Q1 2024 Creative Realities Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to Creative Realities Incorporated's earnings call for the quarter ended March 31st, 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Logan, Chief Financial Officer. Please go ahead, sir.
Good day, and thank you for standing by and welcome to creative realities incorporated earnings call for quarter ended March 31st 2024.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one one on your telephone you will then hear an automated message advising your hand. This race to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
Now like to hand, the conference over to your first speaker today, well look Logan Chief Financial Officer. Please go ahead Sir.
Will Logan: Thank you and good morning everyone. Welcome to our earnings call for the first quarter ended March 31st, 2024. I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose, and similar expressions or the negative versions of such words or expressions as they relate to us or our management are intended to identify such forward-looking statements.
Thank you and good morning, everyone welcome to our earnings call for the first quarter ended March 31, 2024, I would like to take this opportunity to remind you that our remarks. Today will include forward looking statements. The words anticipated will believes expects intends plans estimates projects.
Should may propose and similar expressions or the negative versions of such words or expressions as they relate to us or our management are intended to identify forward looking statements.
Will Logan: Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in our Form 10-Q filed with the SEC this morning, May 10, 2024, and in our annual report on Form 10-K filed with the SEC on March 21, 2024. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events.
Actual results may differ materially from those contemplated by these forward looking statements.
Factors that could cause these results to differ materially are set forth in our Form 10-Q filed with the FCC. This morning may 10th 2024 and in our annual report on Form 10-K filed with the SEC on March 21 2024.
Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During this call. We will present, both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP measures is included in our public filings and in our earnings.
Will Logan: During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our public filings and in our earnings release that was issued this morning. We believe the use of certain non-GAAP measures, such as adjusted EBITDA and several other important KPIs, represents meaningful ways to track our performance. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.
Release that was issued this morning, we believe the use of certain non-GAAP measures such as adjusted EBITDA and several other important kpis represent meaningful ways to track our performance. It is now my pleasure to introduce Rick Mills CEO of creative realities.
Rick Mills: Thanks, Will. And good morning, everybody.
Rick Mills: Thanks will and good morning, everybody. Thank you for joining once again, we posted record quarterly results for the first quarter I want to thank everyone at Cri your dedication to our customers and our company mission is what makes me excited to come in.
Rick Mills: Thank you for joining us. Once again, we posted record quarterly results for the first quarter. I want to thank everyone at CRI. Your dedication to our customers and our company mission is what makes me excited to come in every day. I am pleased to report the following for Q1 2020: record first quarter revenue of $12.3 million, up 23.5 percent from $9.9 million in the prior year; record first quarter gross profit of 5.8 million, up from 5.1 million in 2023.
Rick Mills: And every day.
Rick Mills: I am pleased to report the following for Q1 2024.
Rick Mills: Record first quarter revenue was $12 3 million up 23, 5% from $9 9 million in the prior year.
Our record first quarter gross profit of $5 8 million up from $5 1 million in 2023.
Rick Mills: Adjusted EBITDA of approximately $0.8 million against $1 million last year. And finally, annual recurring revenue, or ARR, at an annual run rate of $17.7 million versus $16.3 million at the end of the fourth quarter. We are off to a great start in fiscal 2024 with strong revenue growth and solid margins. Plus, our sales funnel continues to expand, which is very encouraging. We remain on track to deliver record results for the full year.
Rick Mills: Adjusted EBITDA of approximately <unk> eight.
Rick Mills: <unk> 8 million against $1 million last year.
Rick Mills: And finally annual recurring revenue or <unk> at an annual run rate of 17.7 million versus $16 3 million at the end of the fourth quarter. We are off to a great start in fiscal 2024 with strong revenue growth and solid margins.
Rick Mills: Plus our sales funnel continues to expand which is very encouraging.
Rick Mills: We remain on track to deliver record results for the full year.
Rick Mills: First quarter revenue increased by 23.5% versus 2023 despite typical first quarter seasonality as deployments are initiated or restarted and budget cycles reset. While our consolidated gross margin was lower than the first quarter in 2023 on a percentage basis, it increased in absolute dollars. This reflected our revenue mix. The 45% year-over-year growth in service revenue included significantly higher installations, where the margins are not as high as those for our other services, including SAS, hence the slightly lower gross margin year over year.
Rick Mills: First quarter revenue increased by 23, 5% versus 2023, despite typical first quarter seasonality.
Rick Mills: As deployments are initiated or restarted and budget cycles reset.
Rick Mills: While our consolidated gross margin was lower than the first quarter in 2023 on a percentage basis it increased in absolute dollars.
Rick Mills: This reflected our revenue mix, the 45% year over year growth in service revenue included significantly higher installations, where the margins are not as high as those for our other services, including SaaS, hence the slightly lower gross.
Rick Mills: However, it is important to note that greater installation activity ultimately leads to higher subscription revenue going forward, as deployed hardware utilizes our SAS solution. At the end of the first quarter, our ARR stood at an all-time high of approximately $17.7 million on an annual run rate basis.
Rick Mills: <unk> year over year.
Rick Mills: However, it is important to note that greater installation activity ultimately leads to higher subscription revenue going forward as deployed hardware utilizes our SaaS solutions.
Rick Mills: At the end of the first quarter are our stood at an all time high of approximately $17 7 million on an annual run rate basis. This is an increase of $1 4 million from where we ended 2023 at $16 3 million.
Rick Mills: This is an increase of $1.4 million from where we ended 2023 at $16.3 million. When we announced our 2023 fourth-quarter results this past March, we increased our ARR guidance for exiting 2024 from $18 million to $20 million run rate. We affirm that guidance today.
Rick Mills: When we announced our 2023 fourth quarter results. This past March we increased our <unk> guidance for exiting 2024 from 18 million to $20 million run rate, we affirmed that guidance today.
Rick Mills: As we have stated repeatedly, this is an all-important metric as it provides enhanced visibility into higher margin revenue and improved cash flow generation, as well as the increasing trust our customers place in our technology-enhanced solutions. Now, let's take a moment to go through our recent refinancing announcement. The company has entered into a commitment letter to secure a new $20 million senior revolving credit facility with an additional $5 million accordion feature on top of the $20 million. We expect to finalize the credit facility next week.
Rick Mills: As we have stated repeatedly this is an all important metric as it provides enhanced visibility into higher margin revenue and improve cash flow generation as well as the increasing trust our customers place in our technology enhanced.
Rick Mills: <unk>.
Rick Mills: Now, let's take a moment to go through our recent refinancing announcement. The company has entered into a commitment letter to secure a new $20 million senior revolving credit facility with an additional $5 million accordion feature on top of the $20 million, we expect a final.
Rick Mills: <unk> the credit facility next week.
Rick Mills: I cannot overstate the strategic importance and potential value creation implications of this new facility. As you know, the company has demonstrated a commitment to disciplined debt deleveraging over the past 18 months, working in lockstep with our revenue growth and improved profitability. While we were initially targeting the back half of 2024 for a recapitalization of our existing debt, which was scheduled to mature in 2025, we have always articulated a desire to do so sooner if it was practical and attractive.
Rick Mills: Cannot overstate, the strategic importance and potential value creation implications of this new facility.
Rick Mills: As you know the company has demonstrated a commitment to disciplined debt deleveraging over the past 18 months working in lockstep with our revenue growth and improved profitability.
Rick Mills: We were initially targeting the back half of 2024 for a recapitalization of our existing debt, which was scheduled to mature in 2025, we have always articulated a desire to do so sooner if practical and attractive.
Rick Mills: Due to the company's strong performance, we are taking advantage of the opportunity to secure this financing earlier than anticipated, under favorable terms and a more conventional banking partnership, the company has clearly earned the trust of a number of financial institutions. I want to restate the implications of this financing. Number one, it is transformable in nature with potential for significant lending capacity.
Rick Mills: Due to the company's strong performance, we are taking advantage of the opportunity to secure this financing earlier than anticipated.
Rick Mills: Under favorable terms and a more conventional banking partner.
Rick Mills: The company has clearly earned the trust of a number of financial institutions.
Rick Mills: Want to restate the implications of this financing number one it is transformative in nature with potential for significant lending capacity.
Rick Mills: It provides a tremendous upgrade to our balance sheet by shifting debt from short-term to long-term in nature. Additionally, it allows for flexibility and support for a strong pipeline of organic and acquisition growth opportunities. Finally, it has the capability of unlocking strategic options for the company. Proceeds from the new credit facility will initially be utilized to repay all outstanding debt held by Slipstream Communications, which currently stands at approximately $13.6 million. There are no prepayment penalties associated with refinancing existing debt.
Rick Mills: Two provides a tremendous upgrade to our balance sheet by shifting debt from short term to long term in nature.
Rick Mills: Three it allows for flexibility and support for a strong pipeline of organic and acquisition growth opportunities.
Rick Mills: Finally, it has the capability of unlocking strategic options for the company.
Rick Mills: Proceeds from the new credit facility will initially be utilized to repay all outstanding debt held by Slipstream Communications, which currently stands at approximately $13 6 million.
Rick Mills: There are no prepayment penalties associated with refinancing the existing debt.
Will Logan: We want to thank Slipstream and their parent, Pegasus Capital Advisors, who remains a shareholder, for supporting our management's vision and collaborating to build a world-class digital signage and digital media platform, while the new facility will have a variable interest rate that is currently equivalent to the weighted cost of our existing debt. But with the opportunity to decrease as interest rates decline, we look forward to updating our shareholders once the credit facility has been finalized.
We want to thank slipstream and their parent Pegasus capital advisors, who remains a shareholders for supporting our management's vision and collaborating to build a world class digital signage and digital media platform.
While the new facility will have a variable interest rate that currently is equivalent to the weighted cost of our existing debt.
Rick Mills: But with the opportunity to decrease as interest rates decline, we look forward to updating our shareholders. Once the credit facility has been finalized.
Will Logan: This is a tremendous turn of events for CRI, and I want to thank Will Logan, George Sautter, and the entire finance team for putting this package together. It is great news for CRI. Now, I'll turn it back over to Will to share some additional comments on our financials.
Rick Mills: This is a tremendous turn of events for Cri and I want to thank will Logan George Stauder and the entire finance team for putting this package together it is great news for Cri.
Rick Mills: Now I'll turn it back over to will to share some additional comments on our financials well.
Will Logan: Thank you, Rick. An overview of our financial results for the first quarter of 2024 were provided in our first quarter earnings release and Form 10-Q, each filed this morning, which included the condensed consolidated balance sheet as of March 31st, 2024, the condensed consolidated statement of operations and statement of cash flows for the three months ended March 31st, 2024, as well as a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the three months ended March 31st, 2024, and the preceding four quarters.
Will: Thank you Rick and overview of our financial results for the first quarter of 2024 were provided in our first quarter earnings release and Form 10-Q. Each filed this morning, which included the condensed consolidated balance sheet as of March 31, 2024, our condensed consolidated statement of operations and statement of cash flows for the three months.
Will: Ended March 31, 2024, as well as a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the three months ended March 31, 2024, and the preceding four quarters.
Will Logan: I want to reiterate what Rick stated with respect to the refinancing strategy we are now implementing. It will improve our financial flexibility, strengthen the balance sheet, and should lead to lower interest expense over time. We are excited about bolstering our ability to support future growth and ultimately returns to shareholders. Now, a couple of additional points of context related to our balance sheet. Cash. As of March 31st, 2024, the company had cash on hand of approximately $2.9 million, virtually equivalent to the balance sheet at the end of 2023, despite continued repayments of debt principal during the first quarter of approximately $1.1 million. Growth and net debt stood at $15.1 million and $12.2 million, respectively, at the start of 2024. These numbers now stand at $14 million and $11.1 million, respectively, at the end of the first quarter.
Speaker Change: I want to reiterate what Rick stated with respect to the refinancing strategy. We are now implementing it will improve our financial flexibility strengthened the balance sheet and should lead to lower interest expense over time, we are excited about bolstering our ability to support future growth and ultimately returns to shareholders now a couple of additional points of contact.
Speaker Change: Related to our balance sheet cash.
Speaker Change: Cash as of March 31, 2024, the company had cash on hand of approximately $2 9 million virtually equivalent to the balance sheet at the end of 2023. Despite continued repayments of debt principal during the first quarter of approximately $1 1 million gross and net debt stood at $15 1 million and $12 2 million risk.
Speaker Change: Actively at the start of 2020 for these numbers now stand at $14 million and $11 1 million respectively. At the end of the first quarter on a trailing 12 month basis utilizing adjusted EBITDA the leverage ratio on gross and net basis were $2 nine in 2.3, respectively as of March 31 2024.
Will Logan: On a trailing 12-month basis utilizing adjusted EBITDA, the leverage ratio on a gross and net basis was $2.9 and $2.3, respectively, as of March 31st, 2024. As we have discussed before, this is vastly improved from the 5.4 and 5.0 times for gross and net debt at the end of 2022. We believe that the risk profile of the company continues to favorably change, a key to obtaining our new financing. As Rick mentioned, the new credit facility will be non-amortizing and provides flexibility for the company to continue to evaluate and migrate to an optimized capital structure in support of growth. I will turn it back to Rick for additional comments on our results and customer activities. Thanks, Will.
Speaker Change: As we have discussed before this is vastly improved from the $5 four and 5.0 times for gross and net debt at the end of 2022, we believe that the risk profile of the company continues to favorably change a key to obtaining our new financing as Rick mentioned, the new credit facility will be non amortizing and provides flexibility.
Speaker Change: For the company to continue to evaluate and migrate to an optimized capital structure in support of growth I will turn it back to Rick for additional comments on our results and customer activities.
Rick Mills: Thanks, Will. A few additional updates on customer and operational activities. BCTV. This project continues to move forward but remains slower than originally anticipated. We completed eight locations in 2023 and 54 locations in 1Q24 at an average sale price of $27,000. We currently expect similar results for Q2 and beyond. While the ramp-up has been extended, the opportunity is not lost, and the customer remains focused on ultimately achieving the deployment of 1,000 locations for its ad-based network. Starlight Media.
Rick Mills: Thanks, well, a few additional updates on customer and operational activities.
Rick Mills: BCE television. This project continues to move forward, but remains slower than originally anticipated we completed eight locations in 2023.
Rick Mills: <unk> 54 locations in <unk> 2004 at an average sale price of 27000, we currently expect similar results for Q2 and beyond.
Rick Mills: While the ramp has been extended the opportunity is not lost in the customer remains focused on ultimately achieving deployment of a 1000 locations for its AD based network.
Rick Mills: We deployed another 150 locations in 1Q24 and are expecting to receive another order of 250 sites in Q2 for deployment in the second half of this year. Assuming that the media revenue generated by our customer from this network provides an adequate ROI, CRI would expect to supply hardware and complete installation of an additional 1,000 units in 2025. The average sale price for a unit inclusive of installation is approximately $12,000 per location.
Rick Mills: Starlight media, we deployed another 150 locations in <unk> 24, and are expecting to receive another order of 250 sites in Q2 for deployment in the second half of this year.
Rick Mills: Assuming that the media revenue generated by our customer from this network provides an adequate rois.
Rick Mills: Cri would expect to supply hardware and complete installation of additional 1000 units in 2025, the average sale price for unit inclusive of installation is approximately 12000 per location during our year end earnings call in March I discussed our retail media network for a financial institution.
Rick Mills: During our year-end earnings call in March, I discussed a retail media network for a financial institution that had selected CRI as its partner for an initial deployment of 650 sites. We installed 170 in Q1. We expect another 185 in 2Q.
Rick Mills: <unk> that's had selected cri as its partner for an initial deployment of 650 sites.
We installed 170 in Q1.
Rick Mills: We expect another 185 in to queue.
Rick Mills: Upon completion of the initial deployment, which we anticipate finishing in Q3, the customer has indicated they will evaluate their media revenue for the balance of 2024 and then make decisions about additional locations for 2025 and beyond; the network has the potential to expand to 40,000 locations in the U.S. Icebox Net. We have converted all 85 of their test sites to our CMS and ad-serving platform. This advertising network could begin rapid deployment as early as Q3, and we would expect an initial deployment of 5,000-plus locations.
Rick Mills: Upon completion of the initial deployment, we anticipate finishing in Q3 the customer has indicated they will evaluate <unk> media revenue for the balance of 2044.
Rick Mills: And then make decisions about additional locations for 2025 and beyond that.
Rick Mills: The network has the potential to expand to 40000 locations in the U S.
Rick Mills: Icebox network, we have converted all 85 of their test sites to our CMS and AD serving platform. This advertising network could begin rapid deployment as early as Q3, and we would expect an initial deployment of 5000 plus locations finally the.
Rick Mills: Finally, adoption of our drive-thru solution for quick-serve restaurants continues to accelerate. This product continues to be a key driver in both new customer acquisition and existing customer expansion opportunities, and our product is very, very competitive. We are installing a drive-thru every business day somewhere in the U.S. and expect to grow that number. A couple other noteworthy items; we have engaged Darrow Associates as our IR. We are very pleased with the team and their activities. Frankly, they're working me pretty hard. We recently presented at several micro-cap conferences, and the organizer of one of the conferences commented that the most requested meeting from potential investors was with CRI.
Rick Mills: Adoption of our drive thru solution for quick serve restaurants continues to accelerate.
Rick Mills: This product continues to be a key driver in both new customer acquisition and existing customer expansion opportunities and our product is very very competitive.
Rick Mills: We are installing a drive through every business day somewhere in the U S and expect to grow that number.
Rick Mills: Couple of other noteworthy items, we have engaged garro associates as our IR firm, we are very pleased with the team and their activities frankly, they're working pretty hard we recently presented at several micro cap conferences and the organizer of one of the conferences commented that.
Rick Mills: The most requested meeting from potential investors with Cri.
Rick Mills: Clearly, we are doing something right. And finally, an update on our ERP Converter. We are on track for the transition to NetSuite on July 1st. This will result in significant improvements to our workflow, internal data accuracy, cost management, etc. I could go on and on about the benefits.
Rick Mills: Clearly we are doing something right.
And finally, an update on our ERP conversion.
Rick Mills: We are on track for the transition to net suite on July 1st. This will result in significant improvements to our workflow internal data accuracy cost management et cetera.
Rick Mills: Suffice to say, this will provide operational efficiency in the quarters and years to come. With that, we'll now move to the Q&A portion of the call. Please go ahead, operator. Thanks.
Rick Mills: I could go on and on about the benefits suffice to say this will provide operational efficiency in the quarters and years to come.
Speaker Change: With that we'll now move to the Q&A portion of the call. Please go ahead operator.
Operator: As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star one, one again. Please wait for your name to be announced.
Thank you.
Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.
Speaker Change: To withdraw your question. Please press Star one again, please wait for your name to be announced please standby, while we compile the Q&A roster one moment for your first question. Please.
Operator: Please stand by while we compile the Q and a roster. One moment for our first question, please. Our first question comes from the line of Brian Kingslinger with Alliance Global Partners. Your line is now open.
Speaker Change: Yeah.
Speaker Change: Our first question comes from the line of Brian Kingston Linger with Alliance Global Partners. Your line is now open.
Speaker Change: Great. Thanks.
Brian Kingslinger: Can you talk about business development? You definitely talked about some of the wins you've already had.
Speaker Change: Can you talk about business development, you definitely talked about some of the when you already had.
Brian Kingslinger: You mentioned a sales funnel that continues to grow. What verticals would you say you're seeing the most demand in? And then, is there any way to quantify booking somehow in the quarter, maybe a number of new logos? total contract value, any way to think about how that business development played out?
Speaker Change: You mentioned the sales funnel it continues to grow out what verticals would you say youre seeing the most demand.
Speaker Change: Any way to quantify bookings somehow in the quarter may be a number of new logos total contract value.
Speaker Change: Any way to think about how that business development played out.
Rick Mills: Brian, great question, the verticals that we're seeing tremendous activity in, number one, our QSR space, right, specifically led by the drive-thru, seeing tremendous engagement with a number of QSR brains. Number two would be our sports and entertainment, clearly engaged with somewhere between 10 and 15 professional teams for large stadium overhauls. So we'll see how that goes. Number three.
Brian Linger: Brian Great question.
Brian Linger:
Brian Linger: The verticals that we're seeing tremendous.
Brian Linger: Activity here number one our <unk> space right.
Brian Linger: Specifically led by the drive thru seeing tremendous.
Brian Linger: Engagement with a number of <unk> brands.
Number two.
Would be our sports and entertainment.
Brian Linger: We are.
Brian Linger: Clearly engaged with somewhere between 10 and 15 professional teams for large stadium overhauls.
Speaker Change: So we will see how that goes.
Rick Mills: Vertical is retail media networks, lots of conversations. Now, those transactions tend to move a little slower because they tend to be very big in nature, and there's a whole lot of complexity around building a retail media network. So, that's really it. In terms of new logo wins, not a lot of new quote logo wins in Q1. We expect that to change in Q2 and beyond.
Speaker Change: Third.
Speaker Change: Vertical is retail media networks lots of conversations.
Speaker Change: Those transactions tend to move a little slower because they tend to be very big in nature and.
Speaker Change: And there's a whole lot of complexity around building, our retail media network.
Speaker Change: So that's really it in terms of new logo wins.
Speaker Change: Not a lot of new quote logo wins in Q1, we expect that to change in Q2 and beyond.
Brian Kingslinger: Great, that's helpful. And then, is there any change to the revenue guidance range given the slower ramp discussion on DCTV, or was this contemplated at the low end of the range? And then the second piece of the question, given the heavy services component that you saw in the first quarter, Is there any thought to, for the year, a change in your thought on the mix that may result in a slightly lower EBITDA margin for the year? Or is that just for the first quarter?
Speaker Change: Great. That's helpful. And then is there any change to the revenue guidance range given the slower ramp discussion on HGTV or was it contemplated in the low end of the range and then the second piece of the question.
Speaker Change: Given the heavy services component that you saw in the first quarter.
Speaker Change: Any thought to for the year a change in your thought on the mix.
Speaker Change: May result, in a slightly lower EBITDA margin for the year.
Speaker Change: Not a one quarter phenomenon.
Rick Mills: So far, we believe it's a one-quarter phenomenon. Yes, we are very comfortable, as we have always indicated, our quarterly results will be a minimum of 20 to 40 percent increase over last year. We are still firm in our guidance on $60 million in revenue. Yes, we had contemplated bowling. In the lower end of the guidance, Brian, I will tell you even though bowling is going to be a little lighter than where we contemplated it, we believe we will make it up in other parts of the business, in terms of the relative overall mix. I'm going to throw that one to Will Logan.
Speaker Change: So far we believe it's a one quarter phenomenon.
Speaker Change: Yes, we are very comfortable as we have always indicated our quarters will be a minimum of 20% to 40% increase over last year, we are still firm.
Speaker Change: Our guidance on $60 million in revenue, yes, we had contemplated bowling.
Speaker Change: In the lower end of the guidance, Brian I will tell you, even though bowling's gotta be even a little light of where we contemplated it. We believe we will make it up in other parts of the business.
Speaker Change: In terms of the relative overall mix I'm going to throw that one to will Logan.
Will Logan: Yeah, I think, Brian, we're used to seeing what you've kind of seen here. In the fourth quarter, we had large hardware that resulted in a roll into Q1 of large or higher than maybe historical installation activities that'll then roll into the services bucket. I think expect that trend to continue, but we're not ready to change the overall mix that we expect for the year. So I would expect we would trend back towards a higher mix on the hardware side as more deployments are pre-purchased or purchased in 2Q and 3Q for deployment later in the year. It shouldn't have any impact negatively on our projection for EBITDA margin.
Logan: Yes, I think Brian we're used to seeing what you've kind of seen here fourth quarter, we had large hardware.
Logan: <unk> in a roll into Q1 as large are higher than maybe historical installation activities that will then roll into the services bucket I think <unk>.
Will Logan: I expect that trend to continue but we're not ready to change the overall mix that we expect for the year. So would expect we would trend back towards.
Will Logan: Higher mix on the.
On the hardware side as more deployments are pre purchase or purchased into Q3 Q4 deployment later in the year Shouldnt have any impact negatively on our projection for EBITA margin as we talked about coming into the year, we thought we'd be closer to 50 50 or <unk>.
Will Logan: As we talked about coming into the year, we thought we'd be closer to 50-50 or 40-60 hardware services. I still think we're on track for that for the full year. It just might look a little lumpy or different each quarter.
Will Logan: <unk> 60 hardware services still think we're on track for that for the full year, just might look a little lumpy or different each quarter.
Brian Kingslinger: Last question I have: we talked about a lot of different clients. The only client I haven't heard about, I don't think, in the last two quarters is Panera. I know they obviously had some management changes there that maybe changed the short-term opportunity, maybe talk about. What's happening there? Are you installing?
Will Logan: Great.
Speaker Change: Last question I had you talked about a lot of different clients. The only one Brian I haven't heard it but I don't think in the last two quarters as Panera.
Speaker Change: They obviously had some management changes there that may.
Speaker Change: Maybe change the short term opportunity maybe talk about.
Speaker Change: What's happening there are you installing.
Rick Mills: I probably should have checked. I'm not sure if there are new stores coming out. Just maybe an update on what's happening there. Yeah.
I, probably should've checked I'm not sure if there's new stores coming out just maybe an update on what's happening there.
Rick Mills: Yes, we are fully ingrained into Panera. We're fully integrated into their point of sale, and all new Panera store openings are getting a new digital drive-thru of some configuration. So we're on the construction schedule now, and as a ballpark, we expect them to open 40 to 60 locations a year. We are anticipating that we will be added ultimately to the remodel schedule sometime later this year, and he has filed documents with the SEC and is ultimately looking to go public. And we don't expect a material change until they solve that issue that they're trying to solve with combustion.
Speaker Change: Yes.
Speaker Change: We are fully ingrained into Panera, we're fully integrated to their point of sale.
Speaker Change: And all new Panera store openings are getting eight new digital.
Speaker Change: Drive thru.
Speaker Change: Configuration. So we're on the construction schedule now.
Speaker Change: As a ballpark, we expect them to open 40 to 60 locations a year.
Speaker Change: We are anticipating that we will be added ultimately to the remodel schedule.
Speaker Change: Sometime later in this year.
Speaker Change: But as you know Panera is.
Speaker Change: <unk> filed.
Speaker Change: Documents with the SEC and is ultimately looking to go public.
Speaker Change: We don't expect a material change until they solve that issue that they're trying to solve with going public.
Brian Kingslinger: Thanks for taking all my questions.
Speaker Change: Okay.
Operator: Yep. Thank you. One moment for our next question, please. Our next question will come from the line of Howard Halpern with the Taglitz Brothers. Your line is now open. Oh, great.
Speaker Change: Thanks for taking all my questions.
Speaker Change: Yes. Thank you one month for next question. Please.
Our next question will come from the line of Howard Halpern with <unk> Brothers. Your line is now open.
Howard Halpern: Congratulations on a great start to the year. Could you, I guess, talk a little bit about how you are going about deepening your relationships with existing customers and expanding on the platforms that you already have for those customers?
Howard Halpern: Oh great.
Hi, congratulations on a great start to the year.
Howard Halpern: Could you I guess.
Howard Halpern: Been about how you are going about deepening relationships with existing customers and expanding on what you already on the platforms that you already have with those customers.
Howard Halpern: Well.
Rick Mills: You know, we continue to add services, and customers tend to expand with our services. For example, you know, we brought on a number of customers with the Reflect acquisition that we did several years ago, Howard, right? Right. Every one of those customers today; their revenue is higher than when we acquired them. Number two, they're buying more services across the board from us; we have approximately 10 essential services, and they're buying more out of each bucket. So that's generally true of all of our customers.
Howard Halpern: We continue to add services and the customers tend to expand.
Howard Halpern: With our services for example.
Howard Halpern: We brought on a number of customers with the reflect acquisition that we did several years ago Howard right.
Howard Halpern: Right every one of those customers today their revenue is higher than when we acquired the customer number two they are buying more services across the board out of our we have approximately 10 essential services.
Howard Halpern: And thereby more out of each bucket. So that's generally true of all of our customers.
Rick Mills: Howard, I would also add that we're seeing a lot of our retail and C-store customers who were not initially in the monetization game. They're just, you know, procuring our CMS software for content management today and beginning to trial, test, explore, and ask for our ad tech software as an incremental layer. So as we think about an upsell opportunity, that's where we're seeing the most tracking. Okay, and
Speaker Change: Howard I would also.
Speaker Change: That we're seeing.
A lot of our retail.
Speaker Change: Store customers, who were not initially in the monetization gain there or just.
Speaker Change: Procuring our CMS software for content management today, beginning to trial task explore and ask for our AD Tech software as an incremental layer. So as we think about an up sell opportunity that's where we're seeing the most traction.
Howard Halpern: Okay, and I guess just Could you give, I don't know, what type of margins can we see as that area builds? Can we see them dropping, I guess, to the bottom line as they continue to monetize your service?
Okay, and I guess just.
Speaker Change: Could you give.
Speaker Change: I don't know what type of margins as that area builds can we see.
Speaker Change: Dropping I guess to the bottom line as they continue to monetize.
Speaker Change: Services.
Will Logan: Yeah, Howard, we're selling the ad tech layer right now on a SAAS basis. So if it's an existing customer that's already deployed and is adding that, that would be an incremental price per device per month. That should be consistent with our other SAS offerings, you know, 90% margin on a pure basis, you know, 75 to 80 on a fully loaded basis. So that's a big opportunity. And some of the other customers that Rick talks about where we are growing or expanding services where folks have acquired our software already and we are not the full services provider, expect us to continue to expand the offering with hardware and installation activities.
Speaker Change: Well worst.
Speaker Change: Yes, Howard we're selling the AD tech layer right now on a SaaS basis. So it's an existing customer that's already deployed and is adding that that would be incremental price per device per month that should be consistent with our other SaaS offerings, 90%.
Howard Halpern: Margin on a pure basis 75 to 80 on a fully loaded basis. So that's a big opportunity.
Howard Halpern: On some of the other customers that Rick talks about where we are growing our expanding services, where folks have acquired our software already and we were not the full service provider I expect us to continue to expand the op.
Will Logan: So, same as the rest of our revenue from a profitability standpoint or a margin point of view, depending on the service that we upsell or cross sell. Okay, and just one last one. What are you seeing in the competitive environment? I mean, when you get, you know, submit your request, the proposals, are you winning a good majority of the business that you submit for?
Howard Halpern: Offering with hardware and installation activities. So same same as the rest of our revenue from a profitability standpoint, or a margin view, depending on the service that we upsell or cross sell.
Speaker Change: Okay, and just one last one what are you seeing in the competitive environment.
Speaker Change: Are you when you get.
Speaker Change: Submit your request.
Speaker Change: Proposals are you winning.
Speaker Change: Majority of the business that you submit for.
Howard Halpern: Yes, Howard, we typically have a track record of when we're invited and we participate, we win about 70% of the engagements, and I would tell you that we have been invited, and we continue to grow in invitations, if you will, as we've gotten larger and have really expanded the base across the United States and are truly operating in the enterprise territory. Every enterprise customer generally has CRI on the list somewhere to have a discussion with.
Speaker Change: Yes, Howard we typically have a track record of when we're invited and we participate we wind up about 70% of the engagement.
Speaker Change: And I would tell you that we have been invited we continue to grow.
Speaker Change: In <unk>.
Speaker Change: Invitations if you will.
As we've gotten larger.
Speaker Change: Have really expanded the base.
Speaker Change: Across the United States that are truly operating in the enterprise territory.
Speaker Change: Every enterprise customer generally has cri on the list somewhere to have a discussion with.
Rick Mills: Okay, that sounds great. Keep up the good work, guys. Thanks, Howard.
Speaker Change: Okay that sounds great keep up the good work guys.
Howard Halpern: Thank you.
Speaker Change: Thanks Howard.
Howard Halpern: Thank you.
Operator: One moment for our next question. Our next question comes from the line of Samuel McColgan with Breakout Investors. Your line is open.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of.
Speaker Change: Yes.
Speaker Change: Samuel Mccolgan with breakout investors your line is open.
Samuel McColgan: Congratulations, it's an exciting start to the year. I just had a couple of questions. One was about now that you've got the new financing, well, almost in place, I just wondered if that changes your kind of priorities, in terms of kind of deleveraging versus potentially like acquiring other companies. I just wondered if, now that you have that in place or almost in place, whether you're kind of leaning more towards doing acquisitions sooner than later or that's kind of changed your outlook there at all.
Samuel McColgan: So congratulations.
Samuel McColgan: Congratulations it's an exciting start to the year.
Samuel McColgan: I just had a couple of questions.
Samuel McColgan: One was about.
Samuel McColgan: Now that you've got the new financing well almost in place I just wondered if that changes your kind of.
Samuel McColgan: So priorities.
Samuel McColgan: Yes.
Samuel McColgan: In terms of kind of deleveraging versus potentially like <unk>.
Samuel McColgan: During other cancer.
Samuel McColgan: I just wonder if you now that you have that.
Samuel McColgan: Play so almost in place, whether you're kind of leaning more towards doing acquisitions sooner than later, that's kind of changed that outlook.
Rick Mills: Great question, Samuel. Thanks for asking.
Samuel McColgan: Sure.
Speaker Change: Great questions Daniel Thanks for asking.
Rick Mills: You know, we've always been acquisition inquisitive, if you will; we continue to look at the marketplace. The difference is, before, we had minimal capacity. Today, I have capacity. The issue still remains, buying, in acquiring somebody at reasonable multiples and valuation will always tend to be the hurdle. But if we found the right company, it is something we would certainly be laser-focused on.
Speaker Change: We've always been acquisition inquisitive, if you will we continue to look at the market place.
Speaker Change: The difference is before we had minimal capacity today I have capacity.
Speaker Change: The issue still remains buying.
Speaker Change: And acquiring somebody at reasonable multiples and valuations will always tend to be the hurdle.
Speaker Change: But if we found the right.
Speaker Change: Company is something we would certainly be laser focused on.
Will Logan: Yeah, Samuel, no change in strategic focus. We're just excited that strategic optionality now exists, should something come along.
Speaker Change: Yes, Sam you'll no change in strategic focus we're just excited that the strategic Optionality now exists should something come.
Samuel McColgan: Yeah, it's brilliant news. Thanks for the color there.
Speaker Change: It's been announced that thanks for the color.
Samuel McColgan: My second question was about the expenses. They have come up a little bit, especially the kind of admin expenses. I just wondered if that's kind of about where they'll stay for the rest of the year.
Speaker Change: Canada.
Speaker Change: My second question was on the expenses.
Speaker Change: They have come up a little bit, especially the debt.
Speaker Change: Admin expense I, just wondered if that's kind of that.
Speaker Change: And about where they will stay for the rest of the year.
Rick Mills: My comment to you would be, yes, go ahead Will, go ahead. Yeah, Samuel, we...
Speaker Change: My comment would be great. Yes go ahead go ahead.
Will Logan: Yes, Samuel. We've done some incremental investments. We talked about the ERP application. We brought in a couple of incremental sales people, and our media channel, as well, has grown. So those are things in the one-cue filing that should remain consistent throughout the rest of 2024. We've built up that infrastructure and don't look to expand that.
Speaker Change: Yes Danielle.
Speaker Change: Done some incremental investments we've talked about the ERP application, we brought a couple of incremental sales folks and our media channel as well has ground. So those are those are things in our one Q filing that should remain consistent throughout the rest of 2024, we've built.
Speaker Change: Up that infrastructure and don't look to expand that.
Speaker Change: Through the calendar year.
Samuel McColgan: Brilliant. The last one from me was just on your backlog. I think the last I heard, it was about at a hundred and... $10 million. Is it about in the same range?
Speaker Change: Hi, Dan.
Dan: Last one from me was just on your backlog I think the last I heard it was about 100.
Rick Mills: I would tell you it's in the same range. It is slightly reduced from those numbers, but still very significant.
Dan: 10.
Dan: Is it about in the same range.
Dan: Sure.
Dan: I would tell you. It's in the same range. It has slightly reduced from those numbers, but still very significant.
Samuel McColgan: Yeah, okay, brilliant. That's all from me, but congratulations again and I'm looking forward to the next quarter.
Yes, Okay Brian.
Brian Linger: That's all from me, but congratulations again and looking forward to next quarter.
Operator: Thank you. As a reminder, that's Star 1-1 to ask your question. And at this time, I'm not taking any further questions. I'd like to hand the conference back to Mr. Rick Mills for closing remarks.
Speaker Change: Thank you.
Speaker Change: Thank you as a reminder that start one wanted to ask your question.
Speaker Change: And at this time Im showing no further questions I'd like to hand, the conference back to Mr. Rick Mills for closing remarks.
Rick Mills: Let me conclude the call by thanking all our shareholders, clients, partners, and employees for their continuing efforts, commitment, and support as we work together to transform Creative Realities into the leading brand in digital signage solutions. We look forward to speaking with you again next quarter.
Rick Mills: Thank you let.
Rick Mills: Let me conclude the call by thanking all of our shareholders.
Rick Mills: <unk> partners and employees for their continuing efforts commitment and support as we work together to transform create realities into the leading brand in digital signage solutions. We look forward to speaking with you again next quarter.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Rick Mills: Okay.
[music].
Rick Mills: Okay.
Rick Mills: [music].