Creative Realities, Inc. Q2 FY2025 earnings call

• Financials: Revenue of $13M, gross profit $5M, consolidated gross margin 39%, ARR $18.1M, adjusted EBITDA $1.2M. Reduced $3.1M debt. - Customer activities: Engaged with a well-known upscale quick service restaurant chain, implementing pilot in Q3/Q4 with national rollout to follow. AdLogic CPM+ platform gaining traction with three customers in testing. - C-store: 7-Eleven plans to open 1,100 new restaurants and 1,300 new larger format stores by 2030, expected to add 17,000+ displays and $30M revenue over 5 years. Deployed first C-store in Mexico. - QSR: Introduced new drive-thru hardware and software solution with 20% price reduction. - SOC 2: Achieved SOC 2 Type 2 certification. - Digi Point Media Network: Deployment delayed to Q4, expected to be ~2,000 sites generating over $4M in hardware and installation revenue.

In the second quarter ended June 30, 2025, Creative Realities posted revenue of $13 million, up 34% versus Q1 and roughly flat year-over-year. Gross profit was $5 million in Q2 2025 compared to $6.8 million in Q2 2024. Consolidated gross margin was 39% versus 52% in the prior year period. Annual recurring revenue (ARR) as of June 30, 2025, was $18.1 million versus $17.3 million at the end of the first quarter. Adjusted EBITDA rose to $1.2 million for Q2 2025 from $0.5 million in Q1 and was down slightly versus last year's $1.5 million. The company reduced approximately $3.1 million in debt this quarter. At the end of Q2, the balance on the credit sweep account was $16.1 million, down $3.1 million from the end of Q1, with $600,000 in cash on hand and $6 million additional availability.

• Anticipate margins to rise in third and fourth quarters as products previously purchased in bulk are installed. - Expect adjusted EBITDA as a percent of revenue to rise back to 15% by year-end. - Anticipate revenue to accelerate in the second half, backlog to grow, and margins to improve. - Expect retail media network business to grow in 2026 and beyond.

• Tariffs: Uncertainty around tariffs had some customers make bulk-buys of screens, and finalization of tariffs could have future impacts. - Debt: Increase in leverage due to settlement of contingent liability in Q1 2025. - Deployment delays: Digi Point Media Network deployment delayed to Q4.

Q: For the last few quarters, updates on progression of deals through the pipeline and visibility in unlock?

A: Everything continues to move forward, but nothing comfortable to announce yet, expect announcements this calendar year.

Q: Where see most pressure on businesses to modernize technology?

A: Clearly QSR drive-thru due to post-pandemic impact on drive-thru times, and retail media networks with significant investment and time required.

Q: Follow-up on 7-Eleven installs and opt-ins?

A: 7-Eleven project delayed due to drive-thru footer pouring, opt-ins still consistent.

Q: Impact of off-season on sports and entertainment installs?

A: Off-season is when engagements typically occur, proposals are out, and decisions lead to quick installations.

Q: Impact of pre-buys of screens on hardware and guidance?

A: Puts a little pressure on hardware but also increases services, not significantly affecting guidance.

Q: Update on Bowling Alley customer?

A: No additional sites on schedule currently.

Q: Expectations for digital retail networks in 2026?

A: Significant dollar volume with two large projects on the books.

Q: ARR growth forecast?

A: Not giving forecast around potential growth of ARR due to lumpiness.

Q: Importance of Circle K in Mexico project?

A: POC to understand revenue impact, no additional deployments expected in Mexico until 2026, with focus on sports, entertainment, and C-store.

Q: Update on acquisitions?

A: Still looking for right fit, nothing to discuss.

Q: Projection on debt reduction?

A: Expect to generate cash in future quarters and use it to reduce credit facility.

Q: SOC 2 compliance competitive advantage?

A: Top 20% of CMS companies have achieved it, smaller companies lack resources.

Q: Speculation on breakeven quarter?

A: Expect to achieve breakeven by year-end through increased revenue and operating efficiency.