Consider The CPI Card Group IPO

CPI Card Group (NASDAQ: PMTS) expects to raise $299.8 million in its upcoming IPO. Based in Littleton, Colorado, CPI Card Group engages in the design, production, packaging, data personalization and fulfillment of financial payment cards.

We previewed PMTS' IPO last week on our premium platform.

PMTS will offer 17.64 million shares at an expected price range of $16 to $18. If the underwriters price the IPO at the midpoint of that range, PMTS will have a market capitalization of $858 million.

PMTS filed for the IPO on August 7, 2015.

Lead Underwriters: BMO Capital Markets, CIBC World Markets and Goldman Sachs

Underwriters: Griffith McBurney, Raymond James, Robert W. Baird, Scotia Capital Markets and William Blair & Co.

Business Summary: Provider of Financial Payment Cards

CPI Card Group Inc., engages in the design, production, packaging, data personalization and fulfillment of financial payment cards in conjunction with its subsidiaries. The company operates in three segments: U.S Prepaid Debit, U.S. Debit and Credit, and the U.K. Limited. The U.S. Prepaid Debit division provides integrated card services including tamper-evident packaging, card personalization and fulfillment services for prepaid debit card issues in the United States. The U.S. Debit and Credit division produces financial payment cards and offers services to card-issuing banks in the United States. Their products include both EMV and non-EMV credit cards, pre-paid debit cards and conventional debit cards as well as branded and private label credit cards and instant issuance systems. The U.K. Limited division primarily offers retail gift and loyalty cards for consumers in the United Kingdom and Europe as well as offering card personalization and fulfillment services.

Customers of CPI Card Group include regional and national banks, credit unions, independent community banks, group service providers, managers of prepaid programs and card processors in North America, the United Kingdom, Canada and Western Europe.

CPI Card Group intends to use the proceeds of the IPO to redeem the remaining outstanding shares of preferred stock, terminate a phantom stock plan and repay certain debt under a new term loan facility related to the partial preferred redemption. Any remaining net proceeds will be used for general corporate purposes.

Executive Management Overview

Mr. Steve Montross has been the Chief Executive Officer and President of CPI Card Group since January 2009. Previously, Mr. Montross served as the Sales Alliance Leader for GE Corporate Lending. Mr. Montross' other GE roles include Managing Director and Region Manager for Commercial and Industrial Finance and Managing Director and Region Manager for Global Sponsor Finance. Prior to GE, he began his career at Continental Bank. Mr. Montross is a Certified Public Accountant and holds an M.B.A. from Northwestern University and a B.B.A. from The University of Michigan.

Mr. David Brush has been the Chief Financial Officer at CPI Card Group since June 2015. He has over 25 years of executive experience in global markets and he served as Managing Partner of Idris Capital Partners. His previous positions included group executive and president of Power Transmission at Rexnord Corporation and vice president and general manager of Specialty Packaging at Pactiv Corporation.

Potential Competition: Giesecke & Devrient GmbH, Valid S.A., Oberthur Technologies and Gemalto NV.

CPI Card Group competes with other financial payment card solutions providers and manufacturers. The company noted in its SEC filings that its primary competitors are Gemalto NV, Valid S.A., Giesecke & Devrient GmbHand Oberthur Techologies S.A.

Financial Highlights: Top and Bottom Line Growth

CPI Card Group provided the following figures from its financial documents for the six months ended June 30, 2015:

As of June 30, 2015:

Conclusion: Buy In

Despite the risk of a security breach (which is common to all firms dealing with payments at this point), we are excited for this deal. CPI Card's work on mobile payments helps round out its business and a strong syndicate plus solid financial status is very encouraging.

CPI holds the leading market position for credit and debit cards in the US (35%).

We suggest buying in.