CREATIVE REALITIES, INC. Q1 FY2025 earnings call

• Financials: Revenue down due to installation timing, but gross margin in-line. ARR increased. SG&A expenses down 11% to $5.2 million. Resolved $12.8 million contingent liability with $3 million cash, $4 million promissory note, and warrants.
• New Win: Selected by a well-known upscale quick service restaurant chain to lead transformation of menu boards. Pilot in Q3 2025, national rollout expected.
• Pipeline and Segments: High engagement with potential customers. Sports and entertainment team expanded, with MLB projects and POCs. BCTV project moving forward, Digi Point Media Network expected to deploy 2,000 sites. SOC 2 Type 2 compliance expected by year-end. Warehouse revamped for increased capacity.

In the first quarter of 2025, Creative Realities posted revenue of $9.7 million, down from $12.3 million in Q1 2024. Gross profit was $4.5 million in Q1 2025 compared to $5.8 million in Q1 2024, with a gross margin of 46%. Annual recurring revenue (ARR) was at a run rate of $17.3 million at the end of the quarter, up from $16.8 million at the start of 2025. The BCTV project has completed over 300 site installations and expects to generate ~$3 million in revenue from the next 200+ sites. The Digi Point Media Network is expected to generate over $4 million in hardware and installation revenue with additional SaaS revenue. The sports and entertainment team was expanded, with 3 MLB projects won in Q1 2025 and 7 proof of concepts ongoing.

• Revenue expected to accelerate from Q2 and in the second half of the year.
• Adjusted EBITDA expected to rise to 15% by year-end.
• SOC 2 Type 2 compliance targeted by year-end.
• Anticipated growth in sports and entertainment, BCTV, and Digi Point Media Network segments.

• Tariff uncertainty: Impact on mounts made of steel could affect costs. Minor hardware pull forwards seen due to tariff concerns but no large-scale hedging observed.
• Global trade uncertainty: Could slow down decisions on large procurements. Impact on the signage market and deployment timelines.

Q: Can you talk about the expectations as it relates to screen installs for your large QSR win, maybe second half 2025 and 2026? And then what percentage of franchisees have expressed interest in opting in?

A: Expect POCs in Q3, 20+ sites per month beginning end of Q3. 600 of over 1,000 locations have indicated interest in converting to digital, and it's a ~3-year project with ~300 sites a year ballpark.

Q: 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 1 or 2 clients? And has that reversed yet in the second quarter?

A: Delays were from 3 separate projects, not across the board. We're through that period and on track going forward.

Q: 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 opportunities?

A: Top 10 opportunities are significantly enhanced. Industry signage market not terribly affected by tariffs yet, but mounts made of steel could be affected. Still progressing with opportunities, no customers putting projects on hold due to tariffs yet.

Q: The company's ad tech solution has gone through some significant upgrades and functionality. 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 offering?

A: Ad tech is focused on retail media networks, which are in early game. Significant interest from large retail customers. Ad tech has significant potential impact on revenue in 2026 and 2027.

Q: Just curious why you won the large QSR win 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?

A: Won due to being a first-class brand, and it gives credibility for additional wins. Went through 2 RFP processes over 2 years and won again, showing strong position in the vertical.

Q: What are the things that you guys are doing today to position your company to kind of build on the second half momentum and into 2026?

A: Repositioned warehouse to more space at lower cost per sq ft, increased warehouse cubic storage. Invest in technology platforms continuously, no significant CapEx spends planned.

Q: How is the landscape looking in Mexico for opportunities down there?

A: Quite good. Have a POC going in one of the top 3 C-store chains in Mexico in May, and a call this week with a top 5 major retailer in Mexico about a retail media network. Progressing steadily, potential revenue in 2026.