Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Creative Realities Inc (NASDAQ:CREX) reported record third-quarter revenue of $14.4 million, a 25% increase from the previous year.
• The company achieved a gross profit of $6.6 million, up 24.5% from 2023.
• Adjusted EBITDA increased by 53% to approximately $2.3 million compared to last year.
• Annual recurring revenue (ARR) reached an annual run rate of $18.1 million.
• The company has a robust pipeline with multiple large contracts expected to be consummated in the coming months and quarters.

Negative Points

• There are delays in anticipated orders and deployments due to the decision-making processes of enterprise-grade customers.
• Visibility for the remainder of the year remains uncertain, impacting the ability to provide specific estimates for Q4 and full-year revenue.
• Cash on hand decreased to approximately $0.9 million from $2.9 million at the end of 2023.
• Debt levels rose slightly from the end of Q2 due to working capital requirements.
• The timing of large customer orders may push into fiscal 2025, affecting the goal of $20 million in ARR by year-end.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with CREX.

Q: Are there any specific bottlenecks in your pipeline, and where are they occurring? A: Rick Mills, CEO: The bottlenecks are primarily in the decision-making process of companies, not in installation. Companies are evaluating more factors, such as how retail media network plans factor into their digital signage decisions, which is causing delays.

Q: Given the recent uptick in profitability, are you reconsidering the long-term profit model? A: William Logan, CFO: The current quarter shows the operating leverage at scale. While we are not ready to raise expectations, the results indicate potential for higher profitability than previously projected.

Q: Can you provide more context on your robust pipeline and which industries are the strongest? A: Rick Mills, CEO: Our pipeline is fuller than ever, with 5 to 10 significant projects at the one-yard line. Strong verticals include QSR, retail, and convenience stores, with significant opportunities in IP TV for sports and entertainment venues.

Q: What are the major growth drivers over the next few years? A: Rick Mills, CEO: Growth will come from QSR, which is about 30-35% penetrated, C-stores under 25% penetrated, IP TV in stadiums and arenas, and retail media networks. We expect IP TV to convert to a SaaS-based model, enhancing growth.

Q: Are you still considering acquisitions, and what is your appetite for M&A? A: Rick Mills, CEO: Our appetite for acquisitions is significant, especially as we've managed our debt well. We are interested in acquiring larger organizations, but they are hard to find. We continue discussions with several competitors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.