Hello, everyone, and welcome to the CPI Card Group Third Quarter 2021 Earnings Conference Call. My name is Juan, and I will be coordinating your call today. I will now hand over to your host, Mike Salop, Head of Investor Relations for the team. Please Mike, go ahead.

Thanks, and good morning, everyone. Welcome to the CPI Card Group Third Quarter 2021 Earnings Webcast and Conference Call. Today's date is November 5, 2021, and on the call today from CPI Card Group are Scott Scheirman, President and Chief Executive Officer; and Amintore Schenkel, Chief Financial Officer. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see CPI Card Group's most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Also during the course of today's call, the company will be discussing one or more non-GAAP financial measures, including but not limited to EBITDA, adjusted EBITDA, adjusted EBITDA margin, net leverage ratio and free cash flow. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release and slide presentation we issued this morning. Copies of today's press release as well as the presentation that accompanies this conference call are accessible on CPI's Investor Relations website, investor.cpicardgroup.com. In addition, CPI's Form 10-Q for the quarter and 9 months ended September 30, 2021, will also be available on CPI's Investor Relations website. And now I'd like to turn the call over to President and Chief Executive Officer, Scott Scheirman.

Thanks, Mike, and good morning, everyone. Thank you for joining us today for our third quarter conference call. During today's call, I will provide an overview of CPI's performance and review our vision and strategic priorities. Amintore will then discuss the financial results in more detail, and then we will conclude the call. Before I discuss our performance, I would like to welcome Amintore to the CPI team. Amintore joined us as CFO in October and brings a wealth of experience and knowledge to the company. Prior to leading his own consulting firm, he served as Chief Accounting Officer and Controller of Western Union from 2006 to 2020. He also previously held a variety of financial roles at First Data Corporation and spent 12 years with Ernst & Young. Our previous CFO, John Lowe, has been promoted to become General Manager of our Secure Card business. John has been a key contributor to our business success and financial improvement since joining the company in 2018. In combination with the rest of our management team, I am pleased with the strong group we have assembled to lead our business and serve our customers moving forward. Turning to our third quarter results. We continued our strong performance as we remain focused on providing high-quality products and services that meet the needs of our diverse and growing customer base. We delivered a 20% increase in net sales in the quarter with growth across our portfolio, including contributions from the ongoing conversion to contactless cards and related card personalization, our Card@Once instant issuance and CPI On-Demand solutions and our prepaid business. From a profit standpoint, net income of $6.6 million in the quarter increased 14% from last year, and adjusted EBITDA increased 23% to $21.5 million, while diluted earnings per share of $0.56 compared…

Thank you, Scott. And good morning, everyone. I'm very pleased to be able to join CPI, and I look forward to meeting many of you in the future. I will begin my overview of our results from the third quarter and first 9 months of 2021 on Slide 7. Third quarter net sales increased 20% compared with the third quarter of 2020 to $99.6 million. Net sales growth was driven by a 21% increase from our debit and credit segment and a 14% increase from our prepaid debit segment. Debit and credit segment increase was primarily due to the ongoing transition to higher-priced contactless cards, including the related personalization and new customer growth. Based on the latest market data, we now expect contactless conversion penetration in the U.S. to be approximately 40% by the end of 2021 and still expect it to grow to 80% by the end of 2025. So we continue to expect incremental benefits from the ongoing transition over the next few years. Prepaid debit segment growth in the third quarter was driven by higher volumes with existing customers. As a reminder, prior year results for both segments were negatively impacted by lower customer demand than expected, which we believe was primarily attributable to the COVID-19 pandemic. Third quarter gross profit was $37.7 million, up 23% over the prior year. Gross margins for the third quarter increased 80 basis points year-over-year to 37.8% primarily due to operating leverage from higher net sales, partially offset by increased labor costs. SG&A expenses increased by $3.9 million in the quarter compared to the prior year, primarily due to increased compensation-related costs. The increased compensation costs reflect higher year-on-year performance incentive compensation, new compliance-related labor costs, including [indiscernible] and severance expense incurred in this year's third quarter. Net income in the…

Thanks, Amintore. We are pleased with the third quarter results, highlighted by strong net sales growth across our portfolio and with our overall performance year-to-date in 2021. Our business has proved resilient with strong demand for our products and services throughout the pandemic, and our employees are working hard and adapting to meet the current challenges. In wrapping up, we remain committed to being the partner of choice in payment solutions by providing market-leading quality of products and customer service through a market competitive business model. And we believe we remain well positioned to capitalize on long-term opportunities in our growing industry. Thank you for joining our call today, and we look forward to speaking to you again soon.