Q3 2025 Creative Realities Inc Earnings Call
Good morning. At this time, I would like to welcome everyone to creative realities 2025 third quarter earnings conference call
This call will be recorded and copy will be available on the company's website at cri.com.
Following its completion, creative realities has prepared remarks summarizing the interim results for the quarter along with additional industry and Company updates, joining the call today is Rick Mills chief executive officer and George Sauder Chief strategy officer and head of corporate development Mr. Sartor, you may be proceeded.
Thank you and good morning, everyone. Welcome to our earnings call. For the third quarter, ended September 30th 2025, I would like to take this opportunity to remind you that remarks today will include forward-looking statements.
The words anticipated will the leaves 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 k and other filings with the SEC. Any forward-looking statements that we make on this, call are based on assumptions as of today and we undertake no obligation to update. These statements as a result of new information or future events.
During this call, we will present both gaap and non-gaap financial measures. A Reconciliation of gaap to non-gaap measures is included in our public filings and in our earnings release. That was issued this morning. We believe the use of certain non-gaap measures such as adjusted ibida and several other important kpis represent meaningful ways to track or perform.
It is now my pleasure to introduce Rick Mills CEO of creative realities.
Call, we also want to take this moment.
to welcome all the team members from Cineplex, digital media, who are joining the call for the first time,
As many of you are aware, we completed the purchase of ciplex digital media or CDM, uh, just last week on November 7th. This was a tremendous effort by everyone here. Involving a great deal of due diligence, strategic analysis. And of course, the arrangement of appropriate financing to get the transaction across the finish line.
I'll speak about this more in a moment.
LeapFrog. The competition in North America, doubling the size of the company puts us on an accelerated growth trajectory to significantly improve bottom line results. And as many of, you know, we've talked about this transformational acquisition for the past year and a half and it has finally come to fruition.
But first.
Let me give you an overview of the quarter.
We posted revenue of 10.5 million in Q3 versus 14.4 in the prior year period.
While gross profit was 4.8 as compared to 6.6 million in 2024.
A $2 million order slipped from the third quarter into the fourth quarter negatively, impacting our results.
However, we do not believe this Revenue H has been lost, it's just been delayed.
As we have discussed previously, we often don't control the sales cycle or the Cadence of deployments by our customers and working with our Target Enterprise customers can involve delays.
Our pipeline Still Remains strong and we believe that we are close to converting significant engagements that will reward our shareholders for their patients.
However, we also recognize the need to improve the rate of conversion.
Yesterday, we announced the hiring.
Of a chief Revenue officer Dan McAllister.
Dan joins, CRI this coming Monday with a clear mandate.
Improve our new customer acquisition velocity across North America.
Dan. And I will be working hand in hand to reorganize our sales force and reorganize our go to market strategy with a shared Vision. Grow, our recurring revenue and push opportunities through the pipeline quicker,
with that said, our third quarter uh consolidated gross margin was 45% roughly in line with last year's 46%
Uh, as of December 30th 2025, we had an annual recurring run rate or ARR of 12.3 versus 18.1 at the end of the third quarter in 2024.
Adjusted ibida was 0.8 million for the third quarter versus 2.3 million last year.
Now, let's talk a little bit more about our acquisition.
We purchased CDM for 70 million Canadian, approximately 50 million us after many months of due diligence and negotiation.
The business is a great addition.
Realities. And as I first discussed on a call following our announcement, the company is a leader in providing data experienced based digital Marketing Solutions across North America,
Over 6% of the revenue is recurring in, in approximately 84% of sales are based in Canada.
CDM posted revenue of just under 56 million. Canadian dollars. In 2024 is on and is on track to deliver 25% Topline. Year-over-year growth in 2025
It operates in more than 6,000 locations.
That it has signage deployments in approximately 30,000 end points.
Including such well-known Brands as Scotia Bank RBC.
AMC Theaters here in the US and of course, Tim Hortons in Canada.
And it was recently made the exclusive partner for the North Carolina educational lottery retail deployment.
This in itself was a huge win. It's a 54 million deployment over a 10-year period.
In addition.
with the acquisition of CDM, we acquired
Canada's largest mall, retail media Network, which will generate over 32 million Canadian or 25 million us, approximately of advertising sales revenue this year.
This digital out of home.
Or d, o, h Media Network has over 750 screens with exclusive representation and revenue sharing across 95 shopping destinations.
These locations include 76 out of the hundred most productive Canadian shopping centers.
Ultimately 750 million visitor uh, or shopper visits annually.
And by the way, this is the first and only Mall Network certified by the Canadian out of home marketing and measurement Bureau or what is referred to as comb.
All in all through this transaction, we have more than doubled, the size of the company.
Significantly increased our operations outside the US.
Opened new avenues for accelerating growth going forward.
CDM served, thousands of qsr restaurants financial institutions and re and Retail establishments across Canada.
Combine that with our us coverage. It immediately places us in a strong position to take advantage of the explosive growth going on in retail media networks of North America.
from a technology standpoint, these
Uh, these CDM customers bring a strong opportunity for chrises broad product, portfolio of solutions.
To improve the customer purchase experience, driven by digital hardware installation, the management of retail media networks, and professional support services.
By the way, in addition CDM has a creative agency of record credentials. They do very high-end quality content all around content, design and creation.
In addition while CDM currently licensed certain software applications from third-party providers. The combination with CRI including our reflect View, and complete and Clarity, CMS platforms as well as our add logic ads server and add logic CPM, plus our CMS. And adtech platforms will provide significant synergies to accelerate growth across the business.
overall We Believe CDM will rapidly evolved Elevate our data science and content capabilities while adding the scale
We need to thrive in an increasingly competitive rapidly expanding Marketplace.
Given cdm's large customer base. And operating footprint, we expect that our unified organization will see higher Topline performance and improved bottom line. Results in the quarters to come
As previously, disclosed the acquisition is anticipated to provide Synergy of at least 10 million across North America on an annualized basis by the end of 2026.
This is really a reflection of the operating efficiencies margin enhancement opportunities and the adoption of our CMS and adtech platforms throughout the CDM customer base.
taking these synergies into account, the new combined company, and based on cdm's business for the 12-month period, ending September 30th,
2025, we calculate our purchase price to re somewhere between 3 and 4 times the adjusted ibida of CBM CDM.
On a forward-looking basis, we anticipate total company revenue to exceed $100 million in 2026.
With the adjusted ebita margins in the High Teens.
Once all the synergies are realized we expect adjusted IBA margins will uh exceed 20% in free cash flow generation will be significant.
We finance the CDM acquisition through a combination of debt and preferred equity, as George will discuss shortly. He'll go into the details.
simultaneous with the transaction, the company increased the size of its board from 4 to 7 individuals, appointing 3 new directors,
I want to take this time to welcome Dan McGrath, who is the Chief Operating Officer of ciplex along with Tom Ellis, and Mike Bosco from northrun capital,
These individuals each with unique capabilities and expertise will help lead us through our next phase of expansion across North America, and potentially overseas.
It's an exciting time to be here and we can't wait to see what the future holds.
We continue to have an extremely large pipeline of opportunities under consideration.
Including new potential business opportunities due to the acquisition of CDM.
But we, we are on track with our previous announced deal with a large queues.
We are a chain that has over a thousand locations across more than 25 states. We completed the pilot program in select locations during the third quarter, and we are in the process of rolling out nationally in Q4.
We're, we are delivering TurnKey Solutions, along with Consulting content strategy, the hardware deployment. And then, of course, ongoing Day 2 service all powered by our proprietary, CMS platform clarity,
Our add logic ad server and CPM plus program, programmatic applications. Also, continue to see, increasing traction and interest from existing and new customers.
As a reminder, historically, we've already delivered up to 50 million ads daily via this advertising platform.
I believe this technology will play a key role in driving topline growth, going forward. Particularly now, with CDM under our belt.
With all our advances in proprietary platforms. The future looks very bright for the new much larger creative realities.
We expect Revenue accelerate backlog to grow and margins to improve putting us in position for much better results in 2026.
I'll turn it back over to George to share some additional comments on our financials George
Thank you, Rick. An overview of our financial results for the third quarter of 2025 was provided in our earnings release and Form 10-Q, which included the condensed consolidated balance sheet as of September 30, 2025, the statement of operations, and the statement of cash flows for the three and nine months ended September 30, 2025, as well as a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended September 30, 2025, and the preceding four quarters.
While Rick reviewed our operational results in detail, let me provide a couple of points of contact relating to the balance sheet cash as of September 30, 2025. The company had cash on hand of approximately $0.3 million versus $0.6 million at the end of the second quarter 2025. As previously mentioned, our consolidated balance sheet reflects minimal cash on hand as the company.
Company has a sweep instrument to apply cash against the revolving debt facility to further manage our interest expense.
Debt. Our gross and net debt stood at approximately 22.2 million and 21.9 million respectively. At the end of the third quarter, as compared to 20.1 million and 19.5 million respectively. At the end of the second quarter of 2025, at the end of the third quarter, our leverage on a gross, and net basis, was 7.56 times and 7.646 times respectively versus 4.53 times, and 4.440 times, at the end of the second quarter of 28.25,
Please be reminded that the Q2 and Q3 2025, debt balances reported here in contain the settlement of the contingent liability, from the merger of reflux systems in 2822.
Since the end of the quarter as Rick discussed, our balance sheet has changed significantly due to the acquisition of CDM. We Finance the transaction through a combination of debt and preferred Equity, including a 3-year, 36 million. Senior term loan with Birch, Merchants Bank, and 30 million dollars of convertible preferred Equity with a 3 dollar conversion price provided by Affiliates affiliates.
Capital.
With this financing in place, we have a total of $39.9 million in debt as of November 7th, 2025, and retain a credit facility of $22.5 million, with availability of $17.7 million. I will turn it back to Rick for any additional comments.
Certified by a very large qsr that they have chosen CRI as a result of the competitive RFP process.
Announcement in mid December at the latest. They have over 4,000 locations in the us alone.
And our our drive-through pricing was 1 of the key deciding factors as they have not rolled out digital drive-through yet. And so, we expect a large expansion with that customer in 2026
Our largest sea store customer. We've talked about before has begun a test utilizing their current into store screens and updating the configuration of those screens.
To and configuring it into a retail. Media Network, utilizing our add logic ads serving technology.
So they're running our CMS. Now they're running, add logic. Assuming the test is successful, the 8000 in-store screens, it's approximately 2,000 locations.
Would growth significantly as the rest of the screens would be added to the retail media Network.
We expect that decision in April of 2026.
Assuming they move forward. This would result in an additional 1 million in annual recurring SAS from that customer alone.
We remain well positioned in the digital transformation landscape. We look forward to delivering, uh, further improved operating results with that. We'll now move to the Q&A portion of the call. Please go ahead, operator.
Thank you. At this time, we'll collect the question-and-answer session. As a reminder, to ask a question, you will need to press *1 1 on your telephone and wait for your name to be announced to withdraw your question. Please press *1 again. Please stand by while I compile the Q&A roster.
In our first question, comes a line of Jason Cryer of Greg how your line is now open.
Great. Thank you guys. See Rick. I was just wondering if you can provide some feedback on what you've been hearing from customers and partners and stuff. Um, since you announced the CDM acquisition, a few weeks ago and you know, any enthusiasm that's built up in the channel.
Uh, yeah, Jason great question. So comment. All the customers have been very positive, uh, and certainly appreciate how it gives us, tremendous scale. Um and as as you uh, may or may not know, I
Hello, 10,000 miles in one week to literally visit virtually every customer of CDMs in the week prior to the closing. So the CDM customers understand the acquisition—no issue. I will tell you the one area. You mentioned, you use the term "the channel" in the competitive landscape among our industry. Um, I will tell you, this was a very large statement, and everybody has acknowledged CRI is absolutely now one of the top 2, 3, 4 digital signage integrators in North America, period. So, a lot of acknowledgment around that. As you know, or folks on this call know, we have always stated this is all about getting scale. Go big or go home. Well, guess what? We've got scale, and we went big, and we're glad to be here.
Appreciate that. Um, you've had a lot of success in in ksr, so maybe you can just talk about how you go to marketing Canada, follow the following, the acquisition. Um, I'm curious when you think about that, like, do you do you lead with existing CDM customers in Canada? Or or do you feel like there's an opportunity to lead with existing CRI customers? That that have somewhat of a footprint in Canada?
A little bit of both. There's certainly, some CRI customers, they have a footprint in Canada. You better believe, we are already knocking on their door, right? Number 2, we believe there is a tremendous opportunity for our to lead with our drive-thru opportunity for a number of customers throughout Canada Canadian qsrs generally speaking have not gone digital at all and so we have a tremendous opportunity to take these qsr customers in Canada to go digital today. We we service a portion of a number of qsrs in Canada specifically A&W. Uh also Dairy Queen of Canada. Also we do all the content for Tim Hortons. So certainly 3 Rich opportunities there alone but we do expect to reach out to what I would call the tier 2 qsr operators throughout Canada, those folks with 500 to 1500.
Locations.
Um, so that's really uh,
Uh, strategy that we are embarking upon virtually immediately.
Lastly for me, um, we've talked the last few quarters about the retail media opportunity. Um, we've talked about how scale matters there. You know, can you reframe that opportunity now with CDM in the fold, how this increases your scale, how this increases your capabilities, and if you feel any differently about CRI's ability to win in that market.
Yes, so clearly it's just yes, but let me tell you why. Um, we now, you know, before we have always had the credibility of having a very qualified ad tech stack.
Number 1. Number 2, that has delivered millions of ads on a daily basis. So we've always had that credibility. Now, what we bring to the market or to the to the table is we can look customers in the eye and say, yes. We understand about how to run a retail media Network. We own 1, We Own the largest retail Mall. Uh retail media Network in Canada. We're delivering over 32 million Canadian in ad sales. We understand the entire ecosystem from a to z Mr. Customer so it brings a whole new level of credibility. Oh, by the way, it brings some of the retail media expertise which CDM has a lot of because
Of running those networks in Canada. So we expect to bring that expertise down in front of our us customers.
And gain traction quicker.
All right, thanks a lot, Rick. Appreciate it.
Thanks Jason.
Thank you. 1 moment for our next question.
Our next question comes from the line of Brian, kieninger of Alliance Global Partners. Your line is now open.
Hey guys, thanks for taking my question. Um,
Well, it's only been a month since you announced the acquisition. I'm curious, if you've learned anything more about the state lottery Pipeline and rfps, when those might be competed, and maybe if you could size that opportunity, collectively,
Sure. Great question. Brian, number one. Um, as you know, we talked about the North Carolina lottery. That alone was approximately $54 million, with about $8 to $10 million dedicated to hardware, and the rest is SaaS over a 10-year period. So, number two, the opportunity. What we had heard early is that there were about 10 or so states in the U.S. that were planning RFPs. We have since received our first RFP from down here in the U.S. and expect to participate in more. We believe the opportunity in Lottery is robust.
Okay. Um, and then, can you talk about your
Go to market strategy in US, malls as you leverage cdm's. Positioning them Canada.
Um, we are currently talking with a couple of mall light properties that have the ability to expand our retail media network from Canada down into the U.S.
Uh Brian. We expect over the next 2 quarters to engage with a number of the mall ownership properties here in the US. You know think folks like a Westfield like a Simon that we would engage with. We have not had meaningful discussions yet but we expect to do that.
1 of just 1, General note throughout the US Mall. There is nobody that has been able to construct a mall Network that is as successful as our Canadian Mall Network in in Canada. No 1's. Been able to put it together in the US. We expect to be able to bring some of that knowledge and potentially participate in that in the US over the next year or 2
Okay. Um, you we heard comments on qsr and Retail, uh, 1 1, uh, vertical items are about a stadium. So maybe you can provide an update on how that's materializing.
Uh, you know, our Stadium business continues to grow. This is year 3, 2026 is year 3 that we've been in that vertical Market really going hard. Um, we have a couple signature wins that are waiting for signatures as we speak, um, we expect 2026 to be our best year.
In 2026 alone.
Okay. My last my last question, I want to make sure I understand there was a lot of discussion of different sized customers, potential wins things you've already won.
I heard a thousand store location. I thought I heard a qsr, they had a 4,000 store location that I heard an 8,000 store to sound like 3 separate ones. I can only assume that 8,000 is 711 you talked about specifically last quarter. Am I right there were 3 separate, uh, opport opportunities, in 1 of those who've been signed versus not signed. I was confused. And then last name, customers specific ice box. Is that is that moving forward? This quarter. So there's a 4 different customers I think. Yeah. So you know the ice box network was as we talked about was the 2 million dollars. That got pushed from Q3 to Q4 because of a, a funding smash through, and we are literally still waiting to launch that we're waiting on a daily basis, for them to resolve that, so we can launch that. That Network number 1. Number 2. Yes. You, you were.
Correct, when you talked about the 8,000 screens and 711. Yeah. So we have dramatically worked with them to move approximately 8,000 screens into a true retail media Network test
Um, that test started at the end of October and runs through the end of March. Assuming it's a success, they will turn all the rest of the screens utilizing our ad tech and our ad-serving tech, which will grow our SaaS revenue relatively significantly. The third one I talked about was another QSR win.
We've got we received the verbal we are in Daily discussions. Contracts are going back and forth, lawyers red lines, Etc. We expect uh that contract to be signed by mid December and at which point in time we would make it official announcement. I still do not would do not anticipate, getting permission to articulate the name as you know that's always a challenge in our industry but that particular 1 is conversion of a number of the number of their 4,000 locations that have already gone digital. They will be migrating all of that to our
Platform. And most importantly, out of all their locations, they have a less than a handful of digital drive-throughs. And that's the number 1 area of growth for them in 2026. So, we expect that alone to be add some significant Revenue in 2026. Assuming the franchisees have the desire to buy a digital drive-thru for their location. So number of things going on there,
Okay, thank you.
Thanks Brian.
Thank you. 1 moment for our next question.
Our next question, comes to a line of John Hickman of ladenburg. Do menu, Line is now open.
Hey, John. Hi, um, hey, um, I'm intrigued with this, um, new, uh, Chief Revenue officer.
Um, what exactly? I mean, it's no secret that you've had trouble.
Um,
Or.
The sometimes the addition of new customers has been slower than you thought it should be but except can you elaborate on what you think this guy can do to push customers? Like, over the
Goal line to actually sign with you.
First foremost, John, that was most gracefully said in articulated. Yes, we've had a challenge, getting them AC, the Finish Line. Um, I need somebody who can really be a strong closer out there as a chief Revenue officer, who really owns the revenue number this business is now at over a 100 million, uh, you know, there's not enough for Rick Mills at the CEO founder to go around. I need help. And uh, so I really, this is an individual. I've spent 8 9 months back and forth, we originally met in, uh,
June time frame, George and I were together and had a meeting with the fella and and really were intrigued and spent a number of months in conversations.
Um, he is.
Uh, been in and around our industry for 20 years knows, a bunch of customers, a bunch of a bunch of even industry professionals, you know, when you bring on somebody like a chief Revenue officer, you expect them to bring in some of the industry professionals. So we expect a lot of uh, a lot of in in potential inbound, customer opportunities.
The ability to convert some of these customers who have been lingering, uh, just haven't gotten them across the finish line. So I'm very intrigued to have helped.
Answers your question, John.
Okay. So, um
With him. How many sales guys will you actually have beside yourself.
well, um,
Between the CDM, sales organization, and the CRA sales organization, we have approximately between 40 and 43 customer-facing individuals. So it's a dramatic expansion of our sales effort.
Okay.
Okay, um, all my other questions got answered.
by the previous, um,
Uh, question is so thank you. Thanks.
Great.
1 moment for our next question.
Our next question, comes from line of Howard Halpern of Technic Brothers. Your line is now open,
Uh, hi guys. Uh, hey Howard.
uh, how does having now, uh, you know, a little bit of a Content, creation team helped across, uh, your existing, you know, customer base
You know, Howard, I would say we've always had content creation. We had a relatively smaller team as part of CRI, and our predominant content creation and content management was focused on QSR.
And sea store.
With the ciplex team.
Now, they're adding at least 15 people just in content creation alone. They do high-end agency work. They will actually go and do a photo shoot; they will do high-end agency of record type content, and we expect to chase that.
Uh, our content business, I think in 2026, uh, will... I think we've budgeted somewhere between $5.5 million and $6 million for content, uh, and over the next couple of years, we expect to drive the content team. Ultimately, the goal is to get it to about $10 million over the next 24 months. So we expect content to grow.
Okay. And, and with the, with the funding that, uh, occurred through the transaction, you're comfortable with the, uh,
You know, with the growth potential and and the capital you have uh in place.
Uh, yes, that matter of fact.
Our our wonderful Partners at northrun. Uh Tom Ellis. Mike Basco, 1 of the key elements of discussion about them. Making the investment was making sure we had enough cash and available credit facility to run this business and grow this business. And that was a key tenant of them even making the investment. And I'd have to defer to George if George is on the line, but I believe George don't, we have about 17 million or 17 and a half million available today.
That that's correct Rick. Yeah so lots of Headroom to run the business on a go forward basis. Thanks George.
And and just 1 final 1 more of a number of question, what entering 2026? Uh, uh, the end end of this year? What do you anticipate? Uh, uh, combined companies, a a ARR to be.
Um, we expect as we enter the year, the combined ARR, It's a combination of ARR plus our ad Revenue which we indicate is ARR like those 2 will exceed 40 million us. Uh combined.
Okay.
Okay, so that's good higher margin Revenue going into 2026, that sounds great. Very much so and you know, that that's why we're very bullish on our um adjusted earnings targets.
Okay, thanks, and keep up the good work.
Thank you.
Thank you. I'm showing no further questions at this time, I'll now turn it back to Rick Mills for closing remarks.
Okay.
Um,
Hard work, but it will be fun work and we look forward to speaking with you again next quarter.
Goodbye, and thank you for your participation. This does conclude the program for today's conference. You may now disconnect.