to the Private Securities Litigation Reform Act (the “PSLRA”). On October 17, 2016, lead plaintiff filed a consolidated amended complaint, asserting the same claims for violations of §§11 and 15 of the Securities Act. The amended complaint is based principally on the same theories as the original complaints, but adds allegations that the Registration Statement contained inadequate risk disclosures and failed to disclose (i) small and mid-size issuers’ slower-than-anticipated conversion to EMV technology and (ii) increased pricing pressure and competition CPI faced in the EMV market.

 

On November 16, 2016, the Company filed a motion to dismiss the amended complaint, which was denied by the Court on October 30, 2017. On January 12, 2018, the Company filed an answer to the amended complaint. On March 23, 2018, lead plaintiff filed his motion for class certification. 

The Company believes these claims are without merit and is defending the Class Action vigorously. Given the current stage of the matter, the range of any potential loss is not probable or estimable and no liability has been recorded as of March 31, 2018 or December 31, 2017.

 

Heckermann v. Montross et al., Case No. 1:17-CV-01673 (D. Del.) (the “Derivative Suit”)

 

On November 20, 2017, a purported CPI stockholder filed a stockholder derivative complaint in the United States District Court for the District of Delaware (the “Court”) against certain of CPI’s former officers and current and former directors, along with the sponsors of the IPO. CPI is also named as a nominal defendant. The derivative complaint asserts claims under §§10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 and seeks, among other things, injunctive relief, damages and costs. It alleges false or misleading statements and omissions in the Registration Statement filed by CPI in connection with its IPO and subsequent public filings and statements. The derivative complaint also asserts claims for purported breaches of fiduciary duties, unjust enrichment, mismanagement and waste of corporate assets.

 

On March 28, 2018, the Court entered the parties’ stipulated order staying the Derivative Suit pending final determination of the Class Action.

 

The Company believes these claims are without merit and is defending the Derivative Suit vigorously. Given the current stage of these matters, the range of any potential loss is not probable or estimable and no liability has been recorded as of March 31, 2018 or December 31, 2017.

 

Gemalto S.A. v. CPI Card Group Inc. (2 cases)

 

First case. This suit was initially filed by Gemalto S.A. (“Gemalto”) against the Company in the United States District Court for the Western District of Texas in October 2015.  The complaint alleged that the Company infringed a now-expired Gemalto patent by incorporating into the Company’s products microchips that allegedly practice the EMV standard.  The Company successfully moved to transfer the lawsuit to the District of Colorado, answered the complaint and filed counterclaims that the asserted patent was invalid and unenforceable, and that Gemalto’s lawsuit was a “sham” intended to interfere with the Company’s IPO and business relationships.  

 

During 2016, the Company filed an Inter Partes Review ("IPR") petition with the United States Patent & Trademark Office’s Patent Trial & Appeal Board (“PTAB”) seeking re-examination of Gemalto’s asserted patent, and the United States District Court for the District of Colorado granted the Company’s motion to stay the litigation pending the PTAB’s consideration of the Company’s challenge to the patentability of asserted claims.

 

Second case. On May 3, 2016, Gemalto filed a second patent infringement action against CPI in the United States District Court for the District of Colorado. The complaint alleged that the Company infringed a Gemalto patent on networked smartcard printing by way of the Company’s Card@Once offering. During 2017, the Company filed an IPR petition with the PTAB seeking re-examination of Gemalto’s asserted patent. 

 

On September 28, 2017, the Company reached a settlement with Gemalto to resolve both lawsuits. Under the terms of the settlement, the Company made a one-time payment of $750 in the fourth quarter of 2017. The settlement resulted in the dismissal of both lawsuits with prejudice, and included a mutual covenant not to sue for a period of 18 months.

 

In addition to the matters described above, the Company is subject to routine legal proceedings in the ordinary course of business.  The Company believes that the ultimate resolution of these matters will not have a material adverse effect on its business, financial condition or results of operations.

 

v3.8.0.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2018
Stock-Based Compensation  
Stock-Based Compensation

 13. Stock-Based Compensation

 

CPI Card Group Inc. Omnibus Incentive Plan

On December 20, 2017, the Company effected a one-for-five reverse stock split of its common stock, whereby each lot of five shares of common stock issued and outstanding immediately prior to the reverse stock split was converted into and became one share of common stock. Share and per share amounts below reflect the one-for-five reverse stock split for all periods presented.

During October 2015, the Company adopted the CPI Card Group Inc. Omnibus Incentive Plan (the “Omnibus Plan”) pursuant to which cash and equity based incentives may be granted to participating employees, advisors and directors. The Company had reserved 800,000 shares of common stock for issuance under the Omnibus Plan. Effective September 25, 2017, the Omnibus Plan was amended and restated, providing for an increase in the number of shares of common stock authorized for issuance thereunder by 400,000. The increase was made effective in the fourth quarter of 2017 by stockholder approval in accordance with applicable law, after which the Company had reserved 1,200,000 shares of common stock for issuance.  As of March 31, 2018, there were 167,506 shares available for grant under the Omnibus Plan. 

During the three months ended March 31, 2018, the Company granted awards of non-qualified stock options for 31,480 shares of common stock. All stock option grants have a 10-year term and will generally vest ratably over a three-year period beginning on the first anniversary of the grant date.

The following is a summary of the activity in outstanding stock options under the Omnibus Plan:

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of December 31, 2017

 

937,310

 

$

17.11

 

 

 

Granted

 

31,480

 

 

5.02

 

 

 

Forfeited

 

(22,684)

 

 

18.31

 

 

 

Outstanding as of March 31, 2018

 

946,106

 

$

16.68

 

8.98

 

Options vested and exercisable as March 31, 2018

 

112,225

 

 

35.67

 

8.20

 

Options vested and expected to vest as March 31, 2018

 

946,106

 

 

16.68

 

8.98

 

 

 

The following is a summary of the activity in non-vested stock options under the Omnibus Plan:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

    

Number

    

Grant-Date Fair Value

 

 

 

 

 

 

 

 

Non-vested as of December 31, 2017

 

876,903

 

$

4.08

 

Granted

 

31,480

 

 

1.80

 

Forfeited

 

(22,684)

 

 

5.19

 

Vested

 

(51,818)

 

 

4.61

 

Non-vested as of March 31, 2018

 

833,881

 

$

3.93

 

 

Unvested options as of March 31, 2018 will vest as follows:

 

 

 

 

 

2018

    

255,669

 

2019

 

309,357

 

2020

 

256,880

 

2021

 

11,975

 

Total unvested options as of March 31, 2018

 

833,881

 

 

The fair value of the stock option awards granted during the three months ended March 31, 2018 was determined at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:

 

 

 

 

 

 

Three Months

 

 

 

Ended

 

 

 

March

 

 

 

31, 2018

 

Expected term in years (1)

 

6.0

 

Volatility (2)

 

49.0

%

Risk-free interest rate (3)

 

2.3

%

Dividend yield  (4)

 

 -

%


(1)

The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

(2)

During the first quarter of 2018, the Company considered the volatility of its common stock in determining the fair value of stock option awards, in addition to a peer group average historical volatility over the expected option term. The peer group was based on financial technology companies that completed an initial public offering of common stock within the last 10 years.

(3)

The risk-free interest rate was determined by using the United States Treasury rate for the period that coincided with the expected option term.

(4)

The Company discontinued its quarterly dividend program during August 2017.

 

The weighted-average grant-date fair value of options granted was as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

Weighted-average grant-date fair value of options granted

 

$

1.80

 

$

4.68

 

 

The following table summarizes the changes in the number of outstanding restricted stock units for the three month-period ended March 31, 2018:

 

 

 

 

 

 

 

 

    

 

    

  Weighted-

 

 

 

 

 

Average

 

 

 

 

 

Grant-Date

 

 

 

Units

 

Fair Value

 

Outstanding as of December 31, 2017

 

49,677

 

$

16.20

 

Forfeited

 

(1,168)

 

 

22.53

 

Outstanding as of March 31, 2018

 

48,509

 

$

16.05

 

 

There were no awards of restricted stock units during the first quarter of 2018. The restricted stock units contain conditions associated with continued employment or service and generally vest one year from the date of grant. On the vesting dates, shares of common stock will be issue to the award recipients.

 

The following table summarizes the changes in the number of outstanding cash performance units for the three-month period ended March 31, 2018:

 

 

 

 

 

 

 

    

Units

 

 

 

Outstanding as of December 31, 2017

 

822,915

Granted

 

 —

Vested

 

(263,664)

Forfeited

 

(31,923)

Outstanding as of March 31, 2018

 

527,328

 

There were no awards of cash performance units during the three months ended March 31, 2018. These awards will settle in cash in three annual payments on the first, second and third anniversaries of the date of grant. The cash performance units are based on the performance of the Company’s stock, measured based on the Company’s stock price at each of the first, second and third anniversaries of the grant date compared to the Company’s stock price on the date of grant. During the first quarter of 2018, the first tranche of the cash performance units vested. Accordingly, the Company made a cash payment of $137 to the award recipients.

 

The Company recognizes compensation expense on a straight-line basis for each annual performance period. The cash performance units are accounted for as a liability and remeasured to fair value at the end of each reporting period. As of March 31, 2018, the Company recognized a liability of $68 in “Accrued expenses” and $45 in “Other long-term liabilities” in the Condensed Consolidated Balance Sheet for unsettled cash performance units.

Compensation expense for the Omnibus Plan for the three months ended March 31, 2018 and 2017 was $395 and $689, respectively. As of March 31, 2018, the total unrecognized compensation expense related to unvested options, restricted stock units and cash performance unit awards under the Omnibus Plan was $1,720, which the Company expects to recognize over an estimated weighted-average period of 1.6 years.

 

CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan

 

In 2007, the Company’s Board of Directors adopted the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the “Option Plan”). Under the provisions of the Option Plan, stock options may be granted to employees, directors and consultants at an exercise price greater than or equal to (and not less than) the fair market value of a share on the date the option is granted.

 

As a result of the Company’s adoption of the Omnibus Plan, as further described above, no further awards will be made under the Option Plan. The outstanding stock options under the Option Plan are non-qualified, have a 10-year life and are fully vested as of March 31, 2018. 

 

During the three months ended March 31, 2018, there was no activity under the Option Plan. As such, total shares outstanding and exercisable were 6,600 shares with a weighted-average exercise price of $0.002 per share and a weighted-average remaining contract term of 5.16 years at March 31, 2018.

 

Compensation expense and unrecorded compensation expense related to options previously granted under the Option Plan, for the three months ended March 31, 2018 and 2017, were de minimis.

 

Other Stock-Based Compensation Awards

 

During June 2015, the Company issued 38,332 restricted shares of common stock to certain executives of the Company at weighted-average grant-date fair value of $47.40. There are no outstanding unvested restricted shares of common stock as of March 31, 2018.  There was no compensation expense recorded for these awards during the three months ended March 31, 2018.  During the first quarter of 2017, the executive holding the restricted shares changed employment status to a consultant and the Company remeasured the awards and reduced stock-based compensation expense by $143 during the three months ended March 31, 2017. 

v3.8.0.1
Segment Reporting
3 Months Ended
Mar. 31, 2018
Segment Reporting  
Segment Reporting

 14. Segment Reporting

 

The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its revenue, 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 revenue 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 superior to available 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 identify strategies to improve the allocation of resources amongst segments.

 

During the first quarter of 2018, the Company reorganized its United States business operations and realigned its United States reporting segments to correspond with the manner with which the Company’s chief decision maker evaluates operating performance and makes decisions as to the allocation of resources. As a result of this realignment, the Company’s CPI on Demand business operations have been moved from the U.S. Prepaid Debit segment into the U.S. Debit and Credit reporting segment, consistent with the other related personalization operations. Segment information for previous periods has been restated to conform with this realignment and current period presentation.  The restatement of first quarter 2017 segment information was not material. 

 

As of March 31, 2018, the Company’s reportable segments were as follows:

 

    U.S. Debit and Credit,

    U.S. Prepaid Debit,

    U.K. Limited and

    Other.

 

The Other category includes the Company’s corporate headquarters and a less significant operating segment that derives its revenue from the production of Financial Payment Cards and retail gift cards in Canada.

 

Performance Measures of Reportable Segments

 

Revenue and EBITDA of the Company’s reportable segments for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

U.S. Debit and Credit

    

$

37,148

    

$

39,751

 

U.S. Prepaid Debit

 

 

15,512

 

 

9,497

 

U.K. Limited

 

 

4,213

 

 

5,587

 

Other

 

 

2,699

 

 

2,503

 

Intersegment eliminations

 

 

(502)

 

 

(1,330)

 

Total

 

$

59,070

 

$

56,008

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

U.S. Debit and Credit

    

$

5,719

    

$

7,402

 

U.S. Prepaid Debit

 

 

4,819

 

 

2,013

 

U.K. Limited

 

 

(1,102)

 

 

325

 

Other

 

 

(7,968)

 

 

(6,942)

 

Total

 

$

1,468

 

$

2,798

 

 

The following table provides a reconciliation of total segment EBITDA to net (loss) income for the three months ended March 31, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

Total segment EBITDA from continuing operations

 

$

1,468

 

$

2,798

 

Interest, net

 

 

(5,519)

 

 

(5,062)

 

Income tax benefit

 

 

1,985

 

 

2,291

 

Depreciation and amortization

 

 

(5,225)

 

 

(4,533)

 

Net (loss)

 

$

(7,291)

 

$

(4,506)

 

 

Balance Sheet Data of Reportable Segments

 

Total assets of the Company’s reportable segments at March 31, 2018 and December 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

 

U.S. Debit and Credit

 

$

160,708

 

$

164,397

 

U.S. Prepaid Debit

 

 

30,960

 

 

33,130

 

U.K. Limited

 

 

23,286

 

 

22,640

 

Other

 

 

13,949

 

 

13,838

 

Total assets

 

$

228,903

 

$

234,005

 

 

Plant, Equipment and Leasehold Improvement Additions of Geographic Locations

 

Plant, equipment and leasehold improvement additions of the Company’s geographical locations for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

U.S.

 

$

1,582

 

$

2,275

 

Canada

 

 

 2

 

 

72

 

Total North America

 

 

1,584

 

 

2,347

 

U.K.

 

 

3,311

 

 

961

 

Total plant, equipment and leasehold improvement additions

 

$

4,895

 

$

3,308

 

 

Net Sales to Geographic Locations

 

Net sales to geographic locations for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

U.S.

 

$

52,791

 

$

47,811

 

Other (a)

 

 

6,279

 

 

8,197

 

Total net sales

 

$

59,070

 

$

56,008

 


(a)    Amounts in Other include sales to various countries that individually are not material.

 

Long-Lived Assets of Geographic Segments

 

Long-lived assets of the Company’s geographic segments at March 31, 2018 and December 31, 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

U.S.

 

$

127,396

 

$

130,767

 

Canada

 

 

814

 

 

911

 

Total North America

 

 

128,210

 

 

131,678

 

U.K.

 

 

16,196

 

 

12,705

 

Total long-lived assets

 

$

144,406

 

$

144,383

 

 

Net Sales by Product and Services

 

Net sales from products and services sold by the Company for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

 

March 31, 

 

 

    

2018

    

2017

 

Product net sales (a)

 

$

27,560

 

$

29,764

 

Services net sales (b)

 

 

31,510

 

 

26,244

 

Total net sales

 

$

59,070

 

$

56,008

 


(a)   Product net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, contactless and magnetic stripe card formats.  The Company also generates Product revenue from the sale of Card@Once® instant issuance systems, private label credit cards and retail gift cards.

 

(b)   Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards.  The Company also generates Services revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.

v3.8.0.1
Business Overview and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Business Overview and Summary of Significant Accounting Policies  
Basis of Presentation

Basis of Presentation

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results of the interim periods presented. The Condensed Consolidated Balance Sheet as of December 31, 2017 is derived from the audited financial statements as of that date. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

On December 20, 2017, the Company effected a one-for-five reverse stock split of its common stock, whereby each lot of five shares of common stock issued and outstanding immediately prior to the reverse stock split was converted into and became one share of common stock. Share and per share amounts reflect the one-for-five reverse stock split for all periods presented.

Use of Estimates

Use of Estimates

 

Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, valuation allowances for inventories and deferred tax assets, debt, revenue recognized for period-end work in process and stock-based compensation expense. Actual results could differ from those estimates.

Machinery and Equipment Financing

Machinery and Equipment Financing

 

The Company leases certain machinery and equipment under capital leases. The assets and liabilities under these capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. Once ready for their intended use, the assets are depreciated over the lower of their related lease term or their estimated productive lives.

 

Adoption of and Recently Issued Accounting Pronouncements

Adoption of New Accounting Standard

 

As of January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, as amended (“ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires an entity to disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASU 2014-09 as of January 1, 2018 to all its contracts using the modified retrospective method and recognized the cumulative effect of adoption as an adjustment to the opening balance of “Accumulated loss” on the Condensed Consolidated Balance Sheet. Under the new guidance, the Company recognizes certain performance obligations over time as the goods are produced, since those products provide value to only a specified customer, have no alternative use, and the Company has the right to payment for work completed on such items.  This accelerates the timing of revenue recognition for these arrangements, as revenue will be recognized as goods are produced rather than upon shipment or delivery of goods. In addition to accelerating the timing of recording revenue, the Company has recorded decreases in deferred revenue, work in process and finished goods inventories, and an increase to accounts receivable. The comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

See Note 2 “Revenue” for revenue recognition timing and methodology under ASU 2014-09.

The cumulative effects of the adjustments made to the Company’s January 1, 2018 Condensed Consolidated Balance Sheet upon adoption of ASU 2014-09 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

Balance Sheet

 

2017

 

Adjustments

 

2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

37,537

 

$

6,708

 

$

44,245

 

Inventories

 

 

16,237

 

 

(7,003)

 

 

9,234

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

4,177

 

 

(3,659)

 

 

518

 

Deferred income taxes

 

 

12,286

 

 

540

 

 

12,826

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

 

In accordance with ASU 2014-09, the impact on the Company’s Condensed Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Balance Sheet

 

2018

 

Adjustments

 

ASU 2014-09

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

42,277

 

$

(7,039)

 

$

35,238

 

Inventories

 

 

8,603

 

 

5,861

 

 

14,464

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

403

 

 

725

 

 

1,128

 

Deferred income taxes

 

 

11,209

 

 

(540)

 

 

10,669

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(5,861)

 

 

(1,363)

 

 

(7,224)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Statement of Operations and Comprehensive Income (Loss)

 

2018

 

Adjustments

 

ASU 2014-09

 

Net sales:

 

 

 

 

 

 

 

 

 

 

Products

 

$

27,560

 

$

(725)

 

$

26,835

 

Services

 

 

31,510

 

 

223

 

 

31,733

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

19,082

 

 

(841)

 

 

18,241

 

Services (exclusive of depreciation and amortization)

 

 

21,916

 

 

179

 

 

22,095

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

14,442

 

 

160

 

 

14,602

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

1,985

 

 

(34)

 

 

1,951

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(7,291)

 

 

126

 

 

(7,165)

 

 

Recently Issued Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (“ASU 2016-02”), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets.  ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018 (the Company’s fiscal year 2019) with early adoption permitted. The new standard is required to be adopted using a modified retrospective approach. The Company is in the process of assessing the impact of ASU 2016-02 on its results of operations, financial position and consolidated financial statements.

During 2017, the Company early adopted ASU 2017-04,  Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) in conjunction with its annual impairment testing effective October 1, 2017. In accordance with ASU 2017-04,  an entity should perform its goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value.

v3.8.0.1
Business Overview and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
ASU 2014-09, Revenue from Contracts with Customers  
Adoption of New Accounting Standards  
Schedule of adoption of new accounting standards

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

    

Adoption

    

January 1,

 

Balance Sheet

 

2017

 

Adjustments

 

2018

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

37,537

 

$

6,708

 

$

44,245

 

Inventories

 

 

16,237

 

 

(7,003)

 

 

9,234

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

4,177

 

 

(3,659)

 

 

518

 

Deferred income taxes

 

 

12,286

 

 

540

 

 

12,826

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated (loss) earnings

 

 

(1,366)

 

 

2,824

 

 

1,458

 

 

In accordance with ASU 2014-09, the impact on the Company’s Condensed Consolidated Balance Sheet and Statement of Operations and Comprehensive Loss was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Balance Sheet

 

2018

 

Adjustments

 

ASU 2014-09

 

Assets:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

42,277

 

$

(7,039)

 

$

35,238

 

Inventories

 

 

8,603

 

 

5,861

 

 

14,464

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Deferred revenue and customer deposits

 

 

403

 

 

725

 

 

1,128

 

Deferred income taxes

 

 

11,209

 

 

(540)

 

 

10,669

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

 

 

Accumulated loss

 

 

(5,861)

 

 

(1,363)

 

 

(7,224)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

 

 

 

 

 

Balances

 

 

 

As Reported

 

 

 

Without

 

 

 

March 31,

    

 

    

Adoption of

 

Statement of Operations and Comprehensive Income (Loss)

 

2018

 

Adjustments

 

ASU 2014-09

 

Net sales:

 

 

 

 

 

 

 

 

 

 

Products

 

$

27,560

 

$

(725)

 

$

26,835

 

Services

 

 

31,510

 

 

223

 

 

31,733

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

Products (exclusive of depreciation and amortization)

 

 

19,082

 

 

(841)

 

 

18,241

 

Services (exclusive of depreciation and amortization)

 

 

21,916

 

 

179

 

 

22,095

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

14,442

 

 

160

 

 

14,602

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

 

1,985

 

 

(34)

 

 

1,951

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(7,291)

 

 

126

 

 

(7,165)

 

 

v3.8.0.1
Revenue (Tables)
3 Months Ended
Mar. 31, 2018
Revenue  
Schedule of disaggregation of revenue by major source

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2018

 

 

 

Products

 

Services

 

Total

 

U.S. Debit and Credit

 

$

23,720

 

$

13,428

 

$

37,148

 

U.S. Prepaid Debit

 

 

 -

 

 

15,512

 

 

15,512

 

U.K. Limited

 

 

2,816

 

 

1,397

 

 

4,213

 

Other

 

 

1,375

 

 

1,324

 

 

2,699

 

Intersegment eliminations

 

 

(351)

 

 

(151)

 

 

(502)

 

Total

 

$

27,560

 

$

31,510

 

$

59,070

 

 

v3.8.0.1
Accounts Receivable (Tables)
3 Months Ended
Mar. 31, 2018
Accounts Receivable  
Schedule of accounts receivable

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Trade accounts receivable

 

$

35,291

 

$

37,590

 

Unbilled accounts receivable

 

 

7,039

 

 

 —

 

 

 

 

42,330

 

 

37,590

 

Less allowance for doubtful accounts

 

 

(53)

 

 

(53)

 

 

 

$

42,277

 

$

37,537

 

 

v3.8.0.1
Inventories (Tables)
3 Months Ended
Mar. 31, 2018
Inventories  
Schedule of inventories

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Raw materials

 

$

6,282

 

$

6,498

 

Work-in-process

 

 

 —

 

 

6,557

 

Finished goods

 

 

2,321

 

 

3,182

 

 

 

$

8,603

 

$

16,237

 

 

v3.8.0.1
Plant, Equipment and Leasehold Improvements (Tables)
3 Months Ended
Mar. 31, 2018
Plant, Equipment and Leasehold Improvements  
Schedule of plant, equipment and leasehold improvements

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

    

Buildings

 

$

2,363

 

$

2,318

 

Machinery and equipment

 

 

63,640

 

 

62,318

 

Machinery and equipment under capital leases

 

 

3,734

 

 

 —

 

Furniture, fixtures and computer equipment

 

 

7,626

 

 

7,585

 

Leasehold improvements

 

 

19,782

 

 

19,754

 

Construction in progress

 

 

1,393

 

 

1,980

 

 

 

 

98,538

 

 

93,955

 

Less accumulated depreciation

 

 

(48,294)

 

 

(44,655)

 

 

 

$

50,244

 

$

49,300

 

 

v3.8.0.1
Goodwill and Other Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2018
Goodwill and Other Intangible Assets  
Schedule of goodwill by reportable segment

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

U.S. Debit and Credit

 

$

47,150

 

$

47,150

U.K. Limited

 

 

6,709

 

 

6,461

 

 

$

53,859

 

$

53,611

 

Schedule of intangible assets excluding goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018

 

December 31, 2017

 

 

 

Average Life

 

 

 

 

Accumulated

 

Net Book

 

 

 

 

Accumulated

 

Net Book

 

 

 

(Years)

 

Cost

 

Amortization

 

Value

 

Cost

 

Amortization

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

   

12

to

20

  

$

59,026

  

$

(25,329)

 

$

33,697

   

$

58,895

   

$

(24,373)

 

$

34,522

 

Technology and software

 

 7

to

10

 

 

7,101

 

 

(3,327)

 

 

3,774

 

 

7,101

 

 

(3,095)

 

 

4,006

 

Trademarks

 

7.5

to

10

 

 

3,330

 

 

(584)

 

 

2,746

 

 

3,330

 

 

(487)

 

 

2,843

 

Non-compete agreements

 

 5

to

 8

 

 

491

 

 

(405)

 

 

86

 

 

491

 

 

(390)

 

 

101

 

Intangible assets subject to amortization

 

 

 

 

 

$

69,948

 

$

(29,645)

 

$

40,303

 

$

69,817

 

$

(28,345)

 

$

41,472

 

 

Schedule of future aggregate amortization expense for identified amortizable intangibles

 

 

 

 

2018 (remaining 9 months)

 

$

3,666

2019

    

 

4,868

2020

 

 

4,828

2021

 

 

4,585

2022

 

 

4,100

Thereafter

 

 

18,256

 

 

$

40,303

 

v3.8.0.1
Fair Value of Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2018
Fair Value of Financial Instruments  
Schedule of financial assets and liabilities subject to fair value measurements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value as of

 

Fair Value as of 

 

Fair Value Measurement at March 31, 2018

 

 

 

March 31, 

 

March 31, 

 

 (Using Fair Value Hierarchy)

 

 

 

2018

 

2018

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

First Lien Term Loan

 

$

312,500

 

$

217,188

 

$

 

$

217,188

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying Value as of 

 

Fair Value as of

 

Fair Value Measurement at December 31, 2017

 

 

 

December 31, 

 

December 31, 

 

 (Using Fair Value Hierarchy)

 

 

 

2017

 

2017

 

Level 1

 

Level 2

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

    

 

    

    

 

    

    

 

    

    

 

    

    

 

    

 

First Lien Term Loan

 

$

312,500

 

$

228,125

 

$

 

$

228,125

 

$

 —

 

 

v3.8.0.1
Long-Term Debt and Credit Facility (Tables)
3 Months Ended
Mar. 31, 2018
Long-Term Debt and Credit Facility  
Schedule of long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Interest

    

March 31,

    

December 31,

 

 

 

Rate (1)

 

2018

 

2017

 

First Lien Term Loan (1)

 

6.36

%  

$

312,500

 

$

312,500

 

Unamortized discount

 

 

 

 

(2,954)

 

 

(3,122)

 

Unamortized deferred financing costs

 

 

 

 

(5,191)

 

 

(5,509)

 

Long-term debt

 

 

 

$

304,355

 

$

303,869

 


(1)   Interest rate at March 31, 2018.  Interest rate at December 31, 2017 was 5.96%.

v3.8.0.1
Loss per Share (Tables)
3 Months Ended
Mar. 31, 2018
Loss per Share  
Computation of basic and diluted (loss) EPS

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

 

2018

 

2017

 

Numerator:

 

 

    

    

 

    

    

Net loss

 

$

(7,291)

 

$

(4,506)

 

Denominator: 

 

 

 

 

 

 

 

Basic-weighted-average common shares outstanding

 

 

11,134,714

 

 

11,084,875

 

Diluted-weighted-average common shares outstanding

 

 

11,134,714

 

 

11,084,875

 

Loss per share:

 

 

 

 

 

 

 

Basic

 

$

(0.65)

 

$

(0.40)

 

Diluted

 

$

(0.65)

 

$

(0.40)

 

 

v3.8.0.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies.  
Schedule of equipment under capital leases

 

 

 

 

 

March 31, 

 

 

2018

 

Machinery and equipment

$

3,561

 

Less current portion of capital lease obligations

 

(699)

 

Total long-term capital lease obligations

$

2,862

 

 

v3.8.0.1
Stock Based Compensation (Tables)
3 Months Ended
Mar. 31, 2018
Summary of changes in number of outstanding cash performance units

 

 

 

 

 

 

 

    

Units

 

 

 

Outstanding as of December 31, 2017

 

822,915

Granted

 

 —

Vested

 

(263,664)

Forfeited

 

(31,923)

Outstanding as of March 31, 2018

 

527,328

 

Summary of changes in outstanding restricted stock units

 

 

 

 

 

 

 

 

    

 

    

  Weighted-

 

 

 

 

 

Average

 

 

 

 

 

Grant-Date

 

 

 

Units

 

Fair Value

 

Outstanding as of December 31, 2017

 

49,677

 

$

16.20

 

Forfeited

 

(1,168)

 

 

22.53

 

Outstanding as of March 31, 2018

 

48,509

 

$

16.05

 

 

Omnibus Plan  
Summary of outstanding and exercisable stock options

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

Weighted-

  

 

 

 

 

Weighted-

 

Average

 

 

 

 

 

Average

 

Remaining

 

 

 

 

 

Exercise

 

Contractual Term

 

 

 

Options

 

Price

 

(in Years)

 

Outstanding as of December 31, 2017

 

937,310

 

$

17.11

 

 

 

Granted

 

31,480

 

 

5.02

 

 

 

Forfeited

 

(22,684)

 

 

18.31

 

 

 

Outstanding as of March 31, 2018

 

946,106

 

$

16.68

 

8.98

 

Options vested and exercisable as March 31, 2018

 

112,225

 

 

35.67

 

8.20

 

Options vested and expected to vest as March 31, 2018

 

946,106

 

 

16.68

 

8.98

 

 

Summary of activity in non-vested stock options

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

    

Number

    

Grant-Date Fair Value

 

 

 

 

 

 

 

 

Non-vested as of December 31, 2017

 

876,903

 

$

4.08

 

Granted

 

31,480

 

 

1.80

 

Forfeited

 

(22,684)

 

 

5.19

 

Vested

 

(51,818)

 

 

4.61

 

Non-vested as of March 31, 2018

 

833,881

 

$

3.93

 

 

Schedule of vesting for unvested options

 

 

 

 

2018

    

255,669

 

2019

 

309,357

 

2020

 

256,880

 

2021

 

11,975

 

Total unvested options as of March 31, 2018

 

833,881

 

 

Schedule of valuation assumptions

 

 

 

 

 

 

Three Months

 

 

 

Ended

 

 

 

March

 

 

 

31, 2018

 

Expected term in years (1)

 

6.0

 

Volatility (2)

 

49.0

%

Risk-free interest rate (3)

 

2.3

%

Dividend yield  (4)

 

 -

%


(1)

The Company estimated the expected term based on the average of the weighted-average vesting period and the contractual term of the stock option awards by utilizing the “simplified method”, as the Company does not have sufficient available historical data to estimate the expected term of these stock option awards.

(2)

During the first quarter of 2018, the Company considered the volatility of its common stock in determining the fair value of stock option awards, in addition to a peer group average historical volatility over the expected option term. The peer group was based on financial technology companies that completed an initial public offering of common stock within the last 10 years.

(3)

The risk-free interest rate was determined by using the United States Treasury rate for the period that coincided with the expected option term.

(4)

The Company discontinued its quarterly dividend program during August 2017.

 

Weighted average grant date fair value of options granted

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

Weighted-average grant-date fair value of options granted

 

$

1.80

 

$

4.68

 

 

v3.8.0.1
Segment Reporting (Tables)
3 Months Ended
Mar. 31, 2018
Segment Reporting  
Schedule of revenue and EBITDA of the company's reportable segments

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

U.S. Debit and Credit

    

$

37,148

    

$

39,751

 

U.S. Prepaid Debit

 

 

15,512

 

 

9,497

 

U.K. Limited

 

 

4,213

 

 

5,587

 

Other

 

 

2,699

 

 

2,503

 

Intersegment eliminations

 

 

(502)

 

 

(1,330)

 

Total

 

$

59,070

 

$

56,008

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

Three Months Ended March 31, 

 

 

 

2018

 

2017

 

U.S. Debit and Credit

    

$

5,719

    

$

7,402

 

U.S. Prepaid Debit

 

 

4,819

 

 

2,013

 

U.K. Limited

 

 

(1,102)

 

 

325

 

Other

 

 

(7,968)

 

 

(6,942)

 

Total

 

$

1,468

 

$

2,798

 

 

Schedule of reconciliation of total segment EBITDA to income before taxes

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

Total segment EBITDA from continuing operations

 

$

1,468

 

$

2,798

 

Interest, net

 

 

(5,519)

 

 

(5,062)

 

Income tax benefit

 

 

1,985

 

 

2,291

 

Depreciation and amortization

 

 

(5,225)

 

 

(4,533)

 

Net (loss)

 

$

(7,291)

 

$

(4,506)

 

 

Schedule of total assets of the company's reportable segments

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

 

 

 

 

 

 

 

 

U.S. Debit and Credit

 

$

160,708

 

$

164,397

 

U.S. Prepaid Debit

 

 

30,960

 

 

33,130

 

U.K. Limited

 

 

23,286

 

 

22,640

 

Other

 

 

13,949

 

 

13,838

 

Total assets

 

$

228,903

 

$

234,005

 

 

Schedule of plant, equipment and leasehold improvement additions of geographic locations

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

U.S.

 

$

1,582

 

$

2,275

 

Canada

 

 

 2

 

 

72

 

Total North America

 

 

1,584

 

 

2,347

 

U.K.

 

 

3,311

 

 

961

 

Total plant, equipment and leasehold improvement additions

 

$

4,895

 

$

3,308

 

 

Schedule of net sales of company's geographic locations

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

    

2018

    

2017

 

U.S.

 

$

52,791

 

$

47,811

 

Other (a)

 

 

6,279

 

 

8,197

 

Total net sales

 

$

59,070

 

$

56,008

 


(a)    Amounts in Other include sales to various countries that individually are not material.

Schedule of Long lived assets of the company's geographic segments

 

 

 

 

 

 

 

 

 

 

    

March 31, 2018

    

December 31, 2017

 

U.S.

 

$

127,396

 

$

130,767

 

Canada

 

 

814

 

 

911

 

Total North America

 

 

128,210

 

 

131,678

 

U.K.

 

 

16,196

 

 

12,705

 

Total long-lived assets

 

$

144,406

 

$

144,383

 

 

Schedule of net sales from product and services sold by the company

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

 

 

 

March 31, 

 

 

    

2018

    

2017

 

Product net sales (a)

 

$

27,560

 

$

29,764

 

Services net sales (b)

 

 

31,510

 

 

26,244

 

Total net sales

 

$

59,070

 

$

56,008

 


(a)   Product net sales include the design and production of Financial Payment Cards in contact-EMV, Dual-Interface EMV, contactless and magnetic stripe card formats.  The Company also generates Product revenue from the sale of Card@Once® instant issuance systems, private label credit cards and retail gift cards.

 

(b)   Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, providing tamper-evident security packaging and fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards.  The Company also generates Services revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company’s patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.

v3.8.0.1
Business Overview and Summary of Significant Accounting Policies - Business Overview and Basis of Presentation (Details)
$ in Thousands
1 Months Ended 3 Months Ended
Dec. 20, 2017
Feb. 28, 2018
item
Mar. 31, 2018
USD ($)
item
Business Overview and Summary of Significant Accounting Policies      
Minimum number of payment card brands which certify card services     1
Number of personalization operations consolidated   3  
Number of facilities personalization operations were consolidated into   2  
Accelerated depreciation | $     $ 800
Severance charge | $     $ 329
Reverse stock split 0.20    
v3.8.0.1
Business Overview and Summary of Significant Accounting Policies - Adoption of New Accounting Standard (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Jan. 02, 2018
Dec. 31, 2017
Assets        
Accounts receivable, net $ 42,277   $ 44,245 $ 37,537
Inventories 8,603   9,234 16,237
Liabilities        
Deferred revenue and customer deposits 403   518 4,177
Deferred income taxes 11,209   12,826 12,286
Stockholders' deficit:        
Accumulated loss (5,861)   1,458 $ (1,366)
Net sales:        
Revenues 59,070 $ 56,008    
Cost of sales:        
Gross profit 14,442 16,095    
Income tax benefit (expense) 1,985 2,291    
Net income (loss) (7,291) (4,506)    
Balance without adoption of ASU 2014-09 | ASU 2014-09, Revenue from Contracts with Customers        
Assets        
Accounts receivable, net 35,238      
Inventories 14,464      
Liabilities        
Deferred revenue and customer deposits 1,128      
Deferred income taxes 10,669      
Stockholders' deficit:        
Accumulated loss (7,224)      
Cost of sales:        
Gross profit 14,602      
Income tax benefit (expense) 1,951      
Net income (loss) (7,165)      
Adjustment        
Assets        
Accounts receivable, net     6,708  
Inventories     (7,003)  
Liabilities        
Deferred revenue and customer deposits     (3,659)  
Deferred income taxes     540  
Stockholders' deficit:        
Accumulated loss     $ 2,824  
Adjustment | ASU 2014-09, Revenue from Contracts with Customers        
Assets        
Accounts receivable, net (7,039)      
Inventories 5,861      
Liabilities        
Deferred revenue and customer deposits 725      
Deferred income taxes (540)      
Stockholders' deficit:        
Accumulated loss (1,363)      
Cost of sales:        
Gross profit 160      
Income tax benefit (expense) (34)      
Net income (loss) 126      
Products        
Net sales:        
Revenues 27,560 29,764    
Cost of sales:        
Products (exclusive of depreciation and amortization shown below) 19,082 19,688    
Products | Balance without adoption of ASU 2014-09 | ASU 2014-09, Revenue from Contracts with Customers        
Net sales:        
Revenues 26,835      
Cost of sales:        
Products (exclusive of depreciation and amortization shown below) 18,241      
Products | Adjustment | ASU 2014-09, Revenue from Contracts with Customers        
Net sales:        
Revenues (725)      
Cost of sales:        
Products (exclusive of depreciation and amortization shown below) (841)      
Services        
Net sales:        
Revenues 31,510 26,244    
Cost of sales:        
Services (exclusive of depreciation and amortization shown below) 21,916 $ 17,441    
Services | Balance without adoption of ASU 2014-09 | ASU 2014-09, Revenue from Contracts with Customers        
Net sales:        
Revenues 31,733      
Cost of sales:        
Services (exclusive of depreciation and amortization shown below) 22,095      
Services | Adjustment | ASU 2014-09, Revenue from Contracts with Customers        
Net sales:        
Revenues 223      
Cost of sales:        
Services (exclusive of depreciation and amortization shown below) $ 179      
v3.8.0.1
Revenue (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2018
USD ($)
Disaggregation of Revenue  
Revenue $ 59,070
Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Revenue 37,148
Operating Segments | U.S. Prepaid Debit  
Disaggregation of Revenue  
Revenue 15,512
Operating Segments | U.K. Limited  
Disaggregation of Revenue  
Revenue 4,213
Operating Segments | Other  
Disaggregation of Revenue  
Revenue 2,699
Intersegment eliminations  
Disaggregation of Revenue  
Revenue (502)
Products  
Disaggregation of Revenue  
Revenue 27,560
Products | Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Revenue 23,720
Products | Operating Segments | U.K. Limited  
Disaggregation of Revenue  
Revenue 2,816
Products | Operating Segments | Other  
Disaggregation of Revenue  
Revenue 1,375
Products | Intersegment eliminations  
Disaggregation of Revenue  
Revenue (351)
Services  
Disaggregation of Revenue  
Revenue 31,510
Services | Operating Segments | U.S. Debit and Credit  
Disaggregation of Revenue  
Revenue 13,428
Services | Operating Segments | U.S. Prepaid Debit  
Disaggregation of Revenue  
Revenue 15,512
Services | Operating Segments | U.K. Limited  
Disaggregation of Revenue  
Revenue 1,397
Services | Operating Segments | Other  
Disaggregation of Revenue  
Revenue 1,324
Services | Intersegment eliminations  
Disaggregation of Revenue  
Revenue $ (151)
v3.8.0.1
Accounts Receivable (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Jan. 02, 2018
Dec. 31, 2017
Accounts Receivable      
Trade accounts receivable $ 35,291   $ 37,590
Unbilled accounts receivable 7,039    
Accounts receivable, gross 42,330   37,590
Less allowance for doubtful accounts (53)   (53)
Accounts receivable, net $ 42,277 $ 44,245 $ 37,537
v3.8.0.1
Inventories (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Jan. 02, 2018
Dec. 31, 2017
Inventories      
Raw materials $ 6,282   $ 6,498
Work-in-process     6,557
Finished goods 2,321   3,182
Inventory $ 8,603 $ 9,234 $ 16,237
v3.8.0.1
Plant, Equipment and Leasehold Improvements (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross $ 98,538   $ 93,955
Less accumulated depreciation and amortization (48,294)   (44,655)
Plant, equipment and leasehold improvements, net 50,244   49,300
Depreciation 4,004 $ 3,310  
Buildings      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross 2,363   2,318
Machinery and equipment      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross 63,640   62,318
Machinery and equipment under capital leases      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross 3,734    
Furniture, fixtures and computer equipment      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross 7,626   7,585
Leasehold improvements      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross 19,782   19,754
Construction in progress      
Plant, Equipment and Leasehold Improvements      
Plant, equipment and leasehold improvements, gross $ 1,393   $ 1,980
v3.8.0.1
Goodwill and Other Intangible Assets - Goodwill by Reporting Segment (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Goodwill $ 53,859 $ 53,611
U.S. Debit and Credit    
Goodwill 47,150 47,150
U.K. Limited    
Goodwill $ 6,709 $ 6,461
v3.8.0.1
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Intangible Assets [Line Items]      
Intangible amortization expense $ 1,221 $ 1,223  
Intangible assets subject to amortization, Cost 69,948   $ 69,817
Intangible assets subject to amortization, Accumulated Amortization (29,645)   (28,345)
Intangible assets subject to amortization, Net Book Value 40,303   41,472
Customer relationships      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost 59,026   58,895
Intangible assets subject to amortization, Accumulated Amortization (25,329)   (24,373)
Intangible assets subject to amortization, Net Book Value $ 33,697   $ 34,522
Customer relationships | Minimum      
Intangible Assets [Line Items]      
Average Life (Years) 12 years   12 years
Customer relationships | Maximum      
Intangible Assets [Line Items]      
Average Life (Years) 20 years   20 years
Technology and software      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost $ 7,101   $ 7,101
Intangible assets subject to amortization, Accumulated Amortization (3,327)   (3,095)
Intangible assets subject to amortization, Net Book Value $ 3,774   $ 4,006
Technology and software | Minimum      
Intangible Assets [Line Items]      
Average Life (Years) 7 years   7 years
Technology and software | Maximum      
Intangible Assets [Line Items]      
Average Life (Years) 10 years   10 years
Trademarks      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost $ 3,330   $ 3,330
Intangible assets subject to amortization, Accumulated Amortization (584)   (487)
Intangible assets subject to amortization, Net Book Value $ 2,746   $ 2,843
Trademarks | Minimum      
Intangible Assets [Line Items]      
Average Life (Years) 7 years 6 months   7 years 6 months
Trademarks | Maximum      
Intangible Assets [Line Items]      
Average Life (Years) 10 years   10 years
Non-compete agreements      
Intangible Assets [Line Items]      
Intangible assets subject to amortization, Cost $ 491   $ 491
Intangible assets subject to amortization, Accumulated Amortization (405)   (390)
Intangible assets subject to amortization, Net Book Value $ 86   $ 101
Non-compete agreements | Minimum      
Intangible Assets [Line Items]      
Average Life (Years) 5 years   5 years
Non-compete agreements | Maximum      
Intangible Assets [Line Items]      
Average Life (Years) 8 years   8 years
v3.8.0.1
Goodwill and Other Intangible Assets - Future Aggregate Amortization Expense (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Estimated future aggregate amortization expense    
2018 (remaining 9 months) $ 3,666  
2019 4,868  
2020 4,828  
2021 4,585  
2022 4,100  
Thereafter 18,256  
Intangible assets subject to amortization, Net Book Value $ 40,303 $ 41,472
v3.8.0.1
Fair Value of Financial Instruments (Details) - First Lien Credit Facility - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Liabilities:    
Carrying amount $ 312,500 $ 312,500
Term Loan    
Liabilities:    
Carrying amount 312,500 312,500
Long-term debt 217,188 228,125
Level 2 | Term Loan    
Liabilities:    
Long-term debt $ 217,188 $ 228,125
v3.8.0.1
Long-Term Debt and Credit Facility - Long-Term Debt (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]    
Unamortized discount $ (2,954) $ (3,122)
Unamortized deferred financing costs (5,191) (5,509)
Total long-term debt $ 304,355 $ 303,869
First Lien Credit Facility    
Debt Instrument [Line Items]    
Interest rate (as a percent) 6.36% 5.96%
Long-term debt $ 312,500 $ 312,500
v3.8.0.1
Long-Term Debt and Credit Facility - First Lien Credit Facility (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Aug. 17, 2015
USD ($)
Mar. 31, 2018
USD ($)
letter
Dec. 31, 2017
USD ($)
Long-term Debt      
Fee on outstanding letters of credit (as a percent)   4.50% 4.50%
Fronting fee for letters of credit (as a percent)   0.125% 0.125%
Number of outstanding letters of credit | letter   1  
Letters of credit outstanding   $ 50  
Accrued expenses      
Long-term Debt      
Accrued interest   $ 4,526 $ 4,296
First Lien Credit Facility      
Long-term Debt      
Maximum net leverage ratio 7.00    
Eurodollar rate | First Lien Credit Facility      
Long-term Debt      
Applicable margin over reference rate (as a percent)   4.50%  
Eurodollar rate | First Lien Credit Facility | Minimum      
Long-term Debt      
Interest rate (as a percent)   1.00%  
Base rate | First Lien Credit Facility      
Long-term Debt      
Applicable margin over reference rate (as a percent)   3.50%  
Term Loan | First Lien Credit Facility      
Long-term Debt      
Maximum borrowing capacity $ 435,000    
Revolving Credit Facility      
Long-term Debt      
Amount outstanding   $ 0  
Remaining borrowing capacity   $ 19,950  
Revolving Credit Facility | Minimum      
Long-term Debt      
Unused commitment fee (as a percent)   0.375% 0.375%
Revolving Credit Facility | Maximum      
Long-term Debt      
Unused commitment fee (as a percent)   0.50% 0.50%
Revolving Credit Facility | First Lien Credit Facility      
Long-term Debt      
Maximum borrowing capacity $ 40,000    
Amount drawn to trigger net leverage requirement (as a percent)   50.00%  
v3.8.0.1
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Mar. 30, 2018
Income Taxes        
Income tax benefit $ 1,985 $ 2,291    
(Loss) income before income taxes        
Loss before income taxes $ 9,276 $ 6,797    
Effective income tax rate (as a percent) 21.40% 33.70%    
Federal statutory rate (as a percent) 21.00%   35.00%  
Tax benefit related to the net change in deferred tax liabilities     $ 7,057  
Tax liability from final determination       $ 678
Liability on foreign unremitted earnings $ 0      
v3.8.0.1
Stockholders' Deficit (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Aug. 31, 2017
Mar. 31, 2017
Dividends, Common Stock [Abstract]    
Dividends paid on common stock   $ 2,527
Cash dividend paid per common share   $ 0.225
Amount of discontinued quarterly dividends $ 0.225  
v3.8.0.1
Loss per Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Numerator:    
Net loss $ (7,291) $ (4,506)
Denominator:    
Basic EPS—weighted average common shares outstanding (in shares) 11,134,714 11,084,875
Diluted EPS—weighted average common shares outstanding (in shares) 11,134,714 11,084,875
Loss per share:    
Basic (in dollars per share) $ (0.65) $ (0.40)
Diluted (in dollars per share) $ (0.65) $ (0.40)
Stock Options    
Outstanding stock based awards    
Potential dilutive effect of share-based compensation excluded (in shares) 952,706 465,174
Restricted stock units    
Outstanding stock based awards    
Potential dilutive effect of share-based compensation excluded (in shares) 48,509 37,352
v3.8.0.1
Commitments and Contingencies - Capital Lease (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Commitments and Contingencies.    
Operating leases, rent expense $ 934 $ 953
Machinery and equipment capital lease obligations 3,561  
Less current portion of capital lease obligations (699)  
Total long-term capital lease obligations $ 2,862  
v3.8.0.1
Commitments and Contingencies - Contingencies (Details)
3 Months Ended
Sep. 28, 2017
item
Jun. 15, 2016
plaintiff
Dec. 31, 2017
USD ($)
Mar. 31, 2018
USD ($)
Securities Litigation Case | Pending Litigation        
Commitments and Contingencies        
Number of purported shareholders that have filed lawsuits | plaintiff   2    
Loss contingency accrual     $ 0 $ 0
Heckermann Montross Suit | Pending Litigation        
Commitments and Contingencies        
Loss contingency accrual     0 $ 0
Gemalto Suit | Settled Litigation        
Commitments and Contingencies        
The number of patents involved in lawsuit | item 2      
One-time settlement payment amount     $ 750,000  
Period of no lawsuits upon settlement agreement 18 months      
v3.8.0.1
Stock Based Compensation - Omnibus Incentive Plan (Details)
$ / shares in Units, $ in Thousands
3 Months Ended
Dec. 20, 2017
Sep. 25, 2017
shares
Mar. 31, 2018
USD ($)
$ / shares
shares
Mar. 31, 2017
USD ($)
$ / shares
Oct. 31, 2015
shares
Stock-based compensation          
Reverse stock split 0.20        
Omnibus Plan          
Valuation Assumptions:          
Compensation expense | $     $ 395 $ 689  
Omnibus Plan | Stock Options          
Stock-based compensation          
Number of shares authorized   1,200,000     800,000
Number of additional shares authorized   400,000      
Number of shares available for grant     167,506    
Stock options granted (in shares)     31,480    
Stock option life (in years)     10 years    
Number of shares          
Balance at beginning of year (in shares)     937,310    
Granted (in shares)     31,480    
Forfeited (in shares)     (22,684)    
Balance at end of year (in shares)     946,106    
Options: Options vested and exercisable     112,225    
Options: Options vested and expected to vest     946,106    
Weighted-Average Exercise Price          
Balance at beginning of year (in dollars per share) | $ / shares     $ 17.11    
Granted (in dollars per share) | $ / shares     5.02    
Forfeited (in dollars per share) | $ / shares     18.31    
Balance at end of year (in dollars per share) | $ / shares     16.68    
Weighted-Average Exercise Price: Options vested and exercisable | $ / shares     35.67    
Weighted-Average Exercise Price: Options vested and expected to vest | $ / shares     $ 16.68    
Weighted- Average Remaining Contractual Term (in Years)          
Balance (in years)     8 years 11 months 23 days    
Weighted-Average Remaining Contractual Term (in Years): Options vested and exercisable     8 years 2 months 12 days    
Weighted-Average Remaining Contractual Term (in Years): Options vested and expected to vest     8 years 11 months 23 days    
Number of unvested options scheduled to vest          
Non-Vested Options as of beginning of period     876,903    
Granted (in shares)     31,480    
Forfeited (in shares)     (22,684)    
Vested (in shares)     (51,818)    
Non-Vested Options as of end of period     833,881    
Weighted-Average Grant Date Fair Value          
Non-Vested, beginning balance | $ / shares     $ 4.08    
Granted: Weighted-Average Grant Date Fair Value | $ / shares     1.80 $ 4.68  
Forfeited: Weighted-Average Grant Date Fair Value | $ / shares     5.19    
Vested: Weighted-Average Grant Date Fair Value | $ / shares     4.61    
Non-Vested, ending balance | $ / shares     $ 3.93    
Valuation Assumptions:          
Expected term in years     6 years    
Volatility (as a percent)     49.00%    
Risk-free interest rate     2.30%    
Period of initial public offering of common stock used for volatility rate     10 years    
Awards vesting beginning the first anniversary of the grant date | Stock Options          
Stock-based compensation          
Vesting period     3 years    
2018 | Omnibus Plan | Stock Options          
Number of unvested options scheduled to vest          
Non-Vested Options as of end of period     255,669    
2019 | Omnibus Plan | Stock Options          
Number of unvested options scheduled to vest          
Non-Vested Options as of end of period     309,357    
2020 | Omnibus Plan | Stock Options          
Number of unvested options scheduled to vest          
Non-Vested Options as of end of period     256,880    
2021 | Omnibus Plan | Stock Options          
Number of unvested options scheduled to vest          
Non-Vested Options as of end of period     11,975    
v3.8.0.1
Stock Based Compensation - Restricted Stock Units (Details) - Omnibus Plan - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Weighted Average Grant Date Fair Value    
Compensation expense $ 395 $ 689
Restricted stock units    
Number of Restricted Stock Units    
Units outstanding at the beginning of the period (in shares) 49,677  
Granted (in shares) 0  
Forfeited (in shares) (1,168)  
Units outstanding at the end of the period (in shares) 48,509  
Weighted Average Grant Date Fair Value    
Units outstanding at the beginning of the period (in dollars per shares) $ 16.20  
Forfeited (in dollars per share) 22.53  
Units outstanding at the end of the period (in dollars per shares) $ 16.05  
Unrecognized compensation expense $ 1,720  
Period over which compensation expense expected to recognize 1 year 7 months 6 days  
v3.8.0.1
Stock Based Compensation - Cash Performance Units (Details) - Cash Performance
$ in Thousands
3 Months Ended
Mar. 31, 2018
USD ($)
shares
Stock-based compensation  
Period over which compensation expense expected to recognize 3 years
Cash payments made | $ $ 137
Number of Cash Performance Units  
Units outstanding at the beginning of the period (in shares) 822,915
Granted (in shares) 0
Vested (in shares) (263,664)
Forfeited (in shares) (31,923)
Units outstanding at the end of the period (in shares) 527,328
Accrued expenses  
Stock-based compensation  
Cash performance liability | $ $ 68
Other Long Term Liabilities  
Stock-based compensation  
Cash performance liability | $ $ 45
v3.8.0.1
Stock Based Compensation - Option Plan (Details) - Stock Options - Option Plan
3 Months Ended
Mar. 31, 2018
$ / shares
shares
Stock-based compensation  
Stock option life (in years) 10 years
Number of shares  
Balance at end of year (in shares) | shares 6,600
Weighted-Average Exercise Price  
Exercisable at end of year (in dollars per share) | $ / shares $ 0.002
Weighted- Average Remaining Contractual Term (in Years)  
Balance (in years) 5 years 1 month 28 days
v3.8.0.1
Stock Based Compensation - Restricted Shares (Details) - Restricted shares - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended
Jun. 30, 2015
Mar. 31, 2018
Mar. 31, 2017
Weighted Average Grant Date Fair Value      
Compensation expense   $ 0 $ (143)
Common Stock      
Number of Restricted Stock Units      
Granted (in shares) 38,332    
Units outstanding at the end of the period (in shares)   0  
Weighted Average Grant Date Fair Value      
Granted (in dollars per share) $ 47.40    
v3.8.0.1
Segment Reporting - Revenue and EBITDA from Continuing Operations (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Segment Reporting    
Revenues $ 59,070 $ 56,008
EBITDA 1,468 2,798
U.S. Debit and Credit    
Segment Reporting    
EBITDA 5,719 7,402
U.S. Prepaid Debit    
Segment Reporting    
EBITDA 4,819 2,013
U.K. Limited    
Segment Reporting    
EBITDA (1,102) 325
Other    
Segment Reporting    
EBITDA (7,968) (6,942)
Operating Segments | U.S. Debit and Credit    
Segment Reporting    
Revenues 37,148 39,751
Operating Segments | U.S. Prepaid Debit    
Segment Reporting    
Revenues 15,512 9,497
Operating Segments | U.K. Limited    
Segment Reporting    
Revenues 4,213 5,587
Operating Segments | Other    
Segment Reporting    
Revenues 2,699 2,503
Intersegment eliminations    
Segment Reporting    
Revenues $ (502) $ (1,330)
v3.8.0.1
Segment Reporting - Reconciliation of EBITDA from Continuing Operations to "Net (Loss) Income from Continuing Operations" (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Reconciliation of total segment EBITDA to income before taxes    
Total segment EBITDA from continuing operations $ 1,468 $ 2,798
Interest, net (5,519) (5,062)
Income tax benefit (expense) 1,985 2,291
Depreciation and amortization (5,225) (4,533)
Net loss $ (7,291) $ (4,506)
v3.8.0.1
Segment Reporting - Balance Sheet Data (Details) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Segment Reporting    
Total assets $ 228,903 $ 234,005
Operating Segments | U.S. Debit and Credit    
Segment Reporting    
Total assets 160,708 164,397
Operating Segments | U.S. Prepaid Debit    
Segment Reporting    
Total assets 30,960 33,130
Operating Segments | U.K. Limited    
Segment Reporting    
Total assets 23,286 22,640
Operating Segments | Other    
Segment Reporting    
Total assets $ 13,949 $ 13,838
v3.8.0.1
Segment Reporting - Geographic Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Segment Reporting      
Total plant, equipment and leasehold improvement additions $ 4,895 $ 3,308  
Revenues 59,070 56,008  
Total long-lived assets 144,406   $ 144,383
Total North America      
Segment Reporting      
Total plant, equipment and leasehold improvement additions 1,584 2,347  
Total long-lived assets 128,210   131,678
U.S.      
Segment Reporting      
Total plant, equipment and leasehold improvement additions 1,582 2,275  
Revenues 52,791 47,811  
Total long-lived assets 127,396   130,767
Canada      
Segment Reporting      
Total plant, equipment and leasehold improvement additions 2 72  
Total long-lived assets 814   911
U.K.      
Segment Reporting      
Total plant, equipment and leasehold improvement additions 3,311 961  
Total long-lived assets 16,196   $ 12,705
Other      
Segment Reporting      
Revenues $ 6,279 $ 8,197  
v3.8.0.1
Segment Reporting - Net Sales by Product and Services (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Segment Reporting    
Total net sales $ 59,070 $ 56,008
Products    
Segment Reporting    
Total net sales 27,560 29,764
Services    
Segment Reporting    
Total net sales $ 31,510 $ 26,244