Creative Realities Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: We posted $13.0M in Q2 revenue, up 34% sequentially, and grew ARR to $18.1M from $17.3M in Q1.
  • Negative Sentiment: Consolidated gross margin declined to 39% from 52% YoY, driven by a shift to hardware sales after exiting media sales, though margins are expected to improve in H2.
  • Positive Sentiment: Adjusted EBITDA rose to $1.2M from $0.5M in Q1 and is projected to reach 15% of revenue by year-end as we scale revenue and control expenses.
  • Positive Sentiment: We secured a major QSR engagement with a 1,000-location pilot in Q3/Q4 and anticipate a national rollout, underscoring a robust pipeline and digital transformation demand.
  • Neutral Sentiment: Achieved SOC 2 Type II certification, bolstering data security credentials and positioning us competitively for enterprise retail media network contracts.
AI Generated. May Contain Errors.
Earnings Conference Call
Creative Realities Q2 2025
00:00 / 00:00

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Operator

Good morning. At this time, I would like to welcome everyone to Creative Realogy's twenty twenty five Second Quarter Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at cri.com following its completion. Creative Reales has prepared remarks summarizing the interim results of the quarter along with additional industry and company updates. Joining the call today is Rick Mills, Chairman and Chief Executive Officer George Shutter, Chief Strategy Officer and Head of Corporate Development and Ryan Mudd, Interim Chief Financial Officer. Mr. Mudds, you may proceed.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

Thank you, and good morning, everyone. Welcome to our earnings call for the second quarter ended 06/30/2025. I would like to take this opportunity to remind you that remarks today will include forward looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose, and similar expressions or the negative version of such words or expressions as they relate to us or our management are intended to identify forward looking statements. Actual results may differ materially from those contemplated by such statements.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

Factors that could cause these results to differ materially are set forth in our Form 10 ks and other filings with the SEC. Any forward looking statements we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in our public filings and in our earnings release that was issued this morning. We believe the use of certain non GAAP measures such as adjusted EBITDA and several other important KPIs represent meaningful ways to track our performance.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Rick Mills
Rick Mills
CEO at Creative Realities

Thanks, Ryan, and good morning, everybody. Thank you for joining the call. I'll start by giving some details of our Q2 financials. We posted revenue of $13,000,000 in the second quarter, up 34% versus Q1 and roughly flat year over year, while gross profit was $5,000,000 dollars in twenty twenty five Q2 versus $6,800,000 in Q2 twenty twenty four. Q2 twenty twenty four gross margin of 6,800,000.0 was inflated due to the inclusion of $815,000 in media sales revenue as we exited the media sales business.

Rick Mills
Rick Mills
CEO at Creative Realities

Our consolidated gross margin was 39% versus 52% in the prior year period, with the lower profitability largely due to changes in revenue mix of more hardware versus services. This was driven by few customers who chose to purchase hardware in advance due to the uncertainty of tariffs. We expect margins to rise in the third and fourth quarters as we are installing those products previously purchased in bulk. As of 06/30/2025, we had an annual recurring revenue run rate or ARR of $18,100,000 versus $17,300,000 at the end of the first quarter. As we have previously discussed, new deployments have a follow on effect of growing SaaS based ARR.

Rick Mills
Rick Mills
CEO at Creative Realities

Adjusted EBITDA rose to $1,200,000 for the 2025 from $500,000 in Q1 and was down slightly versus last year's $1,500,000 We anticipate this will improve further going forward as revenue increases and we continue to manage overhead expenses. In fact, we expect adjusted EBITDA as a percent of revenue rising back to 15% by year end. Notably, we were able to reduce approximately $3,100,000 in debt this quarter due to operating cash generated during the period. While some short term working capital issues impacted Q1 as previously discussed, we're pleased to now be able to once again focus on strategically using cash flow to pay down debt and delever the company whenever possible. Let me take this opportunity to address a question that we sometimes get.

Rick Mills
Rick Mills
CEO at Creative Realities

We have a lot of credit with a sweep account. At the end of Q2, the balance on that account was $16,100,000 down $3,100,000 from the end of Q1 due to the cash generation that I just outlined. At the end of Q2, we had $600,000 in cash on hand with additional availability of 6,000,000 We do not keep excess cash on hand and the cash we have on hand at any point is not a proxy for our true working capital capacity. As stated last quarter, we have a very robust pipeline of opportunities on which we're bidding, reflecting strong demand for our technology as well as generally good economic conditions within our customer base. During Q2, we announced a significant engagement with a well known upscale quick service restaurant chain with over a thousand locations across more than 25 states.

Rick Mills
Rick Mills
CEO at Creative Realities

We're currently implementing a pilot program in select locations during Q3 and Q4, and expect a national rollout to begin immediately following the completion of the pilot. This is another example of our ability to digitally transform an establishment's menu boards inside and out, shifting from static displays to dynamic digital engagement, while increasing basket size and profitability and increase throughput in the drive through operations. We are delivering a 100% turnkey solution, all powered by our proprietary CMS platform, Clarity, along with consulting, content strategy, hardware provisioning, deployment support, and ongoing day two service. I'll keep everyone updated on the progress of this important implementation, which will result in a more agile, connected restaurant environment that meets guest expectations and provides flexibility for enhanced applications in the future. Our AdLogic CPM Plus platform continues to impress customers due to its power and flexibility, gives clients the tools to deliver targeted campaigns at significantly reduced cost, combining programming capabilities with a self serve interface that simplifies campaign execution, enhances targeting precision, and eliminates unnecessary intermediation fees.

Rick Mills
Rick Mills
CEO at Creative Realities

This past quarter, we saw increased traction and interest from existing and new customers. We currently have three customers who are in the testing evaluation phase of the platform, which, if chosen, would power their in store retail media networks. We have been in the retail media network business for some time and are currently delivering greater than 25,000,000 ads daily. We expect in store retail media networks to grow our revenue and recurring SaaS in 2026 and beyond. The bottom line is that we remain on track for another year of solid performance.

Rick Mills
Rick Mills
CEO at Creative Realities

As stated last quarter, we expect revenue to accelerate in the second half, backlog to grow and margins to improve, putting us in position for tremendous results in 2026. I'll turn it back over to Ryan to share some additional comments on our financials.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

Thank you, Rick. An overview of our financial results for the 2025 was provided in our earnings release and Form 10 Q, which included the condensed consolidated balance sheet as of 06/30/2025 the statements of operations for the three and six months ended 06/30/2025 the statement of cash flows for the six months ended 06/30/2025 and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended 06/30/2025, as well as the preceding four quarters. While Rick reviewed our operational results in detail, let me provide a couple of points of context related to our balance sheet. As of 06/30/2025, the company had cash on hand of approximately $600,000 versus $1,000,000 at the start of 2025. As previously mentioned, our consolidated balance sheet reflects minimal cash on hand as the company has set up a sweep instrument to apply cash against the revolving debt facility to further manage our interest expense.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

Our gross and net debt stood at approximately $20,100,000 and $19,500,000 respectfully at the end of the second quarter as compared to $13,000,000 and $12,000,000 respectfully at the start of 2025. Our debt level was reduced by approximately $3,100,000 during the period as Rick previously discussed due to operating cash flow as we continue to delever the company whenever possible to strengthen the balance sheet. At the end of the second quarter, our leverage on gross and net basis was 4.534.4% respectively versus 2.592.39% at the beginning of fiscal twenty twenty five. The increase in the leverage was caused by the settlement of the contingent liability in 2025. We see this as continuing to improve going forward and remain dedicated to managing our debt as we evaluate and migrate to an optimized capital structure in support of our growth.

Ryan Mudd
Ryan Mudd
Interim CFO at Creative Realities

I will now turn it back to Rick for additional comments on our results and customer activities.

Rick Mills
Rick Mills
CEO at Creative Realities

Thanks, Ryan. In closing here, our engagement with prospects is at an all time high. We are pleased with the pipeline and the sheer number of discussions going on with potential prospects. We continue to focus on our primary four vertical markets, QSR, C store, retail, sports and entertainment. The demand for improved drive thru performance in the QSR vertical continues to accelerate.

Rick Mills
Rick Mills
CEO at Creative Realities

We have introduced our latest drive thru hardware and software solution, which features a one by three fifty five inches digital display at a market price of $14,999 fully installed. This represents a new price point in the drive thru industry and a price reduction of 20% below most of our competitors. This will allow the smaller mid market regional QSRs to adopt and implement digital drive throughs. In the C store vertical, our longtime customer, seven Eleven, stated in a news release on August 6 it plans to open 1,100 new restaurants in its US stores by 02/1930. The aggressive investment in restaurants is part of an updated transformation plan released by the retailer's Tokyo based parent company, 7NI Holdings.

Rick Mills
Rick Mills
CEO at Creative Realities

In addition to adding more than 1,000 restaurants over the next five years, seven Eleven said it intends to open a total of 1,300 new larger format stores during that timeframe, all of them with an enhanced focus on food service. Assuming this occurs and seven Eleven continues as a customer, we would expect this to add an additional 17,000 plus displays, generating 30,000,000 additional $5,000,000 annually in SaaS over a five year period. One additional note on the C store vertical, we did deploy our first C store in Mexico. This is a proof of concept for Circle K Mexico. More to come on that opportunity in 2026.

Rick Mills
Rick Mills
CEO at Creative Realities

As the transition to digital continues to move forward in our key verticals, the adoption and conversion opportunities continue to grow in scope and complexity. This leads to increasingly long sales cycles and requires patience and persistence. As CRI's market share and influence continues to grow, we expect to be the provider of choice. Other areas of continued growth are coming from our live venue IPTV team. Along with growing our existing live venue customers through seasonal projects, highlights of Q2 would include the conversion of a large D1 college campus stretching across six athletic venues.

Rick Mills
Rick Mills
CEO at Creative Realities

The expansion of club level enhancements for two different NHL arenas and one NBA arena. And finally, the successful IPTV deployment to our first soccer stadium in Mexico. Menu board mobile phone to screen language translation for an NFL stadium that will be a host venue for several World Cup matches. By the way, it's the first stadium to deploy this type of fan experience in The US. Finally, the award of two additional minor league baseball stadiums.

Rick Mills
Rick Mills
CEO at Creative Realities

With more than 12 net new logos or customers in the first half of the year, we expect to continue to secure our portion of the live venue market by providing IPTV solutions, digital signage, and content strategies throughout The United States, as well as we will build on the recent wins in Canada and Mexico. One additional network we have previously announced is the DigiPoint Media Network. This is a retail media network on ice boxes across groceries and C stores. The anticipated deployment, which we originally estimated to begin in Q3, is behind schedule. We now expect this network to begin deployment in Q4 of this year.

Rick Mills
Rick Mills
CEO at Creative Realities

This is expected to be approximately 2,000 sites, and generate in excess of $4,000,000 in hardware and installation revenue, with additional SaaS revenue from our CMS and AdTech software solutions. One quick update on our SOC Type two certification. We achieved SOC two Type one compliance in Q1, and have now achieved SOC two Type two certification. This compliance is a valuable credential that demonstrates the trustworthiness and credibility of our products to enterprise customer. This is yet another indicator of our acceleration in the marketplace.

Rick Mills
Rick Mills
CEO at Creative Realities

We remained well positioned in the digital transformation landscape and look forward to delivering further improved operating results. With that, we'll now move to the Q and A portion of the call. Please go ahead, operator.

Operator

Thank you. At this time, if you would like to ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press 11 again. We also ask that you wait for your name and company to be announced before proceeding with your question.

Operator

One moment while we can pile up the Q and A roster. And my first question today will be coming from the line of Jason Kreyer of Craig Hallum. Your line is open.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Great. Thank you, guys. So Rick, for the last few quarters, we've talked about this growing pipeline and a bunch of volume kind of getting jammed up at the one yard line. It was great to see last quarter you get that QSR win. Just curious if you can give general updates on the progression of those deals through the pipeline and any visibility into any unlock.

Rick Mills
Rick Mills
CEO at Creative Realities

Jason, great question. Everything continues to move forward. They move forward, it seems like an inch at a time. The quality of our top 10 is really spectacular. But we just simply do not have anything that we are comfortable announcing at this time, but we do expect to make some announcements in this calendar year.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

It's good to hear. So when you talk about the acceleration in the back half of the year in terms of revenue and profitability, What is that predicated on? Is that visibility that you have to those deals getting through? Is that pipeline of new wins that are going to roll out? Just trying to understand what gives you that confidence.

Rick Mills
Rick Mills
CEO at Creative Realities

What gives us the confidence is when we announced the QSR wins last quarter or the quarter before. All of those are now piling up. We had expected to be installing some of those right at the end of Q2. That didn't happen. It turned out in that particular instance that every one of those restaurants had to actually pour a new footer for their drive through.

Rick Mills
Rick Mills
CEO at Creative Realities

So that is now getting caught up. In the next month, we begin deploying a significant quantity of new site. So it's been kind of just held up. And then when that comes, when that catches up, we'll be installing just tremendous amounts of locations. So there's that.

Rick Mills
Rick Mills
CEO at Creative Realities

There's a couple stadium announcements. So those are the things that give us confidence. Just to be clear, Jason, if we get some wins this year that we announce, these things from announcement to actually deploying generally takes a number of months.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Got it. Okay. Last question for me. So if you look across the different verticals that you serve, where do you see the most pressure on businesses to modernize their technology and adopt the digital solutions that you guys can provide?

Rick Mills
Rick Mills
CEO at Creative Realities

Clearly, that would be QSR drive through. The post pandemic, the drive through in the QSR business really matters. Transitioning to digital can improve drive through times, ten, fifteen, twenty seconds per car. Well, you add that up to six hours of a packed drive through line queue. It really makes a significant difference in revenue for the QSR operator.

Rick Mills
Rick Mills
CEO at Creative Realities

So tremendous pressure, if you will, for them to update and innovate. So that's number one in the QSR. Number two, I would tell you retail media networks. Everybody is circling it. In store digital is a game changer.

Rick Mills
Rick Mills
CEO at Creative Realities

However, in store digital takes a tremendous investment in your physical retail presence, and it takes a tremendous amount of time to get ready to deploy it just internally. Forget a supplier like myself. So we're talking with three, four. We have three pilots underway now, or three test cases, probably got six other retailers in the queue. And we believe in 2026, we will actually execute or land our first large new retail media network.

Rick Mills
Rick Mills
CEO at Creative Realities

And those retail media networks, Jason, are in the tens of millions of dollars of deployment.

Jason Kreyer
Senior Research Analyst at Craig-Hallum Capital Group LLC

Looking forward to hearing more about those as they come through. Thanks. Great update. Appreciate it.

Rick Mills
Rick Mills
CEO at Creative Realities

Thanks, Jason.

Operator

Thank you. One moment for the next question. And the next question will be coming from the line of Brian Kinstlinger of Alliance Global Partners. Your line is open.

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Great. Thanks so much. Just a follow-up. I was confused. The QSR installs in the second half of the year that give you confidence, is that 1,000 store location that you recently announced?

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Because I thought that was a pilot. Or is that a different one? I'm just trying to understand what the driver of that is.

Rick Mills
Rick Mills
CEO at Creative Realities

No. The driver of that, Brian, is the customer. Yeah, we are deploying 50 POC locations, but we already have a queue of locations behind that. We're already getting sign ups, deposits, etcetera. So that's not like we're going to deploy x number of locations, and then they're going to evaluate.

Rick Mills
Rick Mills
CEO at Creative Realities

That's not how that is being framed. It's really they're going full steam ahead, because that project from the customer was delayed a year. So they feel like they're already a year behind. So that is moving force with relatively consistent speed once we got through the construction hiccup of everybody has to pour new footers at the drive through.

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Got it. And then I think last time we talked, there was an initial survey that had 600 locations on board or opting in. Has there been another survey? Has there been more commitments? Kind of where are you with opt ins?

Rick Mills
Rick Mills
CEO at Creative Realities

I don't have an update on that, Brian, but it's still very consistent. So I can reach out to you and get an update, but I believe it is very consistent.

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Okay. And then as it relates to sports and entertainment, clearly we've got baseball, the only really sport going on right now, NHL and NBA obviously are in the off season. Does that drive increased installs opportunities in the short term or is the sales cycle too long in the installation process? I'm just trying to understand how that impacts revenues in the short term.

Rick Mills
Rick Mills
CEO at Creative Realities

Yeah, no, we would expect to, in the off season for those sports, is typically when we have engagements, we have a number of proposals out, and it just depends upon who finds budget. And those happen relatively quickly. It would be they make a decision, sign it, and sixty days later, we're actually installing. It's not like they sign and nine months later. Those tend to happen relatively quickly.

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Thanks. And my last question is, you clearly had customers buying screens ahead of tariffs. How are tariffs now that are in place impacting decisions? Is it leading to longer sales cycles? Is it not impacting that much?

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Just kind of frame for how that changes, if at all, the discussions you're having right now.

Rick Mills
Rick Mills
CEO at Creative Realities

We had a couple of customers who were concerned around the uncertainty of tariffs. So a couple customers made some bulk buys of screens just to give them some comfort through the balance of this year, number one. Number two, at this point in time, none of the manufacturers whose screens we deploy have raised their price due to tariffs at this time. Now, I believe we are ultimately coming to the end of the uncertainty period. It appears that there is some finalization of tariffs spreading across the various countries, so there could be some impacts in the future. We just do not know what they are.

Brian Kinstlinger
MD, Director - Research & Head - Technology Research at Alliance Global Partners

Okay, thanks so much.

Rick Mills
Rick Mills
CEO at Creative Realities

Thank you, Brian.

Operator

Thank you. And the next question is coming from the line of John Hickman of Ladenburg Thalmann. Your line is open.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Rick, could you I want to follow-up on Brian's question. The pre buys of the screens, does that put pressure on the next couple of quarters on the hardware side?

Rick Mills
Rick Mills
CEO at Creative Realities

It certainly puts a little bit of pressure on the hardware side. John, not going to but it also you'll see increased services because of we're now deploying screens in subsequent quarters, right, that we didn't take the services revenue because we hadn't performed the service yet.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Okay. So that doesn't affect your guidance for increased revenues over the back half of this year?

Rick Mills
Rick Mills
CEO at Creative Realities

Not significantly. No.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Okay. This could you I think I missed it, but the seven Eleven deployments, that's over you're counting on that over a five year period? Yes. The new Okay.

Rick Mills
Rick Mills
CEO at Creative Realities

So that was an announcement seven Eleven made. Once the bid from Couche Star, whatever the takeover ended, didn't happen, seveneleven put new management on August 6. Seveneleven made a number of announcements to the market over the leadership, if you will. And so it was 1,100 new restaurants, I believe, inside the seven Eleven stores, which we service today, and then 1,300 additional locations that they called new enhanced stores. Now, they started the new enhanced store footprint in 2024.

Rick Mills
Rick Mills
CEO at Creative Realities

So we've been installing new enhanced store footprints for about the last year, year and a half approximately.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Okay. So you're expecting that to happen over the next of some measured way over the next five years?

Rick Mills
Rick Mills
CEO at Creative Realities

That is correct. Yeah, they've been a very consistent customer. As we have mentioned in the past, every single business day here in The US, we typically would install one new or between one and three stores every single business day. That's either a new store location or a remodel or a restaurant brand popping up inside of an enhanced seven Eleven.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Okay.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

And then any word, any updates that you wanna share on the bowling alley customer?

Rick Mills
Rick Mills
CEO at Creative Realities

The bowling alley customer has, in effect I want to say they are currently not rolling out any additional sites. I believe the bowling we've deployed three thirty to three fifty ballpark is the range. I believe they have because it has taken them, the bowling center project, they have taken so long to roll it out. I believe that it's potentially caused some funding issues between them and the private equity partner. But I'm not involved in those discussions.

Rick Mills
Rick Mills
CEO at Creative Realities

But we currently have no bowling centers on the schedule on a go forward basis.

Jon Hickman
Jon Hickman
MD - Equity Research at Ladenburg Thalmann

Okay, thank you. That's it for me.

Operator

Thank you. One moment for the next question. And our next question will come from the line of Howard Halpin of Taglich Brothers. Your line is open.

Howard Halpern
Principal Equity Analyst at Taglich Brothers

Good morning, guys. Congratulations on a great Q2. In terms of the digital retail networks, your expectations for 2026, what type of leverage can we expect even if one large deployment occurs?

Rick Mills
Rick Mills
CEO at Creative Realities

When you say what kind of leverage?

Howard Halpern
Principal Equity Analyst at Taglich Brothers

How does it drop to the bottom line or operating line?

Rick Mills
Rick Mills
CEO at Creative Realities

Oh, significant. I mean, because, again, we know of two retail media networks currently on the books for folks across The United States. So we know of two being rolled out. Each of them, well, one was an expected $180,000,000 project over twenty four months. The other is $100,000,000 project being rolled out in a six month period.

Rick Mills
Rick Mills
CEO at Creative Realities

So we obviously did not win those. We came very close second on one of them. So those are the first two we know that are being broadly deployed in The US, but you can see the dollar volume is highly concentrated, and there would be tremendous flow through to the bottom line, just because of pure volume.

Howard Halpern
Principal Equity Analyst at Taglich Brothers

Okay. And circling so back, I guess, maybe to ARR, with deployments occurring now and day two revenue coming in, in the second half, should we expect by the run rate by the end of the year somewhere north of $19,000,000

Rick Mills
Rick Mills
CEO at Creative Realities

That's a great question. We've had some lumpiness in the ARR as some customer we had one customer that had a medical network that had been deployed in the field for a number of years, and they decided to end of life some of their experiences in their customer locations. So at this point in time, we're not predicting or not giving forecast around potential growth of ARR.

Howard Halpern
Principal Equity Analyst at Taglich Brothers

Okay. Now in terms of the Circle K in Mexico, how important is that project? And how important is that project to potentially moving to other countries in Latin America?

Rick Mills
Rick Mills
CEO at Creative Realities

We are in discussions with a couple other retailers that have operations across Central America, but nothing specific. And for example, that's a true POC where they want to understand how the network in that store, the signage in that network, moves their revenue needle and basket size. So for example, we do not expect any additional Circle K deployments until potentially 2026 in Mexico. But also, would note, we've done certainly this quarter, past quarter, we did a Mexican stadium. I think it was a soccer stadium, ZYPTV.

Rick Mills
Rick Mills
CEO at Creative Realities

So we've got several bids in on multiple stadiums in and around in Mexico. So we expect a combination of sports and entertainment and C store will be the focus in Mexico.

Howard Halpern
Principal Equity Analyst at Taglich Brothers

Okay, guys, keep up the great work.

Rick Mills
Rick Mills
CEO at Creative Realities

Thanks.

Operator

Thank you. One moment for the next question. And the next question will be coming from the line of Kevin Sheldon, Private Investor. Please go ahead.

Analyst

Yes. Thanks, wanted to touch base on last call. You had mentioned about being aggressively in the acquisition marketplace. And I was wondering if there was any update on anything like that that's occurring.

Rick Mills
Rick Mills
CEO at Creative Realities

Kevin, it's a great question. We have been very blunt about our desire to accomplish an acquisition. And I would tell you that we still have the same mindset. It's got to be the right fit for the company. And it is still our desire to accomplish something this year, but I have nothing that we could discuss. Nothing to I discuss at this

Analyst

appreciate that. The second question real quick. Based upon your debt reduction over the second quarter, is it safe to project that out through the end of the year? And you're looking at probably another $6,000,000 taken off the debt?

Rick Mills
Rick Mills
CEO at Creative Realities

I don't know if we would reduce debt that drastically throughout the rest of the year. That's just the timing between payables and receivables. We generated cash in Q2. We expect to generate cash in future quarters. And we don't have any increased investment plans, so whatever cash we generate will be used to reduce our credit facility.

Rick Mills
Rick Mills
CEO at Creative Realities

And then I'd also ask George Souter, who is our Chief Strategy Officer. George, anything to add or comment on that?

George Sautter
George Sautter
Chief Strategy Officer & Head of Corporate Development at Creative Realities

No. We stated Kevin, great. Thank you for the questions. As we've stated, we continue to work towards what we deem to be the optimal cap structure. And it is a function of our working capital needs and reinvestment into the business, obviously, to drive organic growth.

George Sautter
George Sautter
Chief Strategy Officer & Head of Corporate Development at Creative Realities

But it's fair to say that if there's any excess cash, and we talked about that earlier on the call, that essentially we're going to be paying down the balance on the line of credit. We pursued a very disciplined strategy and financial management over the past couple of years to decrease our leverage, and that works hand in glove with pursuing those strategic opportunities that you alluded to. So we obviously want all the tools in the tool chest to pursue both strategic and organic growth. Part of that playbook is maintaining an appropriate leverage ratio. But we also know that debt is one of the most inexpensive ways to finance the activities of the company.

George Sautter
George Sautter
Chief Strategy Officer & Head of Corporate Development at Creative Realities

So, it's not a zero debt thing. It's the optimal cap structure, but a great question.

Analyst

And my last question is, you talked about the SOC two compliance. Based upon your competition, how many of your competitors you think are at that same level of SOC two compliance versus yourselves, percentage wise or number wise? I'm fairly flexible.

Rick Mills
Rick Mills
CEO at Creative Realities

That's a great question, Kevin. And this answer is coming from my gut. I don't have anything other than that to tell you. The top two or three or four competitive CMSs are at the same level and have achieved it. Where you will see companies that have not achieved it is all of the mom and pop CMSs around the country.

Rick Mills
Rick Mills
CEO at Creative Realities

It's an $8.10000000 dollars CMS company that's got $7,000,000 $8,000,000 in revenue, they just simply do not have enough staying power to get that type of certification. So the bottom 80% don't. The top 20%, which is four or five or six of us, have achieved it. That's what my gut is telling me.

George Sautter
George Sautter
Chief Strategy Officer & Head of Corporate Development at Creative Realities

Rick, maybe I should count on to that, because we do deem it to be a competitive advantage. Per Rick's comments, the fact that so many companies that are in the industry will never achieve it, simply don't have the resources, don't have the competencies to achieve it, Means that for the types of enterprise clients that we're dealing with, the types of processes that we're in, particularly with respect to retail media networks, it's just the smaller population of industry constituents who can actually go after that type of business. So, are a number of smaller companies out there that actually do have very large customers. And we think when those opportunities are presented again, when those contracts expire, that we're going to be in a terrific position to compete tenaciously for that business.

Analyst

Totally agree that I believe it is a competitive advantage. I don't disagree with that. And my last question is, do you have a speculation as to when you'll first get to your breakeven quarter?

Rick Mills
Rick Mills
CEO at Creative Realities

We think as we exit this year, Kevin, we will have achieved that. And it's through a combination of increased revenue and also operating efficiency. You look at our last six quarters, we've continued to manage our SG and A expenses down. And it's not managing people out of the business. What it is, it's a consolidation of our multiple systems into one.

Rick Mills
Rick Mills
CEO at Creative Realities

We talked a lot about a year and a half ago the conversion to NetSuite. So today, we're already full lap. We're in our second year on our full ERP, our shipping software, and our shipping solutions. So all of those things, we're managing those and becoming much more efficient, along with revenue growth, has us achieving that as we exit this year.

Analyst

Gentlemen, I appreciate you taking my call.

Rick Mills
Rick Mills
CEO at Creative Realities

Yep, thanks, Kevin. We appreciate your support.

Operator

Thank you. And this does conclude today's Q and A session. I would like to go ahead and turn the call back over to Rick Mills for closing remarks. Please go ahead.

Rick Mills
Rick Mills
CEO at Creative Realities

Well, first, let me conclude the call by thanking all the shareholders, clients, partners, and our employees for the continuing efforts, commitment, and support as we work together to transform CRI into the leading brand in digital signage solutions. We look forward to speaking with everyone again next quarter. Thank you.

Operator

Thank you all for joining today's conference call. This does conclude today's meeting. You may now disconnect.

Executives
    • Ryan Mudd
      Ryan Mudd
      Interim CFO
    • Rick Mills
      Rick Mills
      CEO
    • George Sautter
      George Sautter
      Chief Strategy Officer & Head of Corporate Development
Analysts
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