Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
@DTPaymentNews
Payment card manufacturer CPI Card Group Inc. rode the EMV chip card wave over much of the past two years, but slowing sales in the third quarter took a big bite out of its revenues and profits.
“Our third-quarter results were below expectations, primarily due to continued softness in demand for EMV chip cards and unfavorable foreign-currency exchange rates,” Steve Montross, president and chief executive of Littleton, Colo.-based CPI Card Group, said in a statement late Wednesday.
Partially offsetting lower EMV demand was an increase from the second quarter in average per-card selling prices. Still, the company lowered its financial guidance for all of 2016 due to lower-than-expected EMV demand in the U.S. “As we look to the fourth quarter, we do not see EMV card shipments materializing at the improved rates we assumed in our prior guidance,” Montross said.
CPI reported net sales of $81.2 million in the third quarter, down 25% from $107.7 million a year earlier. Net income fell to $4.03 million, a 47% drop from $7.66 million in 2015’s third quarter.
In the U.S., credit and debit card sales plunged 32% to $49.2 million from $72.8 million a year earlier. U.S. prepaid card sales slipped 2% to $23.1 million.
The fact that CPI’s EMV sales are slowing isn’t a surprise, considering that CPI and other card manufacturers have, mostly since early 2015 and continuing to the present, replaced the majority of approximately 1.2 billion U.S. magnetic-stripe credit and debit cards with chip cards. MasterCard, for example, in late September said that 88% of its U.S. consumer credit cards now have chips. Although the debit card conversion is trailing that of credit, the implication for card manufacturers is that the huge but one-time EMV bump centered on the card networks’ October 2015 EMV liability shifts is now largely over.
Still, Montross said Wednesday that CPI’s long-term outlook is good and will be driven by demand for instantly issued card products and CPI’s service offerings, as well as the ongoing U.S. EMV conversion from mag-stripe cards.
Slowing EMV sales contributed to an overall sales decline at CPI in the second quarter. In the first quarter, CPI reported financial results that were slightly below expectations because of slowing chip card demand, even though U.S. EMV shipments had increased 66%.
