- Announces Record 3Q 2023 Revenue of
$11.6 million - Announces Record 3Q Gross Profit of
$5.3 million (45.8%) - Announces Record Annual Recurring Revenue run-rate of
~$15.6 million - Announces Projected 4Q Revenue of
$15.8 -$17.8 million - Reiterates Projected FY2023 Revenue of
$46.8 -$48.4 million - Issues Projected FY2024 Revenue of
$60 million to$80 million - Issues Projected FY2024 Adjusted EBITDA of
$7.2 million to$12.0 million - Issues Projected FY 2024 exit ARR run rate of
$18.0 million
“The company is poised for another transformational year in 2024. Through the first nine months of 2023, we have paid down debt principal by approximately
2024 Guidance
The Company is issuing 2024 Revenue and Adjusted EBITDA projections in ranges of
Our backlog remains steady at greater than
3Q 2023 Financial Overview
All references to “current year” and “prior year” represent references to the three months ended
Key Highlights:
- Revenue in excess of analyst consensus at
$11.6 million . - Expansion of gross margin percentage to 45.8% in the current year from 40.4% in the prior year.
- Expansion of Annualized Recurring Revenue to forward run-rate of
~$15.6 million .
Revenue, gross profit, and gross margin:
- Sales were
$11,568 , representing an increase of$388 , or 3%, as compared to the same period in 2022. Hardware revenues were$4,847 for the current year, a decrease of$168 , or 3%, as compared to the prior year, of which approximately$3.0 million were earned from customers new to the Company in 2023. - Services and other revenues were
$6,721 for the three month period endedSeptember 30, 2023 , an increase of$556 , or 9%, compared to prior year driven by increases of (1)$543 in media sales attributable to the addition of sales resources and restructuring of third party selling contracts to expand its access to such agents, and (2)$420 in managed services revenue as a result of increased SaaS licenses that drive annual recurring revenue. These increases in services revenue in the current year were partially offset by a $505 decrease in installation services revenue as deployment of hardware sold during the current year associated with multiple advertising networks did not begin installation activities until the fourth quarter of 2023. - Gross profit increased
$789 , or 17% during the current year as compared to the prior year driven by enhanced margins on hardware revenues and an increase in services revenue. - Gross profit margin increased to 46% during the current year, from 40% in the prior year driven by (1) favorable revenue mix during the current year as managed services, which includes higher margin SaaS and other services revenues, increased to 37% of total revenue as compared to 35% of total revenues in the prior year, and (2) a 6% margin expansion associated with hardware revenues generated in the current year primarily generated from sales of custom manufactured kiosks purchased for deployment of an advertising network.
Operating expenses:
- Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing costs. Sales and marketing expenses in the current year increased by
$583 , or 81%, compared to the prior year driven primarily by seasonality in the Company’s media sales business unit and the Company’s enhanced investments into sales and marketing activities. Following the Company’s acquisition ofReflect Systems, Inc. via merger in 2022 (the “Merger”), the Company adopted certain tools, technology, and processes – particularly with respect to lead generation and brand marketing – that were historically undercapitalized by the Company and have since accelerated new customer acquisition. Through completion of the Merger, the Company also acquired a media sales business unit that serves to monetize customer networks via the direct sale of advertising to be displayed on digital advertising networks owned by those customers. This business utilizes internal and third-party sales agents - the salaries and commissions of which are included within Sales and Marketing Expense within the Condensed Consolidated Statement of Operations. - Research and development expenses generally include personnel and development tools costs associated with the continued development of the Company’s content management systems and other related application development. The Company capitalizes certain of these expenses and amortizes those costs through the Condensed Consolidated Statement of Operations on a straight-line basis over the economic useful life of the software feature or functionality. Research and development expenses increased by
$155 , or 65%, for the current year as compared to the prior year driven primarily by incremental headcount added via completion of the Merger onFebruary 17, 2022 and a higher rate of bug and maintenance work as compared to capitalized activities during the current year. - General and administrative expenses decreased
$215 , or 8% during the current year as compared to the prior year driven by a decrease of$492 in stock compensation expense as outstanding performance awards were fully expensed as ofDecember 31, 2022 . This decrease was partially offset by increased personnel costs in the current year as a result of higher headcount following the Merger and scaled up operations in response to an increase in customer acquisition and associated planned deployments.
Operating loss, net loss, and EBITDA:
- Operating income was
$160 thousand in the current year as compared to an operating loss of$284 thousand in the prior year, inclusive of approximately$0.8 million in non-cash amortization of fixed and intangible assets in both the current and prior year. - Net loss was
$1.9 million for the current year as compared to net loss of$0.6 million for the prior year. Excluding the non-cash change in the fair value of contingent consideration issuable in the Merger, the net loss was$0.6 and$1.0 million in the current and prior year periods, respectively. - Adjusted EBITDA and associated Adjusted EBITDA margin were approximately
$1.0 million and 8.8% in the current year as compared to$1.2 million and 11.2% in the prior year. See the table at the end of this press release for a description of these non-GAAP financial measures and reconciliation to our net income/(loss) for the current and prior years.
Other notes:
- Cash: The Company’s cash on hand as of
September 30, 2023 increased to$8.4 million from$1.6 million as ofDecember 31, 2022 as a result of the Company’s receipt of$5.4 million in net proceeds from the Company’s public offering completed inAugust 2023 , as well as incremental collections on accounts receivable, annual billings associated with our SaaS-based contracts, and increases in customer deposits on future deployments, partially offset by investments in software development projects and repayment of debt. - Debt: Through
September 30, 2023 , the Company repaid in the current calendar year in excess of$3.9 million in principal on debt in the current calendar year, reducing the Company’s leverage ratio from approximately 4.9 times to approximately 2.6 times.
Conference Call Details
The Company will host a conference call to review the results of the Company’s third quarter 2023, and provide additional commentary about the Company’s recent performance, on
Prior to the call, participants should register at https://bit.ly/CRIearnings2023Q3. Once registered, participants can use the dial-in information provided in the registration email to listen to the Company’s prepared remarks and participate in the live question and answer session. 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 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
Use of Non-GAAP Measures
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
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
Contact
cdavies@ideagrove.com
Investor Relations:
ir@cri.com
https://investors.cri.com/
CREATIVE REALITIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) | ||||||||
2023 | 2022 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 8,376 | $ | 1,633 | ||||
Accounts receivable, net | 5,865 | 8,263 | ||||||
Work-in-process and inventories, net | 2,306 | 2,267 | ||||||
Prepaid expenses and other current assets | 960 | 1,819 | ||||||
Total current assets | $ | 17,507 | $ | 13,982 | ||||
Property and equipment, net | 513 | 201 | ||||||
Operating lease right-of-use assets | 1,198 | 1,584 | ||||||
Intangibles, net | 23,975 | 23,752 | ||||||
26,453 | 26,453 | |||||||
Other assets | 43 | 43 | ||||||
TOTAL ASSETS | $ | 69,689 | $ | 66,015 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 3,340 | $ | 3,757 | ||||
Accrued expenses | 4,499 | 3,828 | ||||||
Deferred revenues | 3,507 | 1,223 | ||||||
Customer deposits | 3,532 | 2,478 | ||||||
Current maturities of operating leases | 575 | 711 | ||||||
Short-term portion of Secured Promissory Note | 521 | 1,248 | ||||||
Short-term portion of related party Consolidation Term Loan, net of | 3,690 | 1,251 | ||||||
Short-term related party Term Loan (2022) | - | 2,000 | ||||||
Total current liabilities | 19,664 | 16,496 | ||||||
Long-term Secured Promissory Note | - | 208 | ||||||
Long-term related party Acquisition Term Loan, net of | 9,037 | 8,516 | ||||||
Long-term related party Consolidation Term Loan, net of | 1,537 | 4,349 | ||||||
Long-term obligations under operating leases | 623 | 873 | ||||||
Contingent acquisition consideration, at fair value | 11,250 | 9,789 | ||||||
Other liabilities | 175 | 205 | ||||||
TOTAL LIABILITIES | 42,286 | 40,436 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common stock, | 104 | 72 | ||||||
Additional paid-in capital | 82,064 | 75,916 | ||||||
Accumulated deficit | (54,765 | ) | (50,409 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 27,403 | 25,579 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 69,689 | $ | 66,015 | ||||
CREATIVE REALITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) | ||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Sales | ||||||||||||||||
Hardware | $ | 4,847 | $ | 5,015 | $ | 12,606 | $ | 17,141 | ||||||||
Services and other | 6,721 | 6,165 | 18,102 | 15,719 | ||||||||||||
Total sales | 11,568 | 11,180 | 30,708 | 32,860 | ||||||||||||
Cost of sales | ||||||||||||||||
Hardware | 3,384 | 3,811 | 9,314 | 13,803 | ||||||||||||
Services and other | 2,881 | 2,855 | 6,704 | 5,989 | ||||||||||||
Total cost of sales | 6,265 | 6,666 | 16,018 | 19,792 | ||||||||||||
Gross profit | 5,303 | 4,514 | 14,690 | 13,068 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing expenses | 1,301 | 718 | 3,666 | 2,572 | ||||||||||||
Research and development expenses | 393 | 238 | 1,136 | 897 | ||||||||||||
General and administrative expenses | 2,632 | 2,847 | 8,125 | 8,269 | ||||||||||||
Depreciation and amortization expense | 817 | 885 | 2,393 | 2,060 | ||||||||||||
Deal and transaction expenses | - | 110 | - | 538 | ||||||||||||
Total operating expenses | 5,143 | 4,798 | 15,320 | 14,336 | ||||||||||||
Operating income (loss) | 160 | (284 | ) | (630 | ) | (1,268 | ) | |||||||||
Other income (expenses): | ||||||||||||||||
Interest expense, including amortization of debt discount | (734 | ) | (757 | ) | (2,324 | ) | (1,956 | ) | ||||||||
Change in fair value of warrant liability | - | - | - | 7,902 | ||||||||||||
Change in fair value of equity guarantee | (1,369 | ) | 442 | (1,461 | ) | 369 | ||||||||||
Loss on debt waiver consent | - | - | - | (1,212 | ) | |||||||||||
Loss on warrant amendment | - | - | - | (345 | ) | |||||||||||
Gain/(loss) on settlement of obligations | - | 37 | - | (237 | ) | |||||||||||
Other income (expense) | (3 | ) | (2 | ) | 132 | 3 | ||||||||||
Total other income (expense) | (2,106 | ) | (280 | ) | (3,653 | ) | 4,524 | |||||||||
Net (loss) income before income taxes | (1,946 | ) | (564 | ) | (4,283 | ) | 3,256 | |||||||||
Benefit (provision) for income taxes | 15 | 10 | (73 | ) | (46 | ) | ||||||||||
Net (loss) income | $ | (1,931 | ) | $ | (554 | ) | $ | (4,356 | ) | $ | 3,210 | |||||
Basic (loss) earnings per common share | $ | (0.22 | ) | $ | (0.08 | ) | $ | (0.56 | ) | $ | 0.50 | |||||
Diluted (loss) earnings per common share | $ | (0.22 | ) | $ | (0.08 | ) | $ | (0.56 | ) | $ | 0.50 | |||||
Weighted average shares outstanding - basic | 8,713 | 7,250 | 7,775 | 6,461 | ||||||||||||
Weighted average shares outstanding - diluted | 8,713 | 7,250 | 7,775 | 6,461 | ||||||||||||
CREATIVE REALITIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | ||||||||
Nine Months Ended | ||||||||
2023 | 2022 | |||||||
Operating Activities: | ||||||||
Net (loss) income | $ | (4,356 | ) | $ | 3,210 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 2,393 | 2,060 | ||||||
Amortization of debt discount | 1,078 | 904 | ||||||
Amortization of stock-based compensation | 539 | 1,587 | ||||||
Loss on debt waiver consent | - | 1,212 | ||||||
Loss on warrant amendment | - | 345 | ||||||
Loss on settlement of obligations | - | 237 | ||||||
Bad debt expense | 318 | 105 | ||||||
Gain on change in fair value of warrants | - | (7,902 | ) | |||||
Loss (Gain) on change in fair value of contingent consideration | 1,461 | (369 | ) | |||||
Deferred income taxes | 44 | - | ||||||
Changes to operating assets and liabilities: | ||||||||
Accounts receivable | 2,080 | (2,835 | ) | |||||
Work-in-process and inventories | (39 | ) | (1,032 | ) | ||||
Prepaid expenses and other current assets | 859 | 682 | ||||||
Accounts payable | (53 | ) | (227 | ) | ||||
Accrued expenses | 683 | 533 | ||||||
Deferred revenues | 2,284 | 1,019 | ||||||
Customer deposits | 1,054 | (585 | ) | |||||
Other | (39 | ) | 6 | |||||
Net cash provided by (used in) operating activities | 8,306 | (1,050 | ) | |||||
Investing activities | ||||||||
Acquisition of business, net of cash acquired | - | (17,186 | ) | |||||
Purchases of property and equipment | (287 | ) | (123 | ) | ||||
Capitalization of labor for software development | (2,851 | ) | (2,959 | ) | ||||
Net cash used in investing activities | (3,138 | ) | (20,268 | ) | ||||
Financing activities | ||||||||
Principal payments on finance leases | (14 | ) | - | |||||
Proceeds from sale of common stock, net of offering expenses | 5,454 | - | ||||||
Proceeds from sale of common stock in PIPE, net of offering expenses | - | 1,814 | ||||||
Proceeds from sale & exercise of pre-funded warrants in PIPE, net of offering expenses | - | 8,295 | ||||||
Proceeds from Acquisition Loan, net of offering expenses | - | 9,868 | ||||||
Repayment of Term Loan (2022) | (2,000 | ) | - | |||||
Repayment of Consolidation Term Loan | (930 | ) | - | |||||
Repayment of Secured Promissory Note | (935 | ) | (723 | ) | ||||
Net cash provided by financing activities | 1,575 | 19,254 | ||||||
Increase (decrease) in Cash and Cash Equivalents | 6,743 | (2,064 | ) | |||||
Cash and Cash Equivalents, beginning of period | 1,633 | 2,883 | ||||||
Cash and Cash Equivalents, end of period | $ | 8,376 | $ | 819 | ||||
RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA
(in thousands, unaudited)
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
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 | ||||||||||||||||||||
Quarters ended | 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||||||
GAAP net loss | $ | (1,931 | ) | $ | (1,425 | ) | $ | (1,000 | ) | $ | (1,334 | ) | $ | (554 | ) | |||||
Interest expense: | ||||||||||||||||||||
Amortization of debt discount | 363 | 358 | 356 | 364 | 363 | |||||||||||||||
Other interest, net | 371 | 429 | 447 | 423 | 394 | |||||||||||||||
Depreciation/amortization: | ||||||||||||||||||||
Amortization of intangible assets | 766 | 754 | 754 | 743 | 848 | |||||||||||||||
Amortization of employee share-based awards | 3 | 151 | 225 | 448 | 456 | |||||||||||||||
Depreciation of property & equipment | 50 | 43 | 25 | 30 | 37 | |||||||||||||||
Income tax expense/(benefit) | (15 | ) | 45 | 43 | 33 | (10 | ) | |||||||||||||
EBITDA | $ | (393 | ) | $ | 355 | $ | 850 | $ | 707 | $ | 1,534 | |||||||||
Adjustments | ||||||||||||||||||||
Gain on settlement of obligations | - | - | - | - | (37 | ) | ||||||||||||||
Loss (Gain) on fair value of equity guarantee | 1,369 | 16 | 76 | (705 | ) | (442 | ) | |||||||||||||
Disposal of Safe Space Solutions inventory | - | - | - | 909 | - | |||||||||||||||
Deal and transaction expenses | - | - | - | 54 | 110 | |||||||||||||||
Other expense (income) | 3 | (123 | ) | (12 | ) | 7 | 2 | |||||||||||||
Stock-based compensation – Director grants | 43 | 43 | 43 | 56 | 82 | |||||||||||||||
Adjusted EBITDA | $ | 1,022 | $ | 291 | 957 | 1,028 | 1,249 | |||||||||||||
Source: Creative Realities
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