- Announces revenue of $10.8
million
- Reaffirms 2022 Revenue Guidance to Exceed $43 Million
LOUISVILLE, Ky., May 16, 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 three months ended
March 31, 2022.
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Rick Mills, Chief Executive
Officer, commented "During the first quarter of 2022, we completed
financing activities and closed on our previously announced
acquisition of Reflect Systems, Inc. ("Reflect"). Customers
spoke immediately, with Creative Realities and Reflect initially
winning a $10 million customer
project which began in February and will continue deployment
through the first quarter of 2023. Despite combined company results
which include only 44 days with Reflect in our consolidated
results, we produced record revenue of approximately $10.8 million. Our current client base
continues to expand, as evidenced by the expansion in our annual
recurring run-rate to in excess of $13.5
million per year. Our pipeline for potential new logos
and new clients has never been more robust."
Mr. Mills continued, "Our primary focus remains in expanding the
number of SaaS devices managed via our digital signage software, in
turn increasing the value of our Company through increasing in our
annual recurring services revenue. As we grow the software
subscription base and continue to integrate Creative Realities and
Reflect, we expect to further enhance our operating leverage and
improve financial results."
"With the expansion of our SaaS revenue and the momentum within
our pipeline, we reiterate our expected target to generate revenue
in excess of $43 million during 2022,
which would represent an organic growth rate in excess of 40% on a
pro forma, combined company basis as compared to 2021. We remain on
track to deliver 25% growth in our annual recurring revenue on a
pro forma, combined company basis in 2022."
Mr. Mills concluded, "We are proud about the work we have
completed thus far, but remain even more engaged and excited about
what is to come for Creative Realities. We are positioned to
service enterprise customers with our end-to-end offering and to
drive profitability through our increased scale."
First Quarter 2022 Financial
Overview
All results herein represent the financial results of Creative
Realities, Inc. and 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
following their merger on February 17,
2022.
Key Highlights:
- Revenue growth of $5.8 million,
or 115%
- Annual Recurring Revenue run-rate exceeds $13.5 million
Revenue, gross profit, and gross margin:
- Revenues were $10.8 million,
representing an increase of $5.8
million, or 115%, as compared to the same period in 2021
despite a reduction in revenues generated from the sale of our Safe
Space Solutions products and services of $0.9 million. Revenues generated from our core
digital signage products and services increased $6.6 million, or 133% in 2022 as compared to
2021, despite continued supply chain disruptions related to
semiconductor chips delaying the delivery of digital displays and
media players to the Company.
- CRI acquired Reflect on February 17, 2022, and the
Company's consolidated results for the three months ended
March 31, 2022 include 44 days of
Reflect's operations. Had the companies completed the Merger as of
December 31, 2021, the combined company would have revenue in
excess of $12 million during the
three months ended March 31, 2022.
- Hardware revenues were $6.5
million in 2022, an increase of $3.6
million, or 129%, as compared to the prior year. Services
and other revenues were $4.3 million
in 2022, an increase of $2.1 million,
or 96% with the inclusion of 44 days of Reflect in the consolidated
results.
- Managed services revenue, which includes both
software-as-a-service ("SaaS") and help desk technical subscription
services, were $2.7 million in the
three months ended March 31, 2022 as
compared to $1.3 million in the same
period in 2021, which included $0.8
million contributed by Reflect in the 44 days from
February 17 – March 31, 2022. The Company's annual
recurring revenue run-rate exceeds $13.5
million as of March 31,
2022.
- Gross profit increased by $1.7
million, or 74% driven by an increase in revenue but offset
by a reduction in gross profit margin. Gross profit margin
decreased to 36.2% from 44.6% driven by a shift in revenue mix to
60% hardware in the first quarter of 2022 related to a material
customer rollout underway. We expect this contraction in gross
profit margin to be less severe as we move into the second quarter
of 2022 and beyond, with significant pressure in the current
quarter driving by a single, large-scale/hardware-heavy
deployment.
Operating expenses:
- Sales and marketing expenses increased by $0.4 million, or 111%, from $0.3 million during the three months ended
March 31, 2021 to $0.7 million in the three months ended
March 31, 2022, driven by the
acquisition of Reflect during the period. Immediately following the
acquisition of Reflect, the company integrated the sales and
marketing functions and does not disaggregate these expenses
between the two legacy companies. Through the acquisition and
integration activities, the Company has adopted certain tools,
technology, and processes – particularly with respect to digital
marketing utilized to generate demand and qualified sales leads –
that were only minimally invested into by Creative Realities in the
past. Additionally, the Company formally engaged an investor
relations firm, HaydenIR, and has increased investor relations
activities, including conferences and presentations. As a result,
we expect the sales and marketing expenses of the combined company
to continue at the current pace for future periods.
- Research and development expenses increased $0.1 million, or 41% in 2022, from $0.1 million during the three months ended
March 31, 2021 to $0.2 million during the three months ended
March 31, 2022, driven primarily by
the acquisition of Reflect. Through the acquisition of Reflect, we
acquired a fully staffed, experienced software development team and
elected to keep these resources intact, in full, particularly given
employment market conditions with respect to talented software
engineers. We have integrated the pre-existing CRI development team
with the acquired team and have experienced speed to market on
feature and functionality development activities from enhancing
this resource pool. We expect this elevated level of expense to
continue into the future as we continue to develop our current and
future product set.
- General and administrative expenses – excluding bad debt
expense – increased $0.6 million, or
31%, from $2.1 million during the
three months ended March 31, 2021 to
$2.7 million during the three
months ended March 31, 2022, driven
by the acquisition of Reflect. While the company anticipates
carrying higher general and administrative expenses moving forward
as a result of the acquisition of Reflect, the integration
activities include several projects that we expect will be realized
by the end of 2022. Bad debt expense returned to a more normalized
rate of $0.1 million during the three
months ended March 31, 2022,
representing an increase of $0.6
million as compared to 2021 as the result of a bankruptcy
recovery in the same period in 2021. Our general and administrative
expenses also include $0.6 million in
non-cash stock compensation expenses.
Operating loss, net income, and EBITDA:
- Operating loss was $1.0 million
during the three months ended March 31,
2022, inclusive of the following $1.7
million in non-cash charges:
-
- Amortization of intangible assets: $0.7
million, with $0.4 million the
result of one-half of one quarter of incremental amortization
related to intangible assets recorded during the acquisition of
Reflect;
- Deal and transaction costs: $0.4
million in expenses incurred to facilitate the Reflect
acquisition and related financing activities; and
- Non-cash employee & director stock compensation expenses:
$0.6 million for both time and
performance vesting options.
- Net income was $2.5 million
during the three months ended March 31,
2022 including:
-
- $5.5 million gain on marking
outstanding warrants to fair value;
- $1.2 million charge related to
the issuance of warrants in exchange for a debt waiver;
- $0.5 million of interest expense,
$0.2 million of which represents
non-cash amortization of debt discount recorded in conjunction with
the issuance of warrants; and
- $0.3 million loss related to
amending our debt facilities.
- EBITDA was $4.1 million in 2022,
with Adjusted EBITDA of $0.6 million.
Adjusted EBITDA margin was 6% during the period.
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
Tuesday, May 17, 2022 at 9:00 am Eastern Time.
Prior to the call, participants should register at
bit.ly/CRIearnings2022Q1. 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, Reflect'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 Company 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 filed with the Securities and Exchange
Commission on 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
|
|
|
|
March 31
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30
|
|
|
March 31,
|
|
Quarters
ended
|
|
2022
|
|
|
2021
|
|
|
2021
|
|
|
2021
|
|
|
2021
|
|
GAAP net income
(loss)
|
|
$
|
2,502
|
|
|
$
|
(1,722)
|
|
|
$
|
(343)
|
|
|
$
|
1,025
|
|
|
$
|
1,272
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt
discount
|
|
|
181
|
|
|
|
29
|
|
|
|
29
|
|
|
|
29
|
|
|
|
72
|
|
Other interest,
net
|
|
|
268
|
|
|
|
160
|
|
|
|
158
|
|
|
|
153
|
|
|
|
177
|
|
Depreciation/amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
|
680
|
|
|
|
302
|
|
|
|
320
|
|
|
|
317
|
|
|
|
312
|
|
Amortization of finance
lease assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
Amortization of
employee share-based awards
|
|
|
469
|
|
|
|
324
|
|
|
|
329
|
|
|
|
329
|
|
|
|
512
|
|
Depreciation of
property, equipment
|
|
|
27
|
|
|
|
27
|
|
|
|
27
|
|
|
|
27
|
|
|
|
28
|
|
Income tax
expense/(benefit)
|
|
|
3
|
|
|
|
13
|
|
|
|
1
|
|
|
|
7
|
|
|
|
1
|
|
EBITDA
|
|
$
|
4,130
|
|
|
|
(867)
|
|
|
$
|
521
|
|
|
|
1,887
|
|
|
|
2,378
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain)/loss on fair
value of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(166)
|
|
(Gain)/loss on fair
value of warrant liability
|
|
|
(5,469)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(Gain)/loss on
settlement of obligations
|
|
|
295
|
|
|
|
-
|
|
|
|
(256)
|
|
|
|
(1,628)
|
|
|
|
(1,565)
|
|
(Gain)/loss on debt
waiver consent
|
|
|
1,212
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Deal and transaction
expenses
|
|
|
391
|
|
|
|
518
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income
|
|
|
(6)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based
compensation – Director grants
|
|
|
82
|
|
|
|
318
|
|
|
|
27
|
|
|
|
27
|
|
|
|
27
|
|
Adjusted
EBITDA
|
|
$
|
635
|
|
|
|
(31)
|
|
|
$
|
292
|
|
|
|
286
|
|
|
|
674
|
|
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SOURCE Creative Realities, Inc.