Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Creative Realities Inc reported a record first quarter revenue of $12.3 million, a 23.5% increase from the previous year.
- The company achieved a record first quarter gross profit of $5.8 million, up from $5.1 million in 2023.
- Annual Recurring Revenue (ARR) reached an all-time high of approximately $17.7 million on an annual run rate basis, an increase of $1.4 million from the end of 2023.
- Creative Realities Inc secured a commitment for a new $20 million senior revolving credit facility, enhancing financial flexibility and strategic options.
- The company continues to expand its sales funnel and customer base, indicating strong future growth potential.
Negative Points
- Adjusted EBITDA for Q1 2024 was approximately $0.8 million, down from $1 million in the same period last year.
- The consolidated gross margin percentage decreased year-over-year, despite an increase in absolute dollars, due to a higher proportion of lower-margin installation services.
- Some project deployments, like the BCTV project, are progressing slower than originally anticipated.
- Administrative expenses have increased, partly due to investments in ERP applications and expansion of sales and media teams.
- While the new credit facility is beneficial, it comes with a variable interest rate, which introduces some uncertainty regarding future financial costs.
Q & A Highlights
Q: Can you talk about business development? What verticals are seeing the most demand and can you quantify bookings in the quarter?
A: Richard Mills, CEO of Creative Realities, highlighted significant activity in the QSR space, led by drive-thru solutions, and in sports and entertainment, with engagements with 10-15 professional teams for large stadium overhauls. The retail media networks are also a key area, though transactions there tend to be slower and larger. Mills noted that there weren't many new logo wins in Q1 but expects this to change in Q2 and beyond.
Q: Is there any change to the revenue guidance range given the slower ramp discussion on BCTV?
A: CEO Richard Mills affirmed the guidance of $60 million in revenue, indicating comfort with the projections despite a slower ramp in BCTV. CFO Will Logan added that the revenue mix might appear different each quarter but maintained the expectation for a return to a higher hardware mix as the year progresses.
Q: Can you provide an update on Panera?
A: Mills confirmed that all new Panera store openings include a new digital drive-thru configuration, with Creative Realities fully integrated into their point of sale. He anticipates that Creative Realities will be added to Panera's remodel schedule later in the year.
Q: How are you deepening relationships with existing customers and expanding on the platforms you have?
A: Mills explained that revenue from customers acquired through the Reflect acquisition has increased, with these customers purchasing more services across Creative Realities' offerings. CFO Will Logan noted an uptick in retail C-store customers beginning to explore ad tech software, presenting significant upsell opportunities.
Q: Now that the new financing is almost in place, does this change your priorities in terms of deleveraging versus acquisitions?
A: Mills emphasized that while the company remains acquisition-focused, the new financing enhances their capacity to make acquisitions, though the challenge remains in acquiring at reasonable multiples. Logan reiterated that the strategic focus remains unchanged, with the new financing increasing strategic options.
Q: What's happening with expenses, particularly the admin expense?
A: CFO Will Logan mentioned that the increase in admin expenses in Q1 is due to investments in ERP applications and additional sales personnel, which are expected to remain consistent through 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
