Q4 2024 Creative Realities Inc Earnings Call
Good Morning!
Speaker Change: At this time, I would like to welcome everyone to the Creative Realities 2024 4th quarter earnings conference call.
This call will be recorded and a copy will be available on the company's website at cri.com.
Speaker Change: Following the completion of the call, the company has prepared remarks summarizing the interim results for the fourth quarter, along with additional industry and company updates. Joining the call today is Rick Mill, Chief Executive Officer, George Sotter, Chief Strategy Officer, and Ryan Mud, Interim Chief Financial Officer. Mr. Mud, you may begin.
Speaker Change: Thank you and good morning everyone. Welcome to our earnings call for the fourth quarter in the December 31st, 2024.
Speaker Change: I would like to take this opportunity to remind you that remarks today will include forward looking statements.
Speaker Change: 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.
Speaker Change: Actual results made differ materially from those contemplated by these forward-looking statements.
Speaker Change: Doctors that could call these results to different materialists are set forth in our form 10K followed with the SEC Friday evening March 14, 2025, and in our other filings with the SEC.
Speaker Change: 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.
Speaker Change: During this call, we will present both gap and non-GAAP financial measures. A reconciliation of gap to non-GAAP measures is included in our public balance and in our earnings release that was issued Friday evening, March 14, 2025.
Speaker Change: We believe the use of certain non-get 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, Ryan. Good morning, everybody. Thanks for joining. Today there are two big milestones to discuss.
Rick Mills: First, number one, we just closed out our best year in the company history with revenue exceeding 50 million
Rick Mills: and Adjusted EBITDA of 10%. Number two, we have resolved our outstanding contingent liability from the purchase of Reflect Systems in 2022. But first, let me review our fourth quarter highlights as follows.
Rick Mills: Revenue of 11 million versus 14.5 million a year ago. Gross profit of 4.9 million versus 7.5 million in 2023.
Rick Mills: Adjusted EBITDA of approximately a half a million against 2.8 million last year, an annual recurring revenue or ARR at a run rate of 16.8 million.
Rick Mills: While completing our best year ever, the fourth quarter, as expected, was negatively impacted by deployment timing.
Rick Mills: However, with an active pipeline of opportunities ahead of us, we remain on track for another period of record performance in fiscal 2025.
Rick Mills: As mentioned on our third quarter call, we have numerous large opportunities currently being pursued, all of which give us a great degree of confidence in the quarters to come.
Rick Mills: We see revenue accelerating as the year progresses with especially strong results in the second half.
Rick Mills: Demand for our unique solutions continues to grow, a trend we anticipate will continue particularly with the introduction of our ad logic CPM plus platform.
Rick Mills: This integrated, innovative solution provides customers with the tools to deliver targeted, high-performing campaigns at significantly reduced cost.
Rick Mills: It combines robust, programmatic capabilities with a user-friendly, self-serve interface that simplifies campaign execution, enhances targeting precision, and eliminates unnecessary intermediation
Speaker Change: It also positions Creative Realities uniquely as a one-stop shop for required ad tech solutions and allows us to benefit from advertising revenue.
Speaker Change: From deploying on-premise screens to offering sophisticated ad-serving and campaign execution tools, our full-service approach addresses the challenges faced by modern in-store retail media networks.
Speaker Change: We believe it's a game changer in the industry that can significantly enhance the in-store media experience.
Speaker Change: As we expect top-line growth to accelerate in the second half, we should see stronger operating results driven by better economies of scale, higher margins and increased cash flow.
Speaker Change: We see adjusted EBITDA as a percentage of revenue rising back to 15% by year end.
Speaker Change: Early today, pre-market in a separate press release and filing, we announced a settlement related to our contingent consideration obligation with former reflect shareholders.
Speaker Change: An issue which has been on our investor's minds for an extended period of time.
Speaker Change: We worked hard to resolve this liability in a way that was a win-win to the company, its investors and the former Reflect stockholders.
Speaker Change: We believe that settlement accomplishes this objective and provides a great deal of financial flexibility while removing a substantial overhang on our shares.
Speaker Change: CRI will pay 3 million in cash utilizing the existing reserve in our current credit agreement.
Speaker Change: In addition, we entered into a $4 million $30 month promissary note that includes a balloon payment in September of 2027.
Speaker Change: This long-term note, along with Lawrence, provides us time to continue growing the company and enhance shareholder value, while also giving former reflex stockholders an additional return on their investment.
Speaker Change: Again, I think this is a win-win for all involved that quantifies a payment plan and eliminates uncertainty through a clear, simplified financing structure.
Speaker Change: We are very pleased with this development that allows us to focus on growth and improved operating results for the remainder of fiscal 2025.
Speaker Change: Going forward, the combination of our active pipeline and new ad logic CPM plus platform puts us on track for revenue acceleration and increased performance, with no further overhang or distraction
Speaker Change: As the quick serve restaurant and retail market requirements continue to become more complex
Speaker Change: CRI remains at the forefront of improving the customer experience in a growing list of innovative clients and brands.
Speaker Change: While we are not providing specific guidance at this time, we anticipate the year ahead will be one of accomplishment and new records. I'll turn it back over to Ryan to share some additional comments on our financials.
Thank you Rick.
Speaker Change: In overview of our financial results for the fourth quarter of 2024 was provided in our earnings release in Form 10K filed Friday evening March 14, 2025, which included the consolidated balance sheet as of December 31, 2024.
Speaker Change: The Statement of Operations and the Statement of Cash Foes for the 12 months into December 31, 2024, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter-ended December 31, 2024, as well as the preceding four quarters.
Speaker Change: Now let me provide a couple of points of context relative to our balance sheet.
Speaker Change: As of December 31, 2024, the company had cash on hand of approximately $1 million dollars versus 2.9 million at the end of 2023.
Speaker Change: As previously mentioned, our consolidated balance sheet reflects minimal cash on hand as the company has set up a sweep instrument to apply against the revolving debt facility to further manage
Speaker Change: Our gross and net debt suited approximately 13 million and 12 million respectfully at the end of the fourth quarter, as compared to 15.1 million and 12.2 million respectfully at the start of 2024.
Speaker Change: Our debt level rose slightly from the end of Q3 as expected due to seasonal working careful requirements in the timing of our staff's base billings.
Speaker Change: As a side note, as Rick previously discussed, our settlement of the contingent consideration included a $3 million payment from our credit facility and the issuance of a $4 million note, so our debt levels will rise during the first half of 2025.
Speaker Change: Of course, our long-term vision remains the same to deliver and strengthen the balance sheet whenever possible.
Speaker Change: At the end of fiscal 2024, our leverage on a gross and net basis was 2.59 and 2.39 times down from 2.97 and 2.4 times at the beginning of fiscal 2024.
Speaker Change: We remain dedicated to managing our debt as we continue to evaluate and migrate to an optimized capital structure in support of our growth. I will turn it back to Rick for additional comments on our results in customer activities.
Rick Mills: Thanks, Ryan. Our engagement with potential customers and prospects is at an all-time high. In July of last year, we hired David Schultz to fill a new position at the company.
Rick Mills: VP of New Business Development. This was a much-needed person to fill the role and provide the dedicated focus required. We are pleased with the pipeline and the sheer number of discussions going on with potential prospects.
Rick Mills: Our sports and entertainment team has been expanded in order to continue to facilitate our anticipated growth in this sector as we move into 2025.
Rick Mills: The company completed its largest deployment of this kind during the third quarter of 2024 and NHL Arena.
Rick Mills: and we have tremendous momentum in the market moving into the new year. In this Q1 2025, we have already been awarded three MLB projects of varying sizes and types.
Rick Mills: and we have an additional seven POCs going on at other venues across the U.S.
with regard to BCTV.
Rick Mills: While we expect this numbered increase moderately in the second half of 2025, we expect a smaller number of installations in the first two quarters of the year.
Rick Mills: Currently, we have minimal installs scheduled from now until June as BCTV had us pause for a 90-day
Rick Mills: Our operations team has been working towards SOC 2 compliance. SOC 2 compliance is a valuable credential that can strengthen the trustworthiness and credibility of our products to enterprise customers.
Rick Mills: The team has made a great deal of progress and I'm pleased to report that our hard work resulted in our receiving our suck to type 1 compliance and certification.
Rick Mills: That is done and complete. We expect to achieve sock to type to certification prior to year-end. We believe this will be yet another differentiator of CRR's enterprise grade offering.
Speaker Change: Before turning it over to the operator, let me just add one comment. We want to take a moment and wish our outgoing CFO , Will Logan, all the best in his new endeavors. As previously announced, we'll remain as an advisor to the company.
Speaker Change: With that, we'll now move to the Q&A portion of the call. Please go ahead, Operator.
Speaker Change: Certainly, as a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again, please stand by while we compile the Q&A roster.
In one moment for our first question,
Thank you. Bye.
Brian Kinstlinger, Jason Weintraub, John
Speaker Change: Our first question will be coming from Jason Kreyer of Craig Halent. Your line is open Jason.
Jason Crayer: All right. Thank you guys. St. Rick, just wondering if you can just give us some general commentary on the conversations you're having with your customers or maybe more so the potential customers just in regards to this kind of frozen pipeline that we're in right now and any prospects for that that's starting to open up in the coming months.
Rick Mills: Hey Jason, good morning. Thanks. Great question. Yeah, we expect customers have had a frozen pipeline of projects that have been creeping to the finish line and we have an incredible number of them.
Jason Crayer: We do expect to have a couple come across the finish line.
here in the coming few months.
Jason Crayer: But it's a little, the market is trying to understand where tariffs might come into play or not. So those conversations are also starting to happen at customers. They're starting to ask questions.
Jason Crayer: about how Terrace could get in the way of their projects.
that's that's currently the state Jason
Speaker Change: Maybe you can double click on that second part just on from a terrorist perspective.
Jason Crayer: Curious what kind of potential headwinds those can create for the business or maybe if there's any other opportunities you would see ahead competitively or otherwise.
Thank you.
Jason Crayer: There is tremendous pressure on these customers to build out their networks.
Jason Crayer: Right? Retail media networks are exploding and there is tremendous pressure on these companies to get them built out.
Jason Crayer: For most of the industry, we expect minimal or no tear at all to be a problem. However, the mounts, most of the mounts are made here domestically and there's a steel problem.
Jason Crayer: So we expect slight moderate increases in steel and we expect that not to really affect much the question will be the display business
Jason Crayer: and I think that will unfold over the next 30, 60, 90 days.
Speaker Change: Perfect. Maybe stepping back, looking at just your opportunities in retail media.
Jason Crayer: How did it with conversations progress in terms of deal size and opportunity and I'm curious
Jason Crayer: perhaps leading to some of the delays. I mean, it would seem as though when retail media gets added to a deal, there's broader conversations that need to be had more strategic planning and curious to what degree that's causing some of these deals to just slow down and not get past the finish line.
That is...
Speaker Change: Very astute as you look at it from the market. Jason, that is exactly what happens when they look at
Speaker Change: Deploying a retail media network, they look for a tremendous amount of detail that the customer will go through, not only...
Speaker Change: with us as a potential vendor also internally. How are they going to run it? What does add operations look like and how are they going to run it?
Speaker Change: So, that tends to extend to the process, number one, number two.
Speaker Change: Now, they bring tremendous returns to the customer who deployed them.
Speaker Change: Typically, if a customer has the foot traffic and has the locations and spends a hundred million to deploy a retail media network, they will see an ROI on that in certainly less than 24 months.
Speaker Change: So tremendous opportunities, but they have slowed down the process of getting it across the
Speaker Change: and I'd just like to ask my compatriot George Souter, who really runs all the ad tech rolls up to George, who's our chief strategist, George, anything to comment there?
George Sautter: You know, Jason, I think you you're hidden on the head and it's Rick indicated [inaudible]
George Sautter: The complexity of these projects for the enterprise customers that we service can be pretty daunting, but all the more reason why, what we've done by knitting together the solutions for retail media networks, our product suite.
George Sautter: to help our customers deploy those networks. But it does take time and we provide the advisory services and conjunction with walking them through the process.
George Sautter: So the dollars are big as Rick has indicated probably bigger dollars than we've seen historically in any one deal and therefore obviously these are sophisticated operators who are...
George Sautter: or doing their diligence and building their business case. They're a huge cat-backed
So it takes time.
All right, perfect. Thank you for the update, guys.
In one moment, next question.
Speaker Change: Our next question will be coming from Howard Halpern of Taglick Brothers Inc. Your line is open and Howard. Congratulations on a record year, guys.
Hey Howard, how are you? Okay, okay, in terms of...
Speaker Change: Your Existing Customer Base, how have they begun to embrace the new ad logic platform and how is that going to impact margins down the road?
Well,
first and foremost as our customers.
Speaker Change: have decided to turn their digital operations from a signage network to a retail media network because retail media network incorporates signage Howard but it's a whole lot more to it when you turn on the ad logic and those ad functions.
I mean, our customers have embraced it.
Speaker Change: because it solves a problem for them, and we've updated the product to embrace...
Speaker Change: All the different types of advertising around the ad logic platform so that it can do programmatic just as quickly and deploy a programmatic ad in seconds.
Speaker Change: as it does non-programmatic. So those upgrades are out in the market being well-embraced by our customers.
and I would tell you that our...
Speaker Change: The addressable market has just gotten a lot bigger for CRIs so we do have existing customers that have the infrastructure
Speaker Change: and have deployed the CAPEX, and obviously converting that existing network into a retail media network represents new returns on those previously sunk costs.
Speaker Change: So there's a compelling business case that's driving that type of activity. So it's not only about new customer acquisition, but it's also about
Speaker Change: Existing Customers, Migrating Up to a Retail Media Network and all that new.
Okay.
Speaker Change: You talk about how the first half and the second half and some of the hesitations, but how has the new ERP system given you the maybe visibility, flexibility to control what your infrastructure is going forward?
Rick Mills: Howard, this is Rick, I'll take that one. I'll tell you...
Speaker Change: You know, we completed the switch over July 1 last year, okay?
So we're now actually moving into the third quarter
Speaker Change: where we are actually using it, but it's also the first quarter of our new budget year in 2025.
Speaker Change: So, we literally redid the entire general ledger, et cetera, as we migrated to the new system.
We see it paying significant cost management dividends.
Speaker Change: Okay, and I will tell you they're not in place today, some of them.
Speaker Change: But we expect to see real super strong expense controls and management of the key metrics of the business which is something that we did not have as we entered 2020
Speaker Change: So, we feel very good about it, but we're still on the journey, but we're using every function Ryan Mud, is that correct, we're using every function of the software today is up and running That's correct, yes sir, okay, so we feel good about it
Speaker Change: Okay, and one last one. Could you talk about, I guess, channel partners, the progress you're making there and, you know, what you're seeing in that area?
Hello.
Speaker Change: We continue to have demand from our Channel Partners. I'll turn that over to George, George ultimately owns the Channel Program.
Speaker Change: Now, a great question, Howard. We obviously committed to developing the channel, and we see licenses and licensed demand ramping up. I think as you know, last year, unfortunately, we had an executive that was heading up that part of the business for us who...
who passed in an unfundly way tragically.
Speaker Change: We have now basically put a new team on that, on that side of the business of the business.
Speaker Change: and their conducting outreach in addition to fielding all the inbound, but we're very much committed to that and see that business growing and are actively recruiting and signing on new customers.
Sounds great. Keep up the good work, guys.
Thanks, Howard.
and one moment for our next question.
Speaker Change: Our next question will be coming from Brian Kinstlinger of Alliance Global Partners, the line of Open Brian .
Brian Kinslinger: Good morning, thanks for taking my questions and it's nice to see this settlement for the contingent consideration in the real living mirror.
Thank you, John.
Speaker Change: Can you quantify the number of warranty and CH that will be issued to reflect what the strike price is and when the expiration date is?
Yes, it's a six-year warrant. Brian Strike Price is $3.25.
Speaker Change: The quantity of warrants was matched the quantity of shares that was originally issued back two years ago, so the number is 777-790, just under 800,000 awards.
Great, thanks. And then...
Speaker Change: Can you speak to the comments that you're expecting revenue growth can excel right in the second half of the year? I think you're talking about growth, but not dollars, I'm not sure. And you exit the year 15% EBITDA margin.
Speaker Change: First, I guess I'm curious, because the fourth quarter is hugely weak, so I'm curious what gives you confidence that the second half will be stronger whether it's scale or revenue growth. And then...
Speaker Change: You didn't say anything about the first half of the year, should we expect the year-over-year declines? Do you expect it to be adjusted to the EBITDA profitable, just maybe just a little bit more high-level commentary?
Speaker Change: We expect to be adjusted even a profitable, but just barely, certainly in Q1, the first part of the year.
Speaker Change: and I think we've made no, you know, we've articulated that even on the last calls. We have...
A number of projects, Brian , that give us great-
Speaker Change: Comfort in understanding that the moment a trigger is pulled, revenue will grow tremendously. We expect to see...
Speaker Change: Year over year growth on 2025 will exceed 2020 for and we expect nice growth in there and also growth in the EBITDA.
So, we're very brilliant.
Speaker Change: When you're, I'm sure it varies, but can you help us understand what a project with an MLB or NHL stadium, what an average total contract value is a range from...
Speaker Change: You know, a couple hundred thousand dollars, a couple of million, is it, is it, or a couple?
Great question. So there's two types. Okay.
We go into an MLB stadium.
Speaker Change: and they may have already deployed an IPTV system, right? So they already have bought that piece.
Speaker Change: and then, typically, where they embrace us is, can you help me with the menu board? So we would do all of the menu boards inside a stadium.
Speaker Change: Right, some might need hardware replacement, but most of it's just software and content.
Speaker Change: So that would be on the low end. That would be a $150,000 project a year because a combination of SaaS on the menu boards and some content refresh and updating of menu boards. That's the low end of the equation.
Other side of the equation.
Typical ballpark has somewhere between 600 and 1,000 displays.
Speaker Change: and they're really looking to deploy IPTV throughout and refresh the entire stadium. That project is always typically in the...
Two between two and three million dollars.
Speaker Change: It's a million for the IPTV system, software deployment, etc., and then it's another million
Speaker Change: So in your MLB projects that you've won, are those more on the poor solution side, or are they more on the menu boards?
It's really a mix.
Speaker Change: It's really a mix, I've got seven POCs going on right now, and I believe out of those seven if they were decide to move forward, four of them would be full stadium refreshers.
Speaker Change: So, four of them would be in the, quote, two million dollar in up range.
Got it?
Speaker Change: and to achieve that second half acceleration, do we need a handful of these large projects to materialize? Just one or two. How do you think about what it takes to achieve your internal targets?
Just we're just looking for a handful.
Speaker Change: Okay, we've got two or three very large retail media networks ready to pull the trigger. We have
A couple of significant QSRs ready to...
Speaker Change: Potentially head to full deployment, and then we have a whole series of these sports entertainment facilities. So, tremendous amount going on. I just can't talk about it at this moment.
and then one more on you know.
Speaker Change: I was just going to comment thanks for recognizing the importance of solving the RSI, taking a lot of time, a lot of effort, but we're glad to get that done and behind us.
Yeah, for sure.
Speaker Change: Can you share just a little bit more information on what led to the 90-day pause on PCTV and could possibly be longer than that?
Yeah, that's, that's...
That's B-C-T-V on its side. I believe they have continued.
Speaker Change: The private equity firm that invested money and is the primary controller of that.
Speaker Change: I think put a pause on additional funding, so BCTV would get caught up.
Speaker Change: David, and I believe that's really it. It's a discussion between BCTV and its funding vendors.
We do believe that BCTD will roll out.
Starting again in the June timeframe.
Great. Thank you so much.
Thank you.
Speaker Change: In one moment for our next question, our next question will be coming from Lawrence Linton, a second-line capital. Your line is open Lawrence.
Lawrence Litton: Good morning. Thank you. The Creative Facility on a performance basis, it's like 16 million outstanding on the revolver. What's available if any beyond that 16 million today?
Speaker Change: This is a great question. I'll turn that over to Ryan Mudd.
Ryan Mudd: Yeah, we've got, you know, the revolver we have set up today has us at 22.1 million in max capacity. I think at the end of the end of the year, we just reported we were at about 12 million and obviously this three million added on will come from there in this settlement. So that cash that will come through that three million will hit as well. So that's kind of where we stand today going into the end of the first quarter.
Speaker Change: So the invocation being, you may have close to $6 or $7 million available as of year end.
Speaker Change: Correct. Yeah, you have from that $4 million reserve we had, there will be $1 million that kind of freed up as we sell to that $3 million. So that's correct.
Speaker Change: Okay, and then there was some comment in the 10K about 5 million potential additionally available. Is there any chance that that comes into play or 22 as a hard cap?
This is Rick, that's a, you know, that's a complex...
Mass that our bank does based upon.
Speaker Change: Earnings, trailing 12 months earnings, several things go into that calculation.
Speaker Change: Okay, but currently we are not currently we're comfortable with our credit facility.
Speaker Change: So obviously you don't want to raise equity here. Do you feel comfortable that you won't have to?
Thank you. Thank you.
Speaker Change: Currently, we do not expect to raise equity. Now, unless we have some transaction that we would announce.
Speaker Change: So currently we have been on that track and we currently have stayed that away.
Speaker Change: Okay. I think you bring it up. Transaction would be an acquisition candidate or you're talking about a large program that needs some financing, for example. It could be one or the other, but but primarily an acquisition.
Okay.
Speaker Change: Can you comment either on the magnitude of the pipeline, or the backlog, or where they are relative to six months ago, for example?
Not that...
Speaker Change: You know, I think six months ago I would have told you they were at the 10 yard line and in some of them today I would tell you they're at the 1 inch line. So and the magnitude of these projects is significant.
Okay, it's far larger than any project.
We've announced his story.
Speaker Change: and what's the cash flow on a major project, either a full-scale baseball stadium or some of these other programs you're thinking about?
Speaker Change: Do they out of the gate for a quarter or two have kind of a meaningful negative cash flow or does the customer fund them positively almost immediately?
Speaker Change: That's a great question. It's about a 50-50 think about it as if it's a private-owned stadium and facility, right? We would typically ask for a significant deposit. You know, if it's $2 million dollar project, we may ask for a million dollar deposit.
Speaker Change: Sometimes it's not more. But if it's a public partnership like it's owned by the city or it's owned by the state, you're working under a standard state construction contract and that one would come with negative cash flow up front.
Speaker Change: because that's where you get reimbursed as project percentage completion. Correct, Brian ? That's correct. So that one typically has some negative cash flow for the first, probably 90 days is a practical number.
Speaker Change: and lastly, I just want to come back to a prior question that I don't think you fully answered. In your comments, you talk about exiting the year at a 15% adjusted EBITDA margin.
Speaker Change: What are you trying to say there? The fourth quarter you're hoping has that margin or going into next year, you think that's where the run rate should be?
Speaker Change: Now it's just where we believe we will finish this year, margins were a little compressed, revenue was a little down as we've articulated to the market.
Speaker Change: just because of the timing of projects, but we see those coming back here. And again, we would always point to look at the leverage in our business model.
Speaker Change: When our revenue is at 15 million a quarter, the company is very profitable.
Speaker Change: and so we believe we will exceed that as we enter the second half of the year.
Speaker Change: Okay, so exceed that, but you're not talking about a full year of 15% or potential you are.
Speaker Change: Yes, we are. Okay, and because this year you did 10% so revenues will grow and you could do 15% for the year. We believe that is our goal. Okay, thanks so much.
And one moment for our next question.
Speaker Change: Our next question is a follow up from Brian Kinstlinger of Alliance Global Partners, Your Mind is Open Brian .
Hey, thanks. Because that either-da and revenue acceleration depends on...
Some of these
Speaker Change: Projects on the go-line getting over the finish line. Can you talk about
Speaker Change: in general, how long it takes to ramp contracts. You see them immediately happening with your inventory. You think it takes a couple of months.
Speaker Change: Is it very, I guess, just trying to understand, you know, that timeframe from Wendy Olser one?
Okay.
Speaker Change: This is a great question, Brian . It always takes extended time. So number one, you'll work a long time to finally sign a project, and now it is signed. The first thing the customer will always do is a POC proof of concept.
Speaker Change: Okay, we're now ready to go. Now let's go deploy a subset.
Speaker Change: Right, so we're talking to a QSR about a thousand store rollout, we're right on the cusp, they're going to do a POC of the first 40 locations just to see how it rolls out before they launch the rest.
Speaker Change: Okay, same thing on a large media network. They're looking at several thousand locations. They want to do a POC for 80 locations.
If so, those POCs will typically take 90 days.
Speaker Change: to get deployed and then the customer will evaluate it for 60 or 90 and then we'll say now let's go and run hard.
Okay, George, anything I can't do that?
Speaker Change: You know, Brian just to build on that and double back on a previous question that you posed about the revenue slope for the year and adjust to deep down on top of that.
Speaker Change: Obviously we've made a big announcement with AdLogic's CPM Plus, basically developing that programmatic platform and knitting together with AdLogic, which is our ad server and of course the CMS.
Um, um,
Speaker Change: and some of these opportunities that we're speaking about, they've been in motion now for an extended period of time, and Rick previously said we expect several to crystallize to some outcome.
Speaker Change: Whether it's a POC, an awarded business, or an expansion of business in the coming months.
Speaker Change: and obviously we're careful about representations we make about the probability of that happening.
Speaker Change: But we do anticipate that we're in good position on a number of these opportunities. The one thing I did want to double back on and just expand upon because it's really important.
Speaker Change: is the new monetization models that align with our retail media network product suite.
Speaker Change: We all know we sell infrastructure digital signage. There's a hard work component to that. We've talked extensively about what our margins are on that.
The Infrastructure Seeds, SAS
Speaker Change: SAS obviously is much higher marching for us and we talked extensively about that.
Speaker Change: What's net new here is our ability to monetize new monetization models in conjunction with our ads server in a pro thematic platform.
and these follow more in line with.
Speaker Change: Platform Access fees, user licenses, SaaS dollars, and more importantly, particularly with CPM Plus, an ability to participate in the ad revenue that is flowing through the stock.
Speaker Change: So, can't can't overstate the importance of that to us in terms of on a go forward basis?
Speaker Change: of Incremental Revenue Opportunities that previously we probably wouldn't have had access to, but also the enhanced margins, the superior margins of the new revenues that we see.
Speaker Change: of flowing through that stack and we're well positioned all of that and it's been an ongoing
Speaker Change: It's been an ongoing process. We've been previewing CPM Plus with certain customers in conjunction with RFP opportunities now for well over six months. And so when we talk about
Rick Mills: How long does it take to convert one of these opportunities? It can vary, but many of them have been gestating already for an extended period of time, and as Rick indicated, we expect that they're going to crystallize.
To one outcome or another, very shortly, we just...
Rick Mills: Unfortunately, not in a position to make any representations about that, but we fully expect by the time that we present on Q1, we would have known that we've won a piece of business or not, or that we have a POC and are executing on and can provide.
Much better information as to the quantum of the opportunity.
Thank you, Brian .
Great. Thanks so much.
Brian Kinstlinger, Brian Kinstlinger, Brian Kinstlinger
Speaker Change: and our next question will be coming from Ben Howard of Pivotal Group. Your line is open Ben.
Ben Howard: Hey guys, congrats on the reflex settlement. It sounds like it's really mutually beneficial for all parties and glad to finally put this behind us as well. And then when we look at AR to R.
Ben Howard: especially as we see kind of subsequent growth throughout the year, quarter-over-quarter, and managed services.
Ben Howard: It's kind of a trend we like to follow and it looks like an exit rate of 20 million on the managed service line but then we reported a 16.8 million.
Ben Howard: ARR number to exit the year. Is that a big customer loss, or can you kind of explain that discrepancy and the quarter of a quarter decline from 18.1 exit?
Rick Mills: Yeah, this is Rick. We had two large customers who were both SaaS customers.
Rick Mills: One of them is actually its own retail media network that they run and they
Rick Mills: They had a product that was out in the field that was installed in thousands of their customer locations and they retreated some of those, they retired some of those.
Rick Mills: We had another large customer who has over 50,000 screens, also do some intern.
Adjustments on It's Contract
Rick Mills: Neither of them is a lost customer, but certainly one of them is revenue did decline in annual basis about a million bucks.
So that's the short-term reduction.
Rick Mills: We expect to make that back up as we continue through 2025 but there was an absolute reduction in that sass due to those two customer adjustments.
Again, I used the term adjustments, not lost.
Rick Mills: Rick, that makes sense. And then when we look at customers, other customers in the book currently that have similar dynamics where they run their own retail media network that are potentially at risk of reductions.
Rick Mills: and are these two specifically, are they chances of wind back to get that back to prior revenue levels?
Rick Mills: Certainly one of them is not because one of them is adjusted its business model, but we don't see them doing reductions over their current spend, so we're comfortable that they're
Rick Mills: Stannis. The other one has been a long time customer for 13 plus years, and we see potential expansion in that network, but that network will expand in 2026, not 2025.
Speaker Change: And then just to answer that first question, other other customers in your boat that you know have similar dynamics, or you could see them pulling back like these two.
No, not really.
We do not [inaudible]
Speaker Change: And then when we look also at kind of the media sales and advertisement sales as well, we thought pretty big drop in Q4 from I think it was 1.4 million in other services and then to 200,000 I believe. When we look at AdLogic, QPN Plus, you'd...
Speaker Change: I believe that'll be higher to catch right when you get that out and rolling from the retail media network and do you think that provides a substantial uplift to that ad services and media sales category?
Speaker Change: Yeah, I've been to George Soder. Yes, we do see that. We definitely have executed the pivot internally. We previously had a media sales team that was selling advertising. We had a different accountability to certain retail media networks to either sell into those networks.
Exclusively or to have the option to sell into them.
Speaker Change: who are deploying retail media networks aren't looking for assistance in media sales.
Speaker Change: so all the more reason why we've committed to add tech and the revenue streams that are going to come along with that tech, and you know this goes back to several years. One of the key...
Speaker Change: Key reasons we emerged with Reflect was for their ad-serving platform, and then we immediately set upon building the programmatic layer-up.
Speaker Change: or developing the programmatic layer, looking to knit together all of these solutions.
Speaker Change: Those weren't very high margin dollars the way that they were very labor intensive and we had partners in order to generate those cells. On a go forward basis it will flow through the stack at its significantly increased margins and we do see the attachment rate escalating throughout the year.
Speaker Change: We're just not in a position to make representations about how big that can get.
Speaker Change: but as indicated previously, we're well down the path with a number of customers on activating our retail media network products suite.
Speaker Change: and therefore, we certainly, it's a strategic thrust, and we see that to be a very important part of our business, and something that can scale very quickly, and again, at much higher margins than...
The very labor-intensive way we were going at media sales.
Speaker Change: Image Science, and then when we think of the ad-take platform, is that going to flow into managed services, or is that still going to be any other services? Mine item, I don't know if that's better suited for you, Ryan or not.
Speaker Change: Yeah, I would imagine it would be under the managed service. This is real see that continue to flow.
Speaker Change: Perfect. All right guys, thank you so much. Congrats on the record year and most of all, congrats on the reflex settlement. It's excited to move forward with that behind us now. Yeah, thank you.
Speaker Change: Okay, and I'm showing no for the questions at this time. I would now like to turn the call back to Rick for closing remarks.
Rick Mills: Thank you everybody for joining the call. Let me conclude the call by thanking all our shareholders, clients, partners and employees for their continuing efforts. Commitment and support is we work together to transform CRI into the leading brand of digital signage solutions. Again, we look forward to speaking with everybody next quarter. Thank you and goodbye.
Speaker Change: In this concludes today's conference call, thank you for participating, you may now disconnect.