CPI Card Group Beats Q1 Expectations, Eyes Stronger Second Half Despite Tariff Headwinds
May 5, 2026 — CPI Card Group Inc. (NASDAQ: PMTS) kicked off fiscal 2026 with a better-than-expected first quarter, posting 20% revenue growth to $147 million. The company credited strong performance in its Secure Card Solutions segment, particularly in contactless metal cards and personalization services, alongside a $16 million contribution from the ArrowEye (AOI) acquisition.
“We’re off to a solid start and on track to hit our full-year targets,” said CEO John D. Lowe during Tuesday’s earnings call. He emphasized that the company is executing on its three-pillar strategy: expanding its proprietary technology platform, deepening its market relationships, and evolving its payment solutions to meet shifting demand.
Adjusted EBITDA rose 9% in the quarter, and free cash flow surged to $10.1 million, up from just $300,000 a year earlier. The company also improved its net leverage ratio to just under 3x, a welcome sign after the temporary spike tied to last year’s ArrowEye acquisition.
Segment Snapshot: Secure Card Shines, Prepaid Stumbles
Secure Card Solutions revenue jumped 35%, fueled by contactless metal card demand and personalization services. Meanwhile, the Prepaid Solutions segment fell 17%, dragged down by timing issues with key customers. Management expects prepaid to rebound later in the year, citing strong closed-loop card sales and a pilot with a major national retailer testing chip-embedded prepaid cards.
Integrated Paytech grew only 1% in the quarter, but the company reiterated its expectation of more than 15% growth for the full year, driven largely by a new referral agreement with Fiserv. “We’re actively marketing our solutions with Fiserv and seeing positive customer interest,” Lowe noted.
Tariffs and Integration Costs Weigh on Margins
Gross profit margin slipped to 30% from 33.2%, impacted by $1.2 million in tariff expenses and $2 million in higher depreciation tied to the new Indiana production facility and the ArrowEye acquisition. Integration costs hit $3 million in Q1, but management expects those to drop significantly in the second half of the year.
“We’re managing discretionary spending and driving operational efficiencies,” said interim CFO Tara Grantham. “We expect gross margins to stabilize and improve as the year progresses.”
Industry Voices Weigh In
Marcus Delaney, 52, a retail banking consultant in Chicago: “CPI’s numbers are solid, but the tariff overhang is real. The fact that they’re expecting refunds but won’t commit to timing tells me they’re still navigating uncertainty. The Fiserv deal is the real story here — that’s a pipeline that could drive years of growth.”
Lena Ortiz, 34, a fintech analyst in Austin: “Honestly, I’m tired of hearing about ‘integration costs’ every quarter. If you bought a company, integrate it. The market doesn’t have infinite patience. That said, the contactless metal and prepaid chip pilot are genuinely interesting. If the prepaid market finally moves to chip, CPI is sitting on a goldmine. But talk is cheap — show me the margins.”
David Tran, 47, a payments industry veteran in New York: “The prepaid decline is a bit of a red flag, but the closed-loop growth and the Fiserv partnership give me confidence. CPI is playing the long game, and their balance sheet is in better shape than a year ago. I’d keep an eye on Q3 — that’s when we’ll see if the second-half ramp is real.”
Outlook and Key Takeaways
CPI reaffirmed its full-year guidance: high single-digit revenue growth, low- to mid-single-digit adjusted EBITDA growth, and a year-end net leverage ratio between 2.5x and 3.0x. Q2 revenue is expected to be similar to Q1, with adjusted EBITDA slightly below last year due to delayed investment spending.
The company also highlighted its Instant Issuance platform and digital solutions as key growth drivers, alongside the Fiserv partnership. “We’re building pipes, expanding integrations, and helping our customers win,” Lowe said. “That’s the strategy, and it’s working.”
This article is based on CPI Card Group’s Q1 2026 earnings conference call held on May 5, 2026. All statements are attributed to company management unless otherwise noted.