LOUISVILLE, Ky., March 9, 2021 /PRNewswire/ -- Creative Realities,
Inc. ("Creative Realities," "CRI," or the "Company") (NASDAQ: CREX,
CREXW), a leading provider of digital marketing solutions,
announced its financial results for the year ended December 31, 2020, including the quarter ended as
of the same date.
Rick Mills, Chief Executive
Officer, commented "CRI's fourth quarter results generated positive
EBITDA, build upon the successful stabilization of our business
during the third quarter of 2020, and evidence the continued
momentum towards a return to sustained growth as we and our
customers begin to exit the ongoing COVID-19 pandemic. We believe
that our implementation of cost control measures and expansion of
our business into the Safe Space Solutions marketplace set CRI on a
path for return to expansion in 2021 and beyond."
"During the fourth quarter a resurgence in COVID-19 cases again
put pressure on our customers as anticipated re-openings were again
delayed; however, as we move through the first quarter of 2021, we
experienced a reawakening of many current and potential customers
of our digital signage solutions, with a renewed focus on
integrating digital technologies into the patron experience as the
U.S. prepares for reopening and the easing of government
restrictions. We expect that the second half of 2021 will present
significant opportunities for CRI as a result of our ability to
strengthen the Company's market perception and competitive position
during the COVID-19 pandemic, and significantly improve our balance
sheet through activities executed in the first quarter of
2021."
Mr. Mills continued, "We believe CRI's suite of Safe Space
Solutions product offerings are a clear market leader, and we see
continued opportunities for growth for this product line in 2021.
The expansion of capabilities we worked to develop alongside our
partner InReality have expanded the use cases for these products
beyond temperature taking and have generated demand that we believe
can be sustained beyond the COVID-19 pandemic."
2020 Financial Overview
Revenue, gross profit, and gross margin:
- Revenues were $17.5 million for
the year ended December 31, 2020, a
decrease of $14.1 million, or 45%, as
compared to the same period in 2019.
- Hardware revenues were $9.0
million for the year ended December
31, 2020, an increase of $0.8
million, or 9.3%, as compared to the prior year, driven by
the introduction of the Thermal Mirror and other Safe Space
Solutions products which generated approximately $3.1 million in hardware sales during the year.
Gross margin on hardware revenue was 30.5% during 2020 as compared
to 24.1% during the same period in 2019 due to the shift in mix of
hardware revenues from displays to the Thermal Mirror and other
Safe Space Solutions products which typically generate higher gross
profit on a per unit basis.
- Services and other revenues were $8.5
million for the year ended December
31, 2020, a decrease of $14.9
million, or 63.8%, as compared to the same period in 2019,
driven by reductions in (1) installation services of $4.9 million following a significant increase in
suspended, delayed, and cancelled customer projects, initiatives,
and capital expenditures as a direct result of the COVID-19
pandemic, and (2) software development services of $8.8 million which included nonrecurrence of
approximately $7.9 million of 2019
revenue related to software development and licensing arrangements,
Reductions in year over year core digital signage business were
partially offset by $0.4 million of
services revenue generated from our Safe Space Solutions products
during the year ended December 31,
2020 following launch of the suite of products at the end of
April 2020.
- Managed services revenue, which includes both
software-as-a-service ("SaaS") and help desk technical subscription
services for our traditional digital signage and new Thermal Mirror
and Safe Space Solutions product offerings, were $5.4 million for the year ended December 31, 2020, a reduction of $1.2 million, or 18.1%, primarily related to
contracts with customers which were partially or permanently closed
during the year as a result of the COVID-19 pandemic.
- Gross profit was $8.1 million for
the year ended December 31, 2020, a decrease of $5.6 million, or 41%, compared to the same period
in 2019. Consolidated gross margin increased to 46.5% for the year
ended December 31, 2020 from 43.5% in
the prior year, driven primarily by higher gross profit generated
on sales of the Thermal Mirror and Safe Space products.
Operating expenses:
- For the year ended December 31,
2020 as compared to the same period in the prior year:
-
- Sales and marketing expenses decreased by $0.7 million, or 28.5% while research and
development expenses decreased by $0.3
million, or 23.4%, each driven by a reduction in
employee-related expenses as a result of a combination of headcount
reductions, salary reductions implemented for retained personnel,
and a reduction in travel-related expenses in the current year
including the elimination of participation in industry trade
shows.
- General and administrative expenses increased by $0.2 million in 2020, or 2.2% compared to 2019,
driven by:
-
- An increase of $0.3 million, or
80%, in non-cash charges related to the amortization of share-based
compensation for employee awards; and
- An increase of $0.6 million, or
289%, in bad debt expenses related to a customer bankruptcy during
the year. The Company has entered a settlement agreement with the
customer to recover a significant portion of those funds during
2021.
Exclusive of the incremental
year-over-year increase in non-cash charges, general and
administrative expenses decreased by $0.7
million, or 8%, for the year ended December 31, 2020 as compared to the same period
in 2019.
Operating loss, net loss, and EBITDA:
- Operating loss was $16.1 million
for the year ended December 31, 2020
as compared to an operating loss of $0.1
million during the same period in 2019. The operating loss
included a non-cash goodwill impairment charge of $10.7 million recorded March 31, 2020. Excluding the impact of the
impact of the goodwill impairment charge, operating loss was
$5.4 million for the year ended
December 31, 2020, representing an
increase in operating loss of $5.3
million despite a reduction in year-over-year revenue of
$14.1 million during the year.
- Net loss was $16.8 million for
the year ended December 31, 2020 as
compared to net income of $1.0
million for the same period in 2019.
- EBITDA loss was $13.9 million for
the year ended December 31, 2020 as
compared to EBITDA of $3.2 million
the same period in 2019. Adjusted EBITDA loss was $3.2 million for the year ended December 31, 2020, compared to $1.8 million for the same period in 2019. See
below for a description of these non-GAAP financial measures and
reconciliation to our net loss.
-
- EBITDA for the second half of 2020 was $0.5 million, highlighting the Company's
continued efforts to control operating expenditures and restructure
commitments.
Subsequent events:
- Payroll Protection Program Loan ("PPP Loan"): On January 11, 2021, we received notice that the
full principal amount of the PPP Loan and the accrued interest,
representing ~$1.6 million, had been
forgiven. Accounting for the forgiveness will be recognized in the
Company's first quarter of 2021.
- Debt Refinancing: On March 7,
2021, the Company refinanced current debt facilities,
which:
-
- extends maturity dates on all outstanding secured credit
facilities to March 31, 2023;
- provides an additional $1.0
million of availability under a line of credit;
- removed the three times liquidation preference of the Company's
special convertible term loan; and
- extinguished the outstanding obligations owed with respect to a
$0.2 million existing disbursed
escrow loan in exchange for shares of the Company's common stock
valued at $2.718 per share (the
trailing 10-day VWAP as reported on the Nasdaq Capital Market as of
the date of execution of the Credit Agreement).
- Registered Direct Offering: On February
18, 2021, the Company entered into a securities purchase
agreement with an institutional investor which provided for the
issuance and sale by the Company of 800,000 shares of the Company's
common stock (the "Shares"), in a registered direct offering (the
"Offering") at a purchase price of $2.50 per Share, for gross proceeds of
$2.0 million. The net proceeds from
the Offering after paying estimated offering expenses were
approximately $1.8 million, which the
Company intends to use for general corporate purposes. The closing
of the Offering occurred on February 22,
2021.
Mr. Mills concluded, "We are proud of the work we have done to
prepare the Company for long-term success and are excited about
recent customer developments, both those we have previously
announced and those we anticipate will come to fruition throughout
2021. We continue to believe that our end-to-end offering has
positioned us well within the industry to compete for new and
growing opportunities with partners, particularly potential
enterprise customers in a variety of key verticals."
Conference Call Details
The Company will host a
webinar to review the results and provide additional commentary
about the Company's recent performance, which is scheduled for
Wednesday, March 9, 2021 at
9:00 am Eastern Time.
Prior to the call, participants should register at
https://bit.ly/criearnings2020Q4. Once registered, participants can
use the weblink provided in the registration email to listen to and
view prepared materials via live webcast. An archived edition
of the conference call will also be posted on our website at
www.cri.com later that same day and will remain available to
interested parties via the same link for one year.
About Creative Realities, Inc.
Creative Realities
helps clients use the latest omnichannel technologies to inspire
better customer experiences. CRI designs, develops and deploys
consumer experiences for high-end enterprise level networks, and is
actively providing recurring SaaS and support services across more
than fifteen diverse vertical markets, including but not limited to
Automotive, Advertising Networks, Apparel & Accessories,
Convenience Stores, Foodservice/QSR, Gaming, Theater, and Stadium
Venues. The Company operates primarily throughout North America and has active contracts in more
than 10 countries.
Use of Non-GAAP Measures
Creative Realities, Inc.
prepares its consolidated financial statements in accordance with
United States generally accepted
accounting principles ("GAAP"). In addition to disclosing financial
results prepared in accordance with GAAP, the Company discloses
information regarding "EBITDA" and "Adjusted EBITDA." CRI
defines "EBITDA" as earnings before interest, income taxes,
depreciation and amortization of intangibles. CRI defines "Adjusted
EBITDA" as EBITDA excluding stock-based compensation, fair value
adjustments and both cash and non-cash non-recurring gains and
charges. EBITDA and Adjusted EBITDA are not measures of performance
defined in accordance with GAAP. However, EBITDA and Adjusted
EBITDA are used internally in planning and evaluating the Company's
operating performance. Accordingly, management believes that
disclosure of these metrics offers investors, bankers and other
stakeholders an additional view of the Company's operations that,
when coupled with the GAAP results, provides a more complete
understanding of the Company's financial results.
EBITDA and Adjusted EBITDA should not be considered as an
alternative to net income/(loss) or to net cash used in operating
activities as measures of operating results or liquidity. Our
calculation of EBITDA and Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies, and the measures
exclude financial information that some may consider important in
evaluating the Company's performance. A reconciliation of GAAP net
income/(loss) to EBITDA and Adjusted EBITDA is included in the
accompanying financial schedules.
For further information, please refer to Creative Realities,
Inc.'s filings available online at www.sec.gov, including its
Annual Report on Form 10-K to be filed with the Securities and
Exchange Commission on or about March 9,
2021.
Cautionary Note on Forward-Looking Statements
This
press release contains certain statements that are deemed
"forward-looking statements" under Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and includes, among other things, discussions of our business
strategies, future operations and capital resources. Words
such as "may," "likely," "anticipate," "expect," "intend," "plans,"
"seeks," will," should," "future," "propose," "believe" and
variations of these words or similar expressions (or the negative
versions of such words or expressions) indicate forward-looking
statements. These forward-looking statements are not
guarantees of future performance, conditions or results, and
involve a number of known and unknown risks, uncertainties,
assumptions and other important factors, many of which are outside
the Company, that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking
statements. Some of these risks are discussed in the "Risk
Factors" section contained in Item 1A in our Annual Report on Form
10-K for the year ended December 31,
2019, and Item 1A of our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2020 and
June 30, 2020, and the Company's
subsequent filings with the U.S. Securities and Exchange
Commission. Important factors, among others, that may affect
actual results or outcomes include: our strategy for customer
retention, growth, product development, market position, financial
results and reserves our ability to meet Nasdaq's continued listing
standards; our ability to execute on our business plan; our ability
to retain key personnel; potential litigation; and general economic
and market conditions impacting demand for our products and
services, including those as a result of the COVID-19 pandemic.
Except where required by law, the Company assumes no obligation
to update forward-looking statements to reflect actual results or
changes in factors or assumptions affecting such forward-looking
statements.
RECONCILIATION OF GAAP NET LOSS TO ADJUSTED
EBITDA
(in thousands, unaudited)
Creative Realities, Inc. prepares its consolidated financial
statements in accordance with United
States generally accepted accounting principles ("GAAP"). In
addition to disclosing financial results prepared in accordance
with GAAP, the Company discloses information regarding "EBITDA" and
"Adjusted EBITDA." CRI defines "EBITDA" as earnings before
interest, income taxes, depreciation and amortization of
intangibles. CRI defines "Adjusted EBITDA" as EBITDA excluding
stock-based compensation, fair value adjustments and both cash and
non-cash non-recurring gains and charges.
EBITDA and Adjusted EBITDA are non-GAAP financial measures and
should not be considered as a substitute for net income (loss),
operating income (loss) or any other performance measure derived in
accordance with United States
generally accepted accounting principles ("GAAP") or as an
alternative to net cash provided by operating activities as a
measure of CRI's profitability or liquidity. CRI's management
believes EBITDA and Adjusted EBITDA are useful financial metrics
because they allow external users of CRI's financial statements,
such as industry analysts, investors, lenders and rating agencies,
to more effectively evaluate CRI's operating performance, compare
the results of its operations from period to period and against
CRI's peers without regard to CRI's financing methods, hedging
positions or capital structure and because it highlights trends in
CRI's business that may not otherwise be apparent when relying
solely on GAAP measures. CRI also presents EBITDA and Adjusted
EBITDA because it believes EBITDA and Adjusted EBITDA are important
supplemental measures of its performance that are frequently used
by others in evaluating companies in its industry. Because EBITDA
and Adjusted EBITDA exclude some, but not all, items that affect
net income (loss) and may vary among companies, the EBITDA and
Adjusted EBITDA CRI presents may not be comparable to similarly
titled measures of other companies.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA from net loss, CRI's most directly comparable
financial measure calculated and presented in accordance with
GAAP.
|
|
|
|
|
Quarters
Ended
|
|
|
|
Year
Ended
|
|
|
December
31,
|
|
|
September
30,
|
|
|
June
30
|
|
|
March
31,
|
|
Quarters
ended
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
GAAP net
loss
|
|
$
|
(16,844)
|
|
|
$
|
(617)
|
|
|
$
|
(585)
|
|
|
$
|
(2,459)
|
|
|
$
|
(13,183)
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt
discount
|
|
|
339
|
|
|
|
85
|
|
|
|
85
|
|
|
|
84
|
|
|
|
85
|
|
Other interest,
net
|
|
|
683
|
|
|
|
186
|
|
|
|
179
|
|
|
|
176
|
|
|
|
142
|
|
Depreciation/amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
|
617
|
|
|
|
139
|
|
|
|
161
|
|
|
|
158
|
|
|
|
159
|
|
Amortization of
finance lease assets
|
|
|
20
|
|
|
|
3
|
|
|
|
5
|
|
|
|
5
|
|
|
|
7
|
|
Amortization of
share-based awards
|
|
|
617
|
|
|
|
250
|
|
|
|
248
|
|
|
|
100
|
|
|
|
19
|
|
Depreciation of
property, equipment & software
|
|
|
837
|
|
|
|
209
|
|
|
|
212
|
|
|
|
216
|
|
|
|
200
|
|
Income tax
expense/(benefit)
|
|
|
(158)
|
|
|
|
(6)
|
|
|
|
(1)
|
|
|
|
4
|
|
|
|
(155)
|
|
EBITDA
|
|
$
|
(13,889)
|
|
|
|
249
|
|
|
$
|
304
|
|
|
$
|
(1,716)
|
|
|
$
|
(12,726)
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value
of Special Loan
|
|
|
93
|
|
|
|
(609)
|
|
|
|
-
|
|
|
|
551
|
|
|
|
151
|
|
Gain on settlement of
obligations
|
|
|
(209)
|
|
|
|
(54)
|
|
|
|
(114)
|
|
|
|
(1)
|
|
|
|
(40)
|
|
Loss on disposal of
assets
|
|
|
13
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
|
|
-
|
|
Loss on lease
termination
|
|
|
18
|
|
|
|
18
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss on goodwill
impairment
|
|
|
10,646
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,646
|
|
Stock-based
compensation – Director grants
|
|
|
102
|
|
|
|
27
|
|
|
|
25
|
|
|
|
19
|
|
|
|
31
|
|
Adjusted
EBITDA
|
|
$
|
(3,226)
|
|
|
|
(369)
|
|
|
$
|
228
|
|
|
$
|
(1,147)
|
|
|
$
|
(1,938)
|
|
|
|
|
|
|
Quarters
ended
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June
30,
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
GAAP net
income/(loss)
|
|
$
|
1,038
|
|
|
$
|
563
|
|
|
$
|
242
|
|
|
$
|
417
|
|
|
$
|
(184)
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt
discount
|
|
|
524
|
|
|
|
105
|
|
|
|
105
|
|
|
|
158
|
|
|
|
156
|
|
Other interest,
net
|
|
|
306
|
|
|
|
109
|
|
|
|
94
|
|
|
|
55
|
|
|
|
48
|
|
Depreciation/amortization
|
|
|
1,250
|
|
|
|
378
|
|
|
|
278
|
|
|
|
308
|
|
|
|
286
|
|
Income tax
expense/(benefit)
|
|
|
93
|
|
|
|
128
|
|
|
|
51
|
|
|
|
(107)
|
|
|
|
21
|
|
EBITDA
|
|
$
|
3,211
|
|
|
$
|
1,283
|
|
|
$
|
770
|
|
|
$
|
831
|
|
|
$
|
327
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in warrant
liability
|
|
|
(21)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22)
|
|
|
|
1
|
|
Gain on settlement of
obligations
|
|
|
(2,051)
|
|
|
|
(1,632)
|
|
|
|
(406)
|
|
|
|
(6)
|
|
|
|
(7)
|
|
Gain on earnout
liability
|
|
|
(250)
|
|
|
|
(250)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based
compensation
|
|
|
447
|
|
|
|
52
|
|
|
|
62
|
|
|
|
291
|
|
|
|
42
|
|
Adjusted
EBITDA
|
|
$
|
1,336
|
|
|
$
|
(547)
|
|
|
$
|
426
|
|
|
$
|
1,094
|
|
|
$
|
363
|
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/creative-realities-reports-fourth-quarter-and-full-year-2020-results-301243935.html
SOURCE Creative Realities, Inc.