Q1 2025 Creative Realities Inc Earnings Call
Yeah.
Operator: Good morning.
Operator: At this time, I would like to welcome everyone to Creative Realities 2025 First Quarter Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at CRI.com following the completion of the call. The company has prepared remarks summarizing the interim results for the first quarter, along with additional industry and company updates.
Good morning.
Speaker Change: At this time I would like to welcome everyone to create a reality 2025 first quarter earnings conference call.
Speaker Change: This call will be recorded and a copy will be available on the company's website at Cri dotcom following the completion of the call.
Speaker Change: The company has prepared remarks summarizing the interim results for the first quarter, along with additional industry and company updates.
Operator: Joining me on the call today is Rick Mills, Chief Executive Officer, George Sautter, Chief Strategy Officer, and Ryan Mudd. Chief Finance Officer. Thank you.
Rick Neely: Joining me on the call today is Rick Neely, Chief Executive Officer, George <unk>, Chief strategy Officer, and Brian mud.
Speaker Change: Chief Financial Officer, Mr. <unk>, you may begin.
Ryan Mudd: Mr. Mudd, you may begin. Thank you and good morning everyone. Welcome to our earnings call for the first quarter ended March 31st, 2025.
Speaker Change: Thank you and good morning, everyone welcome to our earnings call for the first quarter ended March 31, 2025, I would like to take this opportunity to remind you that remarks. Today will include forward looking statements. The words anticipated wheel believes expects intends plans estimates projects should may propose and similar expressions.
Ryan Mudd: I would like to take this opportunity to remind you that 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. Actual results may differ materially from those contemplated by such statements. Factors that could cause these results to differ materially are set forth in our Form 10-K and other subsequent filings with the SEC.
Speaker Change: 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 may differ materially from those contemplated by such statements.
Speaker Change: Factors that could cause these results to differ materially are set forth in our Form 10-K, and other subsequent filings with the SEC.
Ryan Mudd: 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: 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.
Ryan Mudd: 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. Investors are encouraged to review these materials. We believe the use of these non-GAAP measures, such as adjusted EBITDA and several other important KPIs, represent meaningful ways to track our performance.
Speaker Change: 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 investors are encouraged to review. These materials. We believe the use of these non-GAAP measures such as adjusted EBITDA and several other important kpis.
Speaker Change: Is that meaningful ways to track our performance. It is now my pleasure to introduce Rick meals CEO of creative realities.
Rick Mills: It is now my pleasure to introduce Rick Mills, CEO of Creative Realities. Thanks, Ryan. Good morning, everybody. Thank you for joining.
Speaker Change: Thanks, Ryan Good morning, everybody. Thank you for joining.
Rick Mills: I'll start by giving some details of our first quarter financials. We posted revenue of $9.7 million last year. this quarter versus $12.3 million in Q1 of 2024. As I previously discussed, this revenue decrease is a direct result of installation timing on several large projects. We expect increased revenue as the year progresses. Gross profit was $4.5 million in the 2025 first quarter versus $5.8 million last year. The gross margin was 46%, roughly in line with the prior year period. Annual recurring revenue, or ARR, was at a run rate of $17.3 million at the end of the quarter versus $16.8 million at the start of 2025.
Speaker Change: I'll start by giving some details of our first quarter financials, we posted revenue of $9 7 million.
Speaker Change: This quarter versus $12 3 million in Q1 of 2024 as I previously discussed this revenue decrease is a direct result of installation timing.
Speaker Change: On several large projects, we expect increased revenue as the year progresses gross profit was $4 5 million in the 2025 first quarter versus $5 8 million last year.
Speaker Change: Gross margin was 46% roughly in line with the prior year period.
Speaker Change: Annual recurring revenue or <unk> was at a run rate of $17 3 million at the end of the quarter.
Speaker Change: Versus $16 8 million at the start of 2025.
Rick Mills: As we discussed on our last earnings call, and similar to the fourth quarter, deployment timing was expected to impact the Q1 results, particularly our revenue and gross profit level. However, our adjusted EBITDA of $0.5 million was nominally changed versus last year and the previous quarter due to our active management of underlying overhead costs, such that the aggregate SG&A expenses We're down 11% to 5.2 million this year versus 5.8 million in the first quarter of 2024. Operating costs were also down sequentially from $5.6 million in Q4. These reductions will improve profitability as revenue scales back for the balance of the year.
Speaker Change: As we discussed on our last earnings call.
Speaker Change: Similar to the fourth quarter deployment timing.
Speaker Change: It was expected to impact the Q1 results, particularly our revenue and gross profit level.
Speaker Change: However, our adjusted EBITDA of <unk> 5 million was nominally changed versus last year and the previous quarter due to our active management of underlying overhead cost such that the aggregate aggregate SG&A expenses.
Speaker Change: We're down 11% to $5 2 million this year versus $5 8 million in the first quarter of 2024.
Speaker Change: Operating costs were also down sequentially from $5 6 million in Q4.
Speaker Change: These reductions will improve profitability as revenue scales back for the balance of the year.
Rick Mills: And while our debt rose this quarter, it was largely due to the previously discussed settlement of our contingent liability. As a reminder, at December 31, 2024, CRI carried a contingent liability on its balance sheet of approximately $12.8 million from the merger with Reflect Systems, Inc. in 2022. That was to become payable in February of 2025. We ultimately resolved the matter for $3 million in cash, utilizing our credit agreement, a $4 million 30-month promissory note that includes a balloon payment in September of 2027, and the issuance of some warrants. We believe this settlement effectively provides us additional long-term financial visibility and flexibility.
Speaker Change: And while our debt rose this quarter. It was largely due to the previously discussed settlement of our contingent liability.
Speaker Change: As a reminder, at December 31, 2020 for Cri carried a contingent liability on its balance sheet of approximately $12 8 million from the merger with reflects systems, Inc. In 2022.
Speaker Change: That was to become payable in February of 2025.
Speaker Change: We ultimately resolve the matter for $3 million in cash utilizing our credit agreement.
Speaker Change: A $4 million 30 month promissory note that includes a balloon payment in September of 2027.
Speaker Change: The issuance of some warrants.
Speaker Change: We believe this settlement effectively provides us additional long term financial visibility and flexibility.
Rick Mills: We replaced some $12.8 million in contingent liability risk and roughly $13 million of debt with $23.2 million of debt, which includes some short-term working capital increases, as Ryan Mudd will review in a moment. We are now free to focus on growing the company, but we'll also strategically use our cash flow to manage debt and optimize our capital structure in pursuit of commercial and perhaps strategic growth.
We've replaced some $12 8 million in contingent liability risk and roughly $13 million of debt.
Speaker Change: With $23 2 million of debt, which includes some short term working capital increases as Ryan mud will review in a moment.
Speaker Change: We are now free to focus on growing the company, but will also strategically use our cash flow to manage debt and optimize our capital structure in pursuit of commercial and perhaps strategic growth.
Rick Mills: We continue to work on an active pipeline of opportunities and are pleased with a win just recently announced.
Speaker Change: We continue to work on an active pipeline of opportunities and are pleased with the win just recently announced Cri was selected by a well known upscale quick service restaurant chain with over 1000 locations across more than 25 states.
Rick Mills: CRI was selected by a well-known upscale quick service restaurant chain with over 1,000 locations across more than 25 states and to help lead the transformation of its indoor and outdoor menu board. The restaurant chain is nationally recognized by its cooked-to-order food, farm-fresh ingredients, and excellent customer service.
Speaker Change: And to help lead the transformation of its indoor and outdoor menu boards.
Speaker Change: The restaurant chain is nationally recognized by its cooked to order food farmed fresh ingredients and excellent customer service. After a successful pilot, which will begin in select locations. During the third quarter of 2025 National rollout is expected to proceed.
Rick Mills: After a successful pilot, which will begin in select locations during the third quarter of 2025, national rollout is expected to proceed. Through this partnership, we'll play a key role in the chain's digital transformation strategy, shifting from static displays to dynamic, digitally-driven customer engagement, including personalized messaging and real-time promotion. CRI will deliver a turnkey solution along with consulting, content strategy, hardware provisioning, deployment support, and ongoing day two service, all powered by our proprietary CMS platform, Clarity. It's a great win for CRI and underscores our growing leadership position, leveraging digital applications to elevate a customer's experience and satisfaction.
Speaker Change: Through this partnership will play a key role in the change digital transformation strategy shifting from status displays to dynamic digitally driven customer engagement.
Including personalized messaging and real time promotions.
Speaker Change: Cri will deliver a turnkey solution along with consulting content strategy hardware provisioning deployment support and ongoing day to service all powered by our proprietary CMS platform clarity.
Speaker Change: It's a great win for <unk> and underscores our growing leadership position leveraging digital applications to elevate our customers experience and satisfaction.
Rick Mills: This leadership is not just a matter of our technology, but demonstrates our subject matter expertise in the actual underlying business of a vertical such as quick serve restaurants. something our competitors do not bring at all. We'll help this client build a more agile, connected restaurant environment that meets guest expectations and provides flexibility for enhanced applications in the future.
Speaker Change: This leadership is not just a matter of our technology, but demonstrates our subject matter expertise and the actual underlying business of a vertical such as quick serve restaurants, something our competitors do not bring at all well.
Speaker Change: Will help this client build a more agile connected restaurant environment that meets guest expectations and provides flexibility for enhanced applications in the future.
Rick Mills: As stated last quarter, we remain on track for another year of record performance. We continue to expect revenue to accelerate beginning in Q2 and particularly in the second half of the year. And we are engaged in numerous opportunities that will lead to backlog growth, revenue predictability, and improved margins. even as we look to make headway strengthening our balance sheet through debt reduction whenever possible. We also expect adjusted EBITDA as a percentage of revenue to rise to 15% by year end.
Speaker Change: As stated last quarter, we remain on track for another year of record performance.
Speaker Change: We continue to expect revenue to accelerate beginning in Q2, and particularly in the second half of the year.
Speaker Change: And we are engaged in numerous opportunities that will lead to backlog growth revenue predictability and improved margins.
Speaker Change: Even as we look to make headway strengthening our balance sheet through debt reduction whenever possible.
Speaker Change: We also expect adjusted EBITDA as a percentage of revenue to rise to 15% by year end.
Rick Mills: The introduction of our AdLogic CPM platform has gone well, with more potential clients looking at the power it brings to the enterprise. As a reminder, this innovative solution provides customers with the tool to deliver targeted high performance campaigns at significantly reduced cost. delivering programmatic capabilities within a self-serve interface that simplifies campaign execution, enhances targeting precision, and eliminates unnecessary intermediation fees. It positions CRI as a unique one-stop-shop for hardware deployments, an array of day-two services, and the required ad tech solutions with new monetization models for the company and the customer.
Speaker Change: The introduction of our AD logic CPM platform has gone well with more protect clients looking at the power it brings to the enterprise.
Speaker Change: As a reminder, this innovative solution provides customers with the tools to deliver targeted high performance campaigns.
Speaker Change: <unk> significantly reduced cost.
Speaker Change: Delivering programmatic capabilities within our self serve interface that simplifies campaign execution.
Speaker Change: <unk> is targeting precision and eliminate unnecessary intermediation fees at.
Speaker Change: It positions CRA is unique one stop shop for hardware deployments and array of day two services.
Speaker Change: And the required AD Tech solutions with new monetization models for the company and the customer.
Rick Mills: We will provide an update on this new innovation and the customers using it in the months to come. CRI remains at the forefront of improving the customer experience across a growing list of innovative clients and brands. We look forward to the year ahead, including growing revenue, expanding margins, solid cash flow, and debt repayment.
Speaker Change: We will provide an update on this new innovation and the customers using it in the months to come.
Speaker Change: Cri remains at the forefront of improving the customer experience across a growing list of innovative clients and brands we have.
Speaker Change: Look forward to the year ahead, including growing revenue expanding margins solid cash flow and debt repayment.
Rick Mills: In short, the future looks bright for CRI, and we appreciate our investors' continued enthusiasm and support.
Speaker Change: In short the future looks bright for Cri and we appreciate our investors continued enthusiasm and support.
Ryan Mudd: I'll turn it back over to Ryan Mudd to share some additional comments on our financials. Ryan? Thank you, Rick.
Speaker Change: Turn it back over to Ryan month to share some additional comments on our financials Ryan.
Ryan Mudd: An overview of our financial results for the first quarter of 2025 was provided in our earnings release and Form 10-Q filed earlier this morning, which included the condensed consolidated balance sheet as of March 31, 2025, the statement of operations and the statement of cash flows for the three months ended March 31, 2025, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended March 31, 2025, as well as the preceding four quarters. While Rick reviewed our operational results in detail, let me provide a couple points of context related to our balance sheet.
Ryan Mud: Thank you Rick and overview of our financial results for the first quarter of 2025 was provided in our earnings release and Form 10-Q filed earlier. This morning, which included the condensed consolidated balance sheet as of March 31, 2025, the statement of operations and statement of cash flows for the three months ended March 31, 2025, and a detailed reconciliation.
Ryan Mud: <unk> of net income to EBITDA and adjusted EBITDA for the quarter ended March 31, 2025, as well as the preceding four quarters.
Speaker Change: While Rick reviewed our operational results in detail, let me provide a couple of points of context related to our balance sheet.
Ryan Mudd: As of March 31, 2025, the company had cash on hand of approximately $1.1 million versus $1 million at the end of 2024. As mentioned in prior calls, our consolidated balance sheets reflect minimal cash on hand as the company has set up a sweep instrument to apply against a revolving debt facility to further manage our interest expense. Our gross and net debt stood at approximately $23.2 million and $22.1 million, respectfully, at the end of the first quarter, as compared to $13 million and $12 million, respectfully, at the start of 2025. Our debt level rose, as Rick previously discussed, by resolving a $12.8 million contingent consideration liability for $7 million, which was satisfied with a $3 million payment from our credit facility, the issuance of a $4 million promissory note, and some warrants.
Speaker Change: As of March 31, 2025, the company had cash on hand of approximately $1 1 million versus $1 million at the end of 2024 as mentioned in prior calls our Arkansas at a balance sheets reflect minimal cash on hand, as the company has set up a sweep instrument to apply against our revolving debt facility to further manage our interest expense.
Speaker Change: Our gross and net debt stood at approximately $23 2 million and $22 1 million respectively. At the end of the first quarter as compared to $13 million and 12 million respectfully at the start of 2025, our debt level rose as Rick previously discussed by resolving a $12.8 million contingent consideration liability for 7 million.
Speaker Change: Which was satisfied with a $3 million payment from our credit facility the issuance of a $4 million promissory note and some warrants the additional $3 2 million dollar increase quarter to quarter reflects short term working capital uses however, when reconstituted debt as it stood at December 31, 2024 to account for this contingent liability.
Ryan Mudd: The additional $3.2 million increase quarter to quarter reflects short-term working capital uses. However, when reconstituting debt as it stood at December 31st, 2024, to account for this contingent liability, there's an overall reduction of $2.6 million, which is the net of the $5.8 million reduction in the contingent liability through the settlement, offset by the $3.2 million increase for working capital needs as we ramp up for the new opportunities discussed herein.
Speaker Change: There is an overall reduction of $2 6 million, which is the net of the $5 $8 million reduction in the contingent liability through the settlement offset by the $3 2 million dollar increase for working capital needs as we ramp up for the new opportunities discussed herein.
Ryan Mudd: With an agreement now in place, we are returning to a strategy of optimizing capital structure and creating capacity on the balance sheet wherever possible. At the end of the first quarter, our leverage on a gross and net basis was 4.91 and 4.67, respectfully, up from 2.59 and 2.39 at the beginning of fiscal 2025. However, we see improvement going forward and remain dedicated to managing our debt as we continue to evaluate and mitigate to an optimized capital structure in support of our growth.
Speaker Change: With an agreement now in place we are returning to a strategy of optimizing capital structure and creating capacity.
Speaker Change: <unk> on the balance sheet wherever possible at the end of the first quarter, our leverage on a gross and net basis was $4 nine one and $4 six seven respectfully up from 2.5 not in to three nine at the beginning of fiscal 2025.
Speaker Change: However, we see improvement going forward and remain dedicated to managing our debt as we continue to evaluate and mitigate to an optimized capital structure in support of our growth.
Rick Mills: I will turn it back to Rick for additional comments on our results and customer activities.
Rick Neely: I will turn it back to Rick for additional comments on our results and customer activities.
Rick Mills: Thanks, Ryan. Our engagement with potential customers and prospects is at an all-time high. We are pleased with the pipeline and the sheer number of discussions going on with potential prospects.
Speaker Change: Right.
Speaker Change: Our engagement with potential customers and prospects is at an all time high we are pleased with the pipeline and the sheer number of discussions going on with potential prospects, our sports and entertainment team has also been expanded to facilitate our anticipated growth in this sector as we move.
Rick Mills: Our sports entertainment team has also been expanded to facilitate our anticipated growth in this sector as we move into 2025. The company completed an NHL arena during the third quarter of 2024, its largest deployment of this kind, and we have tremendous momentum in this market moving into the new year. In Q1 2025, we were awarded three MLB projects of varying sizes and types, and we have an additional seven POCs, or proof of concepts, going on at other venues across the U.S.
Speaker Change: Into 2025.
Speaker Change: The company completed an H L arena during the third quarter of 2024, its largest deployment of this time and we have tremendous momentum in this market moving into the new year.
Speaker Change: In Q1 2025, we were awarded three MLB projects of varying sizes and types and we have an additional seven POC or proof of concepts going on at other venues across the U S.
Rick Mills: Now let's talk about BCTV. The BCTV project continues to move forward at a slower pace in the first two quarters of 2025. All total, we have completed 300 plus site installations to date and have recently received communication to move forward with the next 200 or so sites beginning in Q3.
Speaker Change: Now, let's talk about be CTV the.
Speaker Change: The BC TV project continues to move forward at a slower pace in the first two quarters of 2025.
Speaker Change: All total we have completed 300 plus site installations to date.
Speaker Change: And have recently received communication to move forward with the next 200 or so sites beginning in Q3.
Rick Mills: We would expect to install more than 50% of these locations through the balance of the year, which would generate approximately $3 million in revenue.
Speaker Change: We would expect to install more than 50% of these locations through the balance of the year, which would generate approximately $3 million in revenue.
Rick Mills: Another additional network we have previously announced is the DigiPoint Media Network. This is a retail media network on ice boxes across groceries and C-stores. It appears they are ready to move forward with deploying approximately 2,000 sites beginning in the third quarter.
Another additional network. We have previously announced is the did you point media network. This is a retail media network on ice boxes.
Speaker Change: Across groceries and food stores.
Speaker Change: It appears they are ready to move forward with deploying approximately 2000 sites beginning in the third quarter.
Rick Mills: Assuming this moves forward, and we install all locations in the second half of 2025, it would generate in excess of $4 million in hardware and installation revenue, with additional SaaS revenue from our CMS and AdTech software solution. Our cloud and software development teams have been working towards SOC 2, Type 2 compliance. CRI achieved SOC 2 Type 1 compliance in Q1 of this year and expect to achieve Type 2 by year end. SOC 2 compliance is a valuable credential that demonstrates the trustworthiness and the credibility of our products to enterprise customers. This is yet another indicator of our acceleration in the market.
Speaker Change: Assuming this moves forward and we install all locations in the second half of 2025, it would generate in excess of $4 million and hardware and installation revenue with additional SaaS revenue from our CMS and AD Tech software solutions.
Speaker Change: Our cloud and software development teams have been working towards sock to type two compliance.
Speaker Change: Cri achieved stocked to type one compliance in Q1 of this year and expect to achieve type two by year end Socs.
Speaker Change: The Sox compliance is a valuable potential demonstrates the trustworthiness and the credibility of our products to enterprise customer.
Speaker Change: This is yet another indicator of our acceleration in the marketplace.
Rick Mills: One additional fact about Q1.
Speaker Change: One additional fact about Q1, we revamped our operations and warehouse facilities, we transitioned to a larger space in the same building and significantly increase the capacity of our warehouse to process orders and projects.
Rick Mills: We revamped our operations and warehouse facilities. We transitioned to a larger space in the same building and significantly increased the capacity of our warehouse to process orders and projects. This significant increase in capacity came at a minimal increase in our cost.
Speaker Change: This significant increase in capacity came at a minimal increase in our cost we are well positioned for the tremendous growth. We expect in the second half of this year.
Rick Mills: We are well positioned for the tremendous growth we expect in the second half of this year.
Operator: With that, we'll now move to the Q&A portion of the call. Please go ahead, operator. Thank you.
Speaker Change: With that we'll now move to the Q&A Q&A portion of the call. Please go ahead operator.
Operator: Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1 1 again.
Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait by name to be announced.
Speaker Change: To withdraw your question simply press Star one again, please standby, while we compile the Q&A roster.
Operator: Please stand by while we compile again a roster.
Brian Kinstlinger: Our first question coming from the line of Brian Kinstlinger with Alliance Global Partners. Your line is now open. Great, thank you.
Speaker Change: My first question is coming from the line of Brian <unk> with Alliance Global Partners. Your line is now open.
Great. Thank you.
Rick Mills: Can you talk about the expectations as it relates to screen installs for your large QSR win, maybe second half 25 and 2026, and then what percentage of franchisees have expressed interest in opting in? Brian Rick here. Thanks, great question. So it is our expectation that we've got POCs actively happening, a couple of test sites literally this quarter, POCs in Q3, and then beginning end of Q3, 20 locations or more per month. As we announced, they have over 1,000 locations, and 600 of those locations have already indicated interest or, quote, signed up to convert to digital.
Speaker Change: Can you talk about the expectations as it relates to screen installs for your large <unk> win maybe.
Speaker Change: That can have 25 in 2026, and then what percentage of franchisees have expressed interest in our opinion.
Brian Rick: Brian Rick here. Thanks, Great question so.
Speaker Change: It is.
Our expectation that we've got poc's actively happening a.
Speaker Change: A couple of test sites literally this quarter.
In Q3.
Speaker Change: And then beginning end of Q3 2000 locations or more per month.
Speaker Change:
Speaker Change: We announced they have over 1000 locations and they have 600 of those locations have already indicated interest or quote signed up to convert to digital.
Rick Mills: So excited about that.
Speaker Change: So excited about that overall, we look at it as a basket.
Rick Mills: Overall, we look at it as a. Is it a two-year project? Probably not. Probably three years. So probably about 300 sites a year, ballpark-ish. Great, that's helpful.
Speaker Change: Is it a two year project, probably not probably three years, so probably about 300 sites a year ballpark ish.
Speaker Change: Great. That's helpful. And then you highlighted delays in the first quarter can you just give us some more detail of what led to those delays and is it broad based or is it.
Rick Mills: And then you highlighted delays in the first quarter. Can you just give us some more detail of what led to those delays? And is it broad-based or is it one or two clients? And has that reversed yet in the second quarter? We've started to see a reverse. It was actually three separate projects. Okay, so it's not it's not across the board. Right. But we had three clients, three unique projects, each had its own set of difficulties. And that's why we saw that back in Q3 of last year.
Speaker Change: One or two clients.
Speaker Change: Exactly I got reversed yet in the second quarter.
Speaker Change: We started to see a reverse it was actually three separate projects. Okay. So it's not it's not across the board.
Speaker Change: Right.
Speaker Change: But we had three clients three unique projects each had its own set of difficulties and that's why we saw that back in Q3 of last year and it's why we wanted to communicate crisply to you and the Investor base that Q4, and Q1, we're going to be.
Rick Mills: And it's why we wanted to communicate crisply to you and the investor base that Q4 and Q1 were going to be like. We're through that period, we're on track and feel very comfortable on a go-forward basis.
Speaker Change: Right.
Speaker Change: We're through that period, we are on track and feel very comfortable on a go forward basis.
Rick Mills: Now, it's great to see the QSR win taking over the gold line. I know you've talked about a handful that were right there.
Speaker Change: Right now.
Speaker Change: It's great to see the <unk> when they can open the call lines I know you've talked about a handful that were right. There can you talk about the pipeline of the other large procurements that you've highlighted in recent quarters.
Rick Mills: Can you talk about the pipeline of the other large procurements that you've highlighted in recent quarters? And with the global trade uncertainty, is that slowing decisions or are you still progressing with your discussions on some of the other large You know, we're still progressing, but with a number of opportunities, again, our, our top 10 opportunities, the quality and size of the top 10 opportunities, even versus 18 months ago are significantly enhanced and improved. Okay, number one. So very bullish on those. Opportunities.
Speaker Change: And with the global trade uncertainty is that slowing decisions or are you still progressing with your discussions on some of the other large opportunities.
Speaker Change: We're still.
Speaker Change: Progressing but.
Speaker Change: With a number of opportunities again are our top 10 opportunity the quality and size of the top 10 opportunities even versus 18 months ago or significantly.
Speaker Change: Enhanced and improved okay number one so.
Speaker Change: Very.
Speaker Change: Very bullish on those.
Rick Mills: Number two. We talked about, you know, global uncertainty and terrorists and those things. As of yet. our industry when I say industry, the specific signage, okay, market has not yet been terribly affected by terror. All the screen manufacturers' product comes out of Mexico, right? So as long as the U.S. and Mexico keeps open and doesn't go crazy, there should not be an issue with screens. The other issue that we have concerns about are the mounts. mounts are made of steel, and the price of steel coming into the US could affect that. As of now, We don't have any customer that says, hey, I'm putting this project on hold because of tariffs.
Speaker Change: Opportunities number two.
Speaker Change: You talked about global uncertainty and tariffs.
Speaker Change: And those things.
Speaker Change: As of yet.
Speaker Change: Our industry when I say industry specific signage, okay market has not yet been terribly.
Speaker Change: <unk> tariffs.
Speaker Change: All the screen manufacturers.
Speaker Change: Product comes out of Mexico right.
Speaker Change: As long as the U S and Mexico keeps open and doesn't go crazy.
Speaker Change: Should not be an issue with screens. The other issue that we have concerns about our the mountains.
Speaker Change: Mounts are made of steel and the prices of steel coming in in the U S could affect that.
Speaker Change: As of now.
Speaker Change: We don't have any customers says hey, I'm, putting this project on hold because of tariffs we have not had any of those conversations. However, I think we would all be cognizant all of us are looking around and trying to understand the new normal landscape, which appears to be very.
Rick Mills: We have not had any of those conversations.
Rick Mills: However, I think we would all be cognizant, all of us are looking around and trying to understand the new normal landscape, which appears to be very uncertain with this tariff in play. Great.
Speaker Change: Uncertainty.
Speaker Change: With this tariffs in play.
Speaker Change: Yeah.
Rick Mills: My last question, the company's ad tech solution has gone through some significant upgrades in functionality.
Speaker Change: Great.
Speaker Change: Last question the company's AD Tech solution has gone through some significant upgrades and functionality.
Rick Mills: Can you talk about either how you're seeing any increased demand, how attach rates maybe are improving, just any kind of progress or success you're seeing as it relates to that, that all? Well, first off, the Ad Tech, or what, let me back up. The market our Ad Tech is very much focused on is what we would use the term retail media networks, right? Retail media networks is very much in the early game. Okay, and why is that in the early game? Because retail media networks require significant capital outlay. Now, the benefit of an end user who is flipping their Signage to a retail media network, it now becomes an income-producing machine for the end-user customer instead of an op-ex expense.
Speaker Change: Can you talk about either are you seeing any increased demand our tax rates may be are improving just any kind of progress or success youre seeing as it relates to that.
Speaker Change: That offering.
Speaker Change: Well first off.
The.
Speaker Change: Ed Tech or what.
Speaker Change: Let me back up the market or AD Tech is very much focused on is what we would use the term retail media networks right retail media networks is very much in the early game.
Speaker Change: Okay.
Speaker Change: Why is that in the early game because retail media networks require significant capital outlay now the benefit of an end user who is flipping there.
Speaker Change: Signage to a retail media network is it now becomes a income producing machine for the end user customer instead of an opex expense.
Rick Mills: So, everybody's interested, everybody's looking, everybody's testing. As you know from our pedigree, we have 10 significant large retail customers. You know, we talk about Macy's, we talk about Verizon, Best Buy, etc. All of them are investigating media networks. And so we are primed and positioned with a number of current customers and prospective customers to deploy retail media networks. we see our ad tech having significant impact. significant potential impact from a revenue perspective in 2026 and 2027.
So everybody is interested.
Speaker Change: Re bodies looking everybody's testing.
Speaker Change: As you know from our pedigree we have.
Speaker Change: 10 significant large retail customers.
Speaker Change: We talk about Macy's, we talk about Verizon best buy et cetera, all of them are investigating media networks and so we are primed and positioned with a number of current customers and perspective customers to deploy retail media networks we.
Speaker Change: We see our AD tech having significant impact.
Speaker Change: Significant potential impact from a revenue perspective in 2026 and 2027.
Rick Mills: Great. Thank you, Rick. Thanks, Brian.
Rick: Great. Thank you Rick.
Rick: Thanks, Brian.
Speaker Change: Thank you.
Cal Bartyzal: And our next question coming from the line of Jason Kreyer from Craig Hallam Capital Group. Your line is now busy. Great. Thank you. This is Cal on for Jason.
Our next question coming from the line of Jay.
Speaker Change: <unk> from Craig Hallum Capital Group. Your line is now open.
Speaker Change: Great. Thank you. This is Kyle on for Jason. So firstly, we can just revisit the large <unk> win that you've had just curious why you won and if you believe that this win could also contribute to larger additional large wins as you continue to validate your position in the market.
Rick Mills: So first, maybe we can just revisit the large QSR win that you had. Just curious, you know, why you won and if you believe that this win could also contribute to larger, you know, additional large wins as you continue to validate your position in the market? Great question, Cal. So number one, the answer is to the second half of the question is, will it give us credibility for additional wins? Absolutely. Yep. It's a first class brand. And when you win first class brands, people sit up and take notice. Maybe I need to be talking to those folks, right?
Speaker Change: Great question Kal.
Speaker Change: So number one the answer is to the second half of the question.
Speaker Change: Is will it give us credibility for additional winds absolutely. Yes. It is a first class brand and when you win first class brands people sit up and take notice and maybe I need to be talking to those folks right. That's number one number two is this one was a unique.
Rick Mills: That's number one.
Rick Mills: Number two, this one was a unique circumstance. in that. They actually went through two RFP processes over a two-year period, and due to some internal shuffle with the customer, well, we actually won the first time, and they decided to repeat the process using third-party advisors, and then we ultimately won again. So we feel very comfortable that that's a sign of how strong we have emerged in this vertical over the last three or four years. Great.
Speaker Change: Dance.
Speaker Change: Isn't that.
Speaker Change: They actually went through to RSP processes over a two year period.
Speaker Change: And due to some internal shuffle with the customer we actually won the first time and they decided to repeat a process using <unk>.
Speaker Change: Third Party advisors and then we ultimately won again, so we feel very comfortable that that's a sign of how strong we have merged in this vertical over the last three or four years.
Rick Mills: And then maybe secondly, you know, just curious, what are the things that you guys are doing today? You kind of alluded to some things with the warehouse capacity, but just kind of curious the investments and different changes that you're making today to position your company to kind of build on the second half of the momentum and into 2020.
Speaker Change: Great.
Speaker Change: And then maybe secondly, just curious what are the things that you guys are doing today, you've kind of alluded to some things with our warehouse capacity.
Speaker Change: But just kind of curious the investments in different changes that youre, making today to position your company to build on the second half momentum into 2026.
Rick Mills: Great question. Number one, we wanted to, we needed to reposition our facility a little bit. We had been in an older part of the building that hadn't been, quote, upgraded, remodeled, we took advantage to move to more space at a lower cost per square footage. It was nice upgrade from the administrative operational side of the business. from the warehouse side of the business, we have effectively increased significantly. I'm not prepared to say that 50 or 100%, but our cubic storage. to move pallets of product through is significantly increased. Why? Because we believe we need that for the second half of this year.
Speaker Change: Yeah, Great question number one we wanted to.
Speaker Change: We needed to reposition our facility a little bit.
Speaker Change: We had been an older part of the building that hadn't been quote upgraded remodeled we took advantage to move to more space at a lower cost per square footage.
Speaker Change: And with nice upgrade from the administrative operational side of the business.
Speaker Change: From the warehouse side of the business, we have effectively increased significantly I'm not prepared to say that 50 or 100%, but our cubic storage.
Speaker Change: To move pallets of product through is significantly increase why because that we believe we need that for the second half of this year.
Rick Mills: Other than that, investments that we make tend to be on our technology. You know, we don't we don't spend a lot of money on brick and mortar and, and the need for enhanced machinery and computer equipment all tend to be very de minimis in the overall scheme of things. So for us, it's investing in our platforms. And we continually invest in our platforms every month. But that's about it. Other than that, we don't anticipate any significant CapEx spends by any Great.
Other than that investments that we make tend to be on our technology.
Speaker Change: We don't we don't spend a lot of money on brick and mortar and and the need for.
Speaker Change: Enhanced machinery and computer equipment, all tend to be very de minimis in the overall scheme of things so for us it's investing in our platforms and we continually invest in our platforms every month.
Speaker Change: But that's about it other than that we don't anticipate any significant capex spend by any means.
Rick Mills: And then maybe just to kind of follow up on that one, you know, you talked about the increased warehouse capacity kind of alluded to some of the tariff impacts earlier, but just curious if you're seeing anything as far as a pull forward in demand for signage or deployments, given kind of some of the tariff uncertainty and, and how things like expanded warehouse capacity can give you more flexibility to kind of adjust to any impact that, you know, the tariff kind of back and forth can can have on the business and customers. We have had some minor hardware pull forwards because people three months ago were concerned as the Terrace started to get implemented.
Speaker Change: Okay.
Speaker Change: Great and then maybe just to kind of follow up on that one you talked about the increased warehouse capacity you kind of alluded to some of the tariff impacts earlier, but just curious if youre seeing anything as far as a pull forward in demand for syn <unk> deployment, given kind of some of the tariff uncertainty in it.
Speaker Change: How things like expanded warehouse capacity, we can give you more flexibility to kind of adjust to any impact of that.
Speaker Change: Tariff kind of back and forth and can have on the business and customer demand.
We have had some minor.
Speaker Change: Hardware pull forwards because people three months ago, we're concerned as to the tariffs started to get implemented nobody knew the landscape and I think today, nobody really knows what the landscape at this moment on a go forward basis. So we had a couple of smaller customers look at Hey, I'm going.
Rick Mills: Nobody knew the landscape, and I think today, nobody really knows the landscape at this moment on a go-forward basis. So we had a couple smaller customers look at, hey, I'm gonna go ahead and hedge my bet. They were relatively small, might be 200 screens here, 300 screens there. We do not have anybody that hedged the bets and said, I'm gonna take 10,000 screens my next year, year and a half, and put it in storage. We have not seen that at this point in time.
Speaker Change: Go ahead and hedge my bet is relatively small might be 200 screens here 300 screens. There we do not have anybody that hedged our bets and said I'm going to take 10000 screens My next year year, and a half and put it in storage we have not seen that at this point in time.
Rick Mills: If we do see that we would see the use of a bonded warehouse type strategy. to get the product in the country but avoid tariffs, et cetera. Great.
Speaker Change: If we do see that we would see the use of the bonded warehouse type strategy.
Speaker Change: To get the product in the country, but avoid tariffs et cetera.
Cal Bartyzal: Thank you so much for taking my question. Thanks, Cal.
Great. Thank you so much for taking my question.
Gal: Thanks Gal.
Operator: Thank you. And as a reminder, to ask a question, please press star 1-1 on your touchtone telephone and wait for your name to be announced.
Speaker Change: Thank you.
Speaker Change: Now some minor to ask a question. Please press star one on your Touchtone telephone and we find them to be announced.
Howard Halpern: And our next question in queue, coming from the lineup, Howard Halpern from Tacos Brothers, Ankylon is now open. Good morning, guys. Morning. Hey, Howard. Hi.
Speaker Change: And our next question in queue coming from the line of Howard Halpern from <unk>. Your line is now open.
Howard Halpern: Good morning, guys good morning.
Rick Mills: Could you talk a little bit more about the sports and entertainment vertical? You know, you talked about you have seven proof of concepts coming down the road, but Could you maybe discuss what's behind that and, you know, what type of appetite those type of customers have for spending and deploying your product? Great question. Number one, the answer is the sports entertainment vertical has a high appetite to spend. And when we say high appetite to spend, everybody is looking at how can I upgrade my facility and make it more fan-friendly, right? That's number one. Number two, as they make it more fan-friendly, they deploy digital, which then gives them a greater ability to generate income from those screens.
Speaker Change: Sure.
Speaker Change: Hi, could you talk a little bit more about the sports and entertainment vertical.
Speaker Change: Talking about you have seven proof of concepts coming down the road, but.
Speaker Change: Could you maybe discuss what's behind that and what type of appetite those type of customers have more spending and deploying your product.
Speaker Change: Great question.
Speaker Change: Number one the.
Speaker Change: Answer is the sports and entertainment vertical.
Speaker Change: As a high appetite to spend and when you say high appetite to spend everybody is looking at how can I upgrade my facility and make it more fan friendly right. That's number one number two as they make it more fan friendly.
Speaker Change: They deploy digital which then gives them a greater ability to generate income.
Speaker Change: From those screens, because remember sports entertainment with our first vertical.
Rick Mills: Because remember, sports entertainment were the first vertical that. generated income from screens, right? That's been doing that for a long time. So they're now all looking at enhancing theirs. So, number one. Number two, you tend to look at POCs and you do a POC and you tend to do that during your team's season. so that once the off-season occurs, that's when you can upgrade the facilities. So for example, we had a lot of POCs in quote, baseball. because now they're all POC-ing. When the baseball season ends, we, in theory, could expect to see some POCs at the end of baseball in the fall go into, we could have some wins.
Speaker Change: Generated income from screens right that's been doing that for a long time. So they are now all looking at enhancing theirs.
Speaker Change: So number one number two you tend to look at <unk> and you do a POC and you tend to do that during your team's season. So that once the off season occurs that's when you tend to upgrade the facilities. So for example, we had a lot of Poc's in quote baseball.
Speaker Change: Because now they're all POC when the baseball season ends we in theory could expect to see some POC at the end of baseball in the fall go into it we could have some wins. So you got to think about that team.
Rick Mills: So you got to think about the team or the sport, and then when is its season. So we expect our goal is, you know, and we're way out in front of that. We're engaged in probably three to five conversations with folks who have stadiums either A, under construction or B, in the planning stages. And the beauty of sports entertainment is we have the ability, as we move into 2026, to sign some potential agreements that are a year, a year and a half out. that give us real predictability of revenue. Hope that helps.
Speaker Change: Sport and then when its season.
Speaker Change: So we expect our goal is.
Speaker Change: And we're way out in front of that we're engaged in probably three to five conversations with folks who have stadiums either eight under construction.
Speaker Change: Or be in the planning stages and the beauty of sports and entertainment is we have the ability as we move into 2026.
Speaker Change: <unk> signed some potential agreements.
Speaker Change: Or a year, a year and a half out that give us real predictability of revenue.
Speaker Change: I hope that helps.
Speaker Change: If we could talk a little bit about that.
Rick Mills: mentioned the digipoint, the icebox, is that? If that gets deployed like you expect it to, is that going to be incrementally, an incremental improvement in to revenue and to day two services, especially on Maybe the ad tech side are running some of the ad tech that might go on the hardware. Spot on. The thing we really like about that particular network is they've adopted our entire tech stack from top to bottom. So it would use our CMS, it would use our ad server, it uses our... campaign planning management tool. So it uses all three of the major points of our SAS and AdTech software.
Speaker Change: You mentioned that did you point.
Speaker Change: Ice box is that.
Speaker Change: If that gets deployed like you expect it to you is that going to be incremental.
Speaker Change: An incremental improvement in revenue and two day two services, especially on.
Speaker Change: Maybe the AD tech side of running some of the add Jack that might go on those.
Speaker Change: Oh on the hardware.
Speaker Change: Spot on the thing we really like about that particular network is they've adopted our entire tech stack from top to bottom. So it would use our CMS. It would use our AD server. It uses are.
Speaker Change: Campaign planning management tool. So it uses all three of the major points of our SaaS and AD Tech software. So that's we're looking forward to getting that deploy.
Rick Mills: So that's, you know, we're looking forward to getting that deployed and running. so that we can use that to show other retailers how it works when it's been deployed at scale at several thousand locations across America.
Speaker Change: And running.
Speaker Change: So that we can use that to show other retailers how it works when its been deployed at scale.
Speaker Change: Several thousand locations across America.
Rick Mills: Okay, and one last one, how is the landscape looking in Mexico for opportunities down there? You know, actually quite good. We have, we have, you know what, I, I may be not up to date, literally, I believe it is next week, we have a POC going in one of the top three convenient or C store chains in Mexico. It's supposed to install in May, and I think it's May 20. So it's probably another week or two. So there's that.
Speaker Change: Okay, and one last one.
Speaker Change: The landscape looking in Mexico for opportunities down there.
Speaker Change: You know actually quite good.
Speaker Change: We have we have.
Speaker Change: I'm, maybe not up to date literally I believe it is next week, we have a POC going in one of the top three convenient or C store chain in Mexico.
Speaker Change: To install in May and I think its may 20th so it's probably another week or two so there is that as a matter of fact, there is a call. This week with one of the top five major retailers in Mexico.
Rick Mills: As a matter of fact, I, there's a call this week with one of the top five major retailers in Mexico to talk about a retail media network. So it's, you know, we put our toe in the water, we've been steadily making progress. But for us, and by the way, we also have a couple stadiums that we are engaged in discussions with.
Speaker Change: To talk about our retail media networks. So.
Speaker Change: We put our toe in the water, we've been steadily making progress.
Speaker Change: But for us and by the way. We also have a couple of stadiums that we are engaged in discussions with.
Howard Halpern: We look at Mexico as really potentially adding revenue, potentially, in 2026. Okay. Well, thanks, guys, and keep up the great work. Thanks, Howard. Thank you.
Speaker Change: We look at Mexico, as really potentially adding revenue potentially in 2026.
Speaker Change: Yeah.
Speaker Change: Well, thanks, guys and keep up the great work.
Howard Halpern: Thanks Howard.
Operator: And I'm showing no further questions from the phone lines.
Thank you and I'm showing no further questions from the phone lines I will now turn it back to Mr. Brian <unk>.
Ryan Mudd: I will now turn it back to Mr. Ryan Mudd. Thank you.
Ryan Mudd: And before we make any closing remarks, I do want to take a moment and acknowledge we did receive some questions through our investor inbox.
Howard Halpern: Thank you and before we make any closing remarks, I do want to take a moment and acknowledge we did receive some questions through our investor Inbox, Rick can I ask you to go ahead and take a moment to address those questions sure happy to so a couple of investors took time to send to some questions number one there was some questions about bowling and I think.
Rick Mills: Rick, can I ask you to go ahead and take a moment to address those questions? Sure, happy to. So a couple of investors took time to send us some questions.
Rick Mills: Number one, there was some questions about bowling, and I think we've kind of clarified that, so I won't really talk about that. Number two, somebody wanted an update on our win rate, and what does that look like, our success rate? and how many RFPs or competitive processes do we enter in a year? So. Typically, that number in the last 12 to 18 months realistically is between 30 and 40 per year. However, The main thing to understand is typically in a typical year, 50% of those customers will not make a decision. It will push for two or three years.
Howard Halpern: We've kind of clarified that so I won't really talk about that.
Howard Halpern: Number two somebody wanted an update on our win rate and what does that look like our success rate.
Howard Halpern: And how many rfps are competitive processes do we enter in a year.
Howard Halpern: So.
Howard Halpern: Typically that number in the last 12 to 18 months.
Howard Halpern: Realistically is between 30 and 40 per year. However.
Howard Halpern: The main thing to understand is typically in a typical year, 50% of those customers will not make a decision.
Howard Halpern: It will push for two or three years, just like we talked about the <unk> win.
Rick Mills: just like we talked about the QSR win that took two years. So just because we answer 30 to 40 RFPs, 50% of them never see the light of day, or I don't say see the light of day, 50% of them get pushed or rolled down the pike. Out of the others, we have a still healthy success rate. We've talked about a 70% win rate. Our track record shows that. However. Then once you've won, the customer has to make the decision to go ahead and deploy. And that may take a year or two for a capital cycle.
Howard Halpern: Two years.
Howard Halpern: So just because we answer 30% to 40 rfps, 50% of them never see the light of day.
Howard Halpern: I don't see the light of day, 50% of them get pushed or rolled down the pike added the others. We have a still healthy success rate, we've talked about a 70% win rate our track record shows that however.
Then once you have won the customer has to make the decision to go ahead and deploy and that May take.
Howard Halpern: Year or two for a capital cycle. So as we've always talked about our process tends to be long and drawn out.
Rick Mills: So as we've always talked about, our process tends to be long and drawn out.
Rick Mills: Another question about, you know, is if this customer was one of the customers at the quote one inch line or one yard line? The answer is yes, that recent win is. We have a couple more that we have been fostering for quite some time that we are very close and hopefully we look forward to making some significant announcements throughout the balance of the I think, were there any others, Ryan, that we should look at?
Speaker Change: Another question about.
Speaker Change: If this customer was one of the customers at the one inch liner one yard line. The answer is yes that recent win is we have a couple more that we have been fostering for quite some time that we are very close.
Speaker Change: Actually we look forward to making some significant announcements throughout the balance of the year.
Speaker Change: Is there are there any others Ryan that.
Ryan Mudd: I'm showing no more, no sir. Show.
Speaker Change: Should look at I'm, showing no more no sir alright.
Speaker Change: So.
Speaker Change: Yes.
Rick Mills: Let me, I guess, go ahead and let me conclude the call by thanking all the shareholders, clients, partners, and employees for their continuing effort, commitment, and support as we work together to transform Creative Realities into the leading brand in digital signage solution.
Speaker Change: Let me I guess go ahead, let me conclude the call by thanking all of the shareholders clients partners and employees for their continuing efforts commitment and support as we work together to transform created realities into the leading brand in digital signage solution. We look forward to speaking with you and everybody again <unk>.
Operator: We look forward to speaking with you and everybody again next quarter. Thank you.
Speaker Change: Quarter. Thank you.
Operator: This concludes today's conference call. Thank you all for your participation, and you may now disconnect.
Speaker Change: This concludes today's conference.
Speaker Change: Thank you all for your participation and you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: [music].