LOUISVILLE, Ky.,
March 22, 2022
/PRNewswire/ -- Creative Realities, Inc. ("Creative
Realities," "CRI," or the "Company") (NASDAQ: CREX, CREXW), a
leading provider of digital signage solutions, announced its
financial results for the year ended December 31, 2021, including the quarter ended as
of the same date.
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Rick Mills, Chief Executive
Officer, commented, "CRI's fourth quarter 2021 revenue was
approximately $5.4 million, bringing
full year 2021 revenue to $18.4
million, which represents an increase of 8.3% and 5.6% as
compared to the same periods in the prior year. Removing the
year-over-year revenue generated from our Safe Space Solutions
products, which we launched in response to the COVID-19 pandemic,
our core digital signage revenue grew 32.2% and 20.5% in the three-
and twelve-month periods ended December 31,
2021 as compared to the same periods in the prior year,
despite facing supply chain difficulties. We continue to experience
strong and growing demand for our digital signage solutions into
2022 and beyond."
Mr. Mills continued, "Our primary focus is growing CRI into the
market leader in end-to-end digital signage solutions for
enterprise customers, expanding the number of devices managed via
our digital signage software, and increasing the value of our
Company through expansion in our recurring services revenue. During
the fourth quarter of 2021, CRI won a significant new theme park
customer that will continue to deploy hardware throughout 2022 and
we expect to ultimately add more than 1,300 billable devices,
generating monthly recurring subscription revenue to our content
management software platforms."
"The tremendous momentum and return to double-digit growth that
we experienced in core digital signage solutions throughout 2022
has only accelerated with our acquisition of Reflect Systems, Inc.
("Reflect") in February 2022. In
December 2021, CRI and Reflect went
to market on our first joint sales effort, which resulted in a
major win – a project to deploy digital experiences for a
retail customer at hundreds of locations nationwide for an expected
total contract value in excess of $10
million. Our merger with Reflect and this win immediately
validated what we've been saying since Reflect and CRI first began
discussing a merger: we believe our combined offerings are stronger
than anything else in the industry," said Mills. "Winning a project
of this value and prominence sends a powerful message to existing
and potential customers – we have something new and exciting that
they need to consider."
"I could not be more excited about the opportunity to join
forces with Reflect, which has an incredible track record for
growing annual recurring revenues via software subscriptions to its
digital signage software platforms. In addition, it brings CRI a
tremendous, patented AdTech platform (Reflect AdLogic) and a media
sales capability that will enable the Company to directly
productize solutions and participate in the out-of-home advertising
industry, including the potential for integrated programmatic high
value digital advertising solutions. With our recent theme park and
retail wins, combined with the outlook for our expanded customer
base and growth prospects, we expect the combined company to
generate revenue in excess of $43
million during 2022, representing an organic growth rate in
excess of 35% on a combined company basis as compared to 2021. This
expectation includes the consolidation of Reflect operations for
the period beginning February 17,
2022."
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
2022. Now more than ever, we believe our end-to-end offering has
positioned CRI well within the industry to compete for new and
growing opportunities with partners, particularly enterprise
customers in a variety of key verticals."
2021 Financial Overview
All results herein
represent the financial results of Creative Realities, Inc. and
exclude any results of Reflect Systems, Inc. as the merger was
closed February 17, 2022. The first
quarter of 2022 will include financial results for Reflect Systems,
Inc. for the period February 17, 2022
– March 31, 2022 during which Reflect
operated as a wholly owned subsidiary of Creative Realities.
Key Highlights:
- Revenue growth of $1.0 million,
or 5.6%
- Digital signage revenue growth of $2.9
million, or 20.5%
- Net income of $0.2 million as
compared to net loss of $16.8 million
in 2020
- EBITDA of $3.9 million as
compared to an EBITDA loss of $13.9
million in 2020
Revenue, gross profit, and gross margin:
- Revenues were $18.4 million for
the year ended December 31, 2021, an
increase of $1.0 million, or 5.6%, as
compared to the same period in 2020. Removing our Safe Space
Solutions revenue in each period, revenues from our core digital
signage solutions were $16.8 million
in 2021, an increase of $2.9 million,
or 20.5%, as compared to 2020.
- Hardware revenues were $9.5
million for the year ended December
31, 2021, an increase of $0.5
million, or 5.1% as compared to the same period in 2020;
digital signage hardware solutions revenue increased $2.1 million in 2021 compared to 2020, offset by
reductions in sales of our Safe Space Solutions products. Gross
margin on hardware revenue was 26.8% during 2021 as compared to
30.5% during 2020 primarily due to the reduction in revenue from
Safe Space Solutions products, which have historically generated
higher gross profit on a per unit basis.
- Services and other revenues were $9.0
million for the year ended December
31, 2021, an increase of $0.5
million, or 6.2%, as compared to the same period in 2020,
driven primarily by a $0.2 million,
or 44%, increase, in software development services for a single key
customer for custom development in our platform.
- Managed services revenue, which includes both
software-as-a-service ("SaaS") and help desk technical subscription
services for our traditional digital signage and Safe Space
Solutions product offerings, were $5.6
million for the year ended December
31, 2021, an increase of $0.2
million, or 4.0%, as our base business and related
deployments continued to rebound following customers opening their
venues/locations upon release of COVID-19 vaccines.
- Gross profit was $8.4 million for
the year ended December 31, 2021, an
increase of $0.2 million, or 3%,
compared to the same period in 2020. Consolidated gross margin
decreased to 45.3% for the year ended December 31, 2021 from 46.5% in the prior year,
driven primarily by a reduction in Safe Space Solutions sales,
which have historically generated higher margin on a per unit
basis.
Operating expenses:
- For the year ended December 31,
2021 as compared to the same period in the prior year:
-
- Sales and marketing expenses decreased by $0.5 million, or 31%, driven by (1) a current
year Employee Retention Credit of $0.2
million related to the retention and payment of salaries to
sales personnel throughout 2020 and 2021, which was all recorded
when filed in 2021, (2) reduction of $0.1
million in sales lead generation tools, and (3) the result
of reduced personnel costs, partially offset by small increases in
trade show activity and related travel costs following a return to
participation in industry trade shows and events after the
elimination of such costs in 2020 as a result of the COVID-19
pandemic.
- Research and development expenses decreased by $0.5 million, or 49% as the result of (1) a
current year Employee Retention Credit of $0.2 million related to the retention and payment
of salaries to development personnel throughout 2020 and 2021,
which was all recorded when filed in 2021, (2) a reduction in
personnel costs during the period following reduced headcount and
salary reductions in March 2020
through salary reinstatements in October
2021, and (3) an increase in capitalization of development
activities for new features/functionality. The Company capitalizes
its costs incurred for additional functionality to its internal
software. We capitalized approximately $1.1
million and $0.6 million for
the years ended December 31, 2021 and
2020, respectively. These software development costs include both
enhancements and upgrades of our client-based systems including
functionality of our internal information systems to aid in our
productivity, profitability and customer relationship management.
We amortize these costs over 3 years once the new projects are
completed and placed in service.
- General and administrative expenses, including bad debt expense
and recoveries, decreased by $2.0
million in 2021, or 21.2% compared to 2020, driven by:
-
- A reduction in bad debt expense of $1.1
million, following a recovery of accounts receivable from a
customer who filed for bankruptcy in 2020;
- A reduction of $0.7 million in
salaries expense from Employee Retention Credits related to the
retention and payment of salaries to sales personnel throughout
2020 and 2021, each of which were recorded in 2021 when the tax
credits were filed;
- A reduction of $0.3 million in
rent expense following closure, downsizing, or restructuring of
four leases facilities during 2020; and
- A reduction of $0.4 million in
legal expenses following settlement of our dispute with the seller
of Allure Global Solutions, Inc.
These reductions were partially
offset by an increase in stock compensation amortization expense of
$1.2 million related to incremental
employee and directors' awards.
Excluding the consideration of those Employee Retention Credits
recorded in the period and the year-over-year impact of bad debt
expense and recovers, total general and administrative expenses
decreased $0.8 million, or 10.2%,
during 2021 as compared to 2020.
Operating loss, net loss, and EBITDA:
- Operating loss was $2.5 million
for the year ended December 31, 2021
as compared to an operating loss of $16.1
million during the same period in 2020. The current year
operating loss included $0.5 million
in costs associated with pursuit of acquisition activities,
including the Reflect transaction.
- Net income was $0.2 million for
the year ended December 31, 2021 as
compared to net loss of $16.8 million
for the same period in 2020.
- EBITDA was $3.9 million for the
year ended December 31, 2021 as
compared to an EBITDA loss of $13.9
million for the same period in 2020. Adjusted EBITDA was
$1.2 million in 2021 as compared to
an Adjusted EBITDA loss of $3.2
million in 2020. See below for a description of these
non-GAAP financial measures and reconciliation to our net
loss.
Subsequent events:
- Debt Financing: On February 17,
2022, the Company refinanced its debt facilities with its
current lender, and raised $10.0
million in gross loan proceeds. The financing also combined
and extended the maturity date of the Company's pre-existing
$4.8 million senior secured term loan
and $2.4 million secured convertible
loan into a Consolidation Term Loan. The refinancing extended the
maturity date of the Company's loans to February 1, 2025 and removed the convertible
feature of the secured convertible loan.
- Equity Financing: On February 3,
2022, the Company completed an at-the-market private
placement priced for gross proceeds of approximately $11.0 million before deducting placement agent
fees and estimated offering expenses. The net proceeds from the
private placement were used to fund payment of the closing cash
consideration in the acquisition of Reflect.
- Acquisition of Reflect: On February 17,
2022, the Company and Reflect consummated a merger, pursuant
to which Reflect stockholders collectively received from the
Company the following merger consideration:
-
- $16.2 million payable in cash;
and
- 2,333,334 shares of common stock of Creative Realities (valued
based on an issuance price of $2 per
share) (the "CREX Shares");
- $2.5 million Secured Promissory
Note; and
- Supplemental cash payments (the "Guaranteed Consideration"), if
any, payable on or after the three-year anniversary of the
effective time of the Merger (the "Guarantee Date"), in an amount
by which the value of the CREX Shares on such anniversary is less
than $6.40 per share, or if certain
customers of Reflect collectively achieve over 85,000 billable
devices online at any time on or before December 31, 2022, is less than $7.20 per share, multiplied by the amount of CREX
Shares held by the Reflect stockholders on the Guarantee Date.
Conference Call Details
The Company will host a
webinar to review the results and provide additional commentary
about the Company's recent performance and the Reflect merger,
which is scheduled for Wednesday, March 23,
2022 at 9:00 am Eastern
Time.
Prior to the call, participants should register at
bit.ly//CRIearnings2021Q4. 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 place-based digital media to achieve business
objectives such as increased revenue, enhanced customer
experiences, and improved productivity. The company designs,
develops and deploys digital signage experiences for
enterprise-level networks, and is actively providing recurring SaaS
and support services across diverse vertical markets, including but
not limited to retail, automotive, digital-out-of-home (DOOH)
advertising networks, convenience stores, foodservice/QSR, gaming,
theater, and stadium venues.
With its recent acquisition of Reflect Systems, Inc., a leading
provider of digital signage software platforms, the company is
poised to extend its product and service offering and accelerate
growth in SaaS revenue. While Reflect provided a broad range of
digital signage solutions, the company's flagship products are the
market-leading ReflectView digital signage platform and Reflect
AdLogic ad management platform. ReflectView is the industry's most
comprehensive, scalable, enterprise-grade digital signage platform,
powering enterprise customer networks. Meanwhile, Reflect AdLogic
has become the benchmark for digital signage powered ad networks,
delivering nearly 50 million ads daily. The acquisition of Reflect
also brought to the business a media sales division with the
expertise and relationships to help any digital signage venue owner
develop and execute a monetization plan for their network.
The combined company has operations across North America with active installations 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 22,
2022.
Cautionary Note on Forward-Looking Statements
This
press release contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995, and includes,
among other things, discussions of our business strategies, product
releases, future operations and capital resources. Words such
as "estimates," "projected," "expects," "anticipates," "forecasts,"
"plans," "intends," "believes," "seeks," "may," "will," "should,"
"future," "propose" and variations of these words or similar
expressions (or the negative versions of such words or expressions)
are intended to identify forward-looking statements.
Forward-looking statements are not guarantees of future
performance, conditions or results. They are based on the
opinions, estimates and beliefs of management as of the date such
statements are made, and they are subject to known and unknown
risks, uncertainties, assumptions and other factors, many of which
are outside of our control, that may cause the actual results,
level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking
statements. Some of these risks are discussed in the "Risk
Factors" section contained in Item 1A of our Annual Report on Form
10-K for the year ended December 31,
2021 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
ability to effectively integrate Reflect's business operations, our
strategy for customer retention, growth, product development,
market position, financial results and reserves, our ability to
execute on our business plan, our ability to retain key personnel,
potential litigation, supply chain shortages, and general economic
and market conditions impacting demand for our products and
services, including those as a result of the COVID-19 pandemic.
Readers should not place undue reliance upon any forward-looking
statements. We assume no obligation to update or revise the
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
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
|
|
2021
|
|
|
2021
|
|
|
2021
|
|
|
2021
|
|
|
2021
|
|
GAAP net income
(loss)
|
|
$
|
232
|
|
|
$
|
(1,722)
|
|
|
$
|
(343)
|
|
|
$
|
1,025
|
|
|
$
|
1,272
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
159
|
|
|
|
29
|
|
|
|
29
|
|
|
|
29
|
|
|
|
72
|
|
Other
interest, net
|
|
|
648
|
|
|
|
160
|
|
|
|
158
|
|
|
|
153
|
|
|
|
177
|
|
Depreciation/amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
1,251
|
|
|
|
302
|
|
|
|
320
|
|
|
|
317
|
|
|
|
312
|
|
Amortization of finance lease
assets
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
Amortization of employee share-based awards
|
|
|
1,494
|
|
|
|
324
|
|
|
|
329
|
|
|
|
329
|
|
|
|
512
|
|
Depreciation of property and equipment
|
|
|
109
|
|
|
|
27
|
|
|
|
27
|
|
|
|
27
|
|
|
|
28
|
|
Income tax
expense/(benefit)
|
|
|
22
|
|
|
|
13
|
|
|
|
1
|
|
|
|
7
|
|
|
|
1
|
|
EBITDA
|
|
$
|
3,919
|
|
|
|
(867)
|
|
|
$
|
521
|
|
|
|
1,887
|
|
|
|
2,378
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
fair value of Special Loan
|
|
|
(166)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(166)
|
|
Gain on
settlement of obligations
|
|
|
(3,449)
|
|
|
|
-
|
|
|
|
(256)
|
|
|
|
(1,628)
|
|
|
|
(1,565)
|
|
Deal and
transaction costs
|
|
|
518
|
|
|
|
518
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation – Director grants
|
|
|
399
|
|
|
|
318
|
|
|
|
27
|
|
|
|
27
|
|
|
|
27
|
|
Adjusted
EBITDA
|
|
$
|
1,221
|
|
|
|
(31)
|
|
|
$
|
292
|
|
|
|
286
|
|
|
|
674
|
|
|
|
|
|
|
|
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
|
|
|
1,330
|
|
|
|
319
|
|
|
|
340
|
|
|
|
344
|
|
|
|
327
|
|
Amortization of finance lease assets
|
|
|
20
|
|
|
|
3
|
|
|
|
5
|
|
|
|
5
|
|
|
|
7
|
|
Amortization of share-based awards
|
|
|
617
|
|
|
|
250
|
|
|
|
248
|
|
|
|
100
|
|
|
|
19
|
|
Depreciation of property and equipment
|
|
|
124
|
|
|
|
29
|
|
|
|
33
|
|
|
|
30
|
|
|
|
32
|
|
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)
|
|
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