Welcome to the CRI Third Quarter twenty twenty one Financial Results and Earnings Call. All lines have been placed on mute to prevent any background noise. The company has prepared remarks summarizing the third quarter results along with additional industry and company updates. Following the company’s prepared remarks, there will be a live question-and-answer session. If you would like to ask a question during that time, please hit the raise hand button within the webcast control panel. Alternatively, questions can be submitted during the call via email to [email protected]. This call, including the presented materials, will be recorded and a copy will be available on our website at cri.com following the completion of the call. Joining me on the call today is Rick Mills, CEO of CRI. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. The words anticipate, believe, expect, intend, plan, estimate, project, should, may, propose, and similar expressions or the negative versions of such words, as they relate to us or our management, are intended to identify forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in our quarterly financial statements on Form 10-Q and our Annual Report on Form 10-K filed with the SEC and in the registration statement on Form S-4 filed November twelve, twenty twenty one. Any forward-looking statements that 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 may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our public filings. It is now my pleasure to introduce Rick Mills, CEO of CRI.

Thanks, Will. Good morning to everyone who has joined the call today. I want to begin the call by discussing the announcement we made this past Friday about the pending merger with Reflect Systems, Inc. First and foremost, welcome to the Reflect shareholders, Lee Summers, and any of the Reflect employees who have joined us on this call today. We could not be more excited about this transaction and the possibilities it generates for the companies, our combined employees, and finally, most importantly, our collective customers. Again, welcome. We believe the Reflect merger is truly an ideal combination. At CRI, we have a strong history of deploying large-scale sophisticated digital signage projects, driven by our exceptional creative and project management teams. Reflect has a long history of designing and building world-class content management software platforms. ReflectView is their flagship product; it has become an industry standard for scalable, flexible, and reliable digital signage. Also, Reflect's advertising technology platform called AdLogic is a game-changing solution for digital-out-of-home advertisers. It is currently used by publishers to deliver approximately one billion ads per month. In addition, the merger also brings to the combined company an immediate sales organization. We expect to introduce the ADTECH platform and media sales capability to a number of current CRI customers. This is an area of the digital-out-of-home space in which CRI has not historically been a participant. In the past, CRI has supported digital advertising networks as a supplier of the displays, players, installation services, and content management, but we have not had the ability to integrate and deliver the ads themselves. In addition, we expect to offer the CRI legacy services, for which we are known for procurement, logistics, installation, and day two support services to all Reflect customers. Combined, CRI and Reflect offer some of the most comprehensive digital signage and media solutions available in a powerful one-stop shop for our customers. Post-merger, the combined company will have one of the broadest offerings for true enterprise-level digital signage customers; purpose-built menu board software via the Clarity Platform; digital signage Software-as-a-Service via ReflectView and Reflect Xperience; a digital-out-of-home advertising platform with the AdLogic solution; complete engineering design and planning services; procurement logistics and installation services; creative planning and content design; IPTV streaming platforms, which we address large venues and stadiums with; and finally, post-deployment technical support services. With that said, let's go into the financial overview of the quarter. Will?

Thanks, Rick. I'll now summarize our financial results for the three months ended September thirty, twenty twenty one, as compared to the same period for twenty twenty. Regarding the twenty twenty one results, we note that the MD&A section of our quarterly report on Form 10-Q provides unaudited quarterly financial information derived from the company’s annual and quarterly financial statements. We've also provided a reconciliation of GAAP net income to non-GAAP quarterly EBITDA and adjusted EBITDA for the current and previous four quarters therein. As a review, the quarterly financial information, all references to twenty twenty one and twenty twenty represent results for the three months ended September thirty for each period, unless specifically indicated otherwise. With respect to our revenue, gross profit, and gross margin, revenues were four point eight million dollars representing a decrease of zero point four million dollars or seven percent as compared to the same period in twenty twenty, despite a reduction in revenues generated from the sale of our Safe Space Solutions products and services of one point nine million dollars. Revenues generated from our core digital signage products and services increased one point five million dollars or fifty percent for the three months ended September thirty, twenty twenty one as compared to the same period in twenty twenty. This supports our continued statements about the reopening and return of the digital signage industry. Hardware revenues were two point two million dollars in twenty twenty one, a decrease of zero point six million dollars or twenty two percent as compared to the prior year, driven by continued supply chain disruptions related to semiconductor chips delaying the delivery of digital displays and media players to the company. And second, reduced revenues from the sale of our Safe Space Solutions hardware of one point nine million. Despite disruption for digital displays preventing the company from delivering hardware and executing inflation activities during the quarter. As of September thirty, twenty twenty one, the company had customer purchase orders for equipment and installation activities in excess of one point two million dollars, which were delayed as a result of product unavailability. The company expects to experience continued disruptions and delays related to fulfillment of inventory purchases from vendors throughout the remainder of this year. However, the company currently anticipates those disruptions will be resolved in the first half of twenty twenty two. Services and other revenues were two point five million dollars in twenty twenty one, an increase of zero point three million dollars or thirteen percent as compared to twenty twenty driven by increases in both installation activity and managed services revenue. Managed services revenue, which includes both software-as-a-service and help desk technical subscription services for our traditional digital signage and Safe Space Solutions product offerings, were one point four million dollars in twenty twenty one as compared to one point three million dollars in twenty twenty as the digital signage subscription revenue began to rebuild following: one, the customer reopening activities; and two, the continued expansion in the number of devices managed by the company generating such revenues. Gross profit decreased zero point one million dollars or four percent during the three months ended September thirty, twenty twenty one, as compared to twenty twenty driven by reduction revenue, but offset by an increase in gross profit margin. Gross profit margin increased to forty nine point four percent from forty seven point nine percent during the same period in twenty twenty as a result of improved mix from increasing managed services revenue. With respect to our operating expenses, a relatively flat quarter. Sales and marketing expenses decreased zero point one million dollars or twenty percent, having benefited by approximately zero point one million dollars in the current period from employee retention credits. Research and development expenses were flat in the P&L twenty twenty one as compared to twenty twenty. During the third quarter of twenty twenty one, we did kick off a material project in which we undertook a platform architecture upgrade for our auto market software tools. We expect to invest approximately one million dollars in aggregate and to complete this project by the end of the first quarter of twenty twenty two. As a result, we anticipate tripling our current annual recurring revenue stream related to this product from approximately one million dollars annually to approximately three million annually, as well as the rewrite facilitating the ability to sell this product into international markets. General and administrative expenses were flat in twenty twenty one as compared to twenty twenty. General and administrative expenses included a benefit of zero point two million dollars in twenty twenty one, which was offset by an increase of zero point one million dollars in non-cash stock compensation expenses. With respect to our operating loss, net loss in EBITDA. Our operating loss was zero point four million dollars in both twenty twenty one and twenty twenty, reducing by approximately four percent in twenty twenty one, which included a benefit of zero point four million dollars of employee retention credits recorded in the three months ended September thirty, twenty twenty one, partially offset by an increase of zero point one million dollars in non-cash share-based compensation expenses as a result of probable best in performance-based awards. Net loss was zero point three million dollars in twenty twenty one as compared to a net loss of zero point six million dollars in twenty twenty, representing a reduction of the net loss of forty one percent. EBITDA was zero point five million dollars in twenty twenty one as compared to EBITDA zero point three million dollars in twenty twenty. Adjusted EBITDA was zero point three million dollars in twenty twenty one compared to an adjusted EBITDA of zero point two million dollars in twenty twenty. See our earnings release for a description of these non-GAAP financial measures and a reconciliation to our net loss. This does mark the fifth quarter in a row for positive EBITDA generated at Creative Realities. Two other notes from the quarter, we had in September twenty twenty one, the statute of limitations expired with respect to the possibility of the claim against the company related to the abandonment of the legacy lease in twenty fifteen. The company recorded a gain on the settlement of this liability, or potential liability, of approximately zero point three million dollars during the three months ended September thirty, twenty twenty one. Secondly, the company qualified for the ERC credits beginning in March of twenty twenty through September thirty, twenty twenty one. During the three months ended September thirty, twenty twenty one, the company recorded an ERC totaling zero point four million dollars which were included as a reduction in payroll taxes within the condensed consolidated statement of operations and allocated to the financial statement caption from which the employee taxes were originally incurred. The company currently has approximately one point two million in receivables recorded as of September thirty, twenty twenty one related to the ERC program and has received zero point four million dollars in cash refunds year-to-date. We anticipate that our revenue will be too high in the fourth quarter of twenty twenty one to further qualify for ERC in that period. At this point, I'll turn the call back over to our CEO, Rick Mills.

Thank you, Will. So let me take a minute and provide an update on kind of the other pieces of our business and current opportunities. During the third quarter of twenty twenty one, we saw demand for our core digital signage offerings beginning to approach pre-pandemic levels. Revenues from our core digital signage products and services increased one point five million dollars or fifty percent versus the same period in twenty twenty, so some significant growth and rebound. Throughout twenty twenty one, we've been engaged in customer conversations who like many customers were simply challenged by understanding how to move their own business forward, what to do and how much do I do budget allocation for the twenty twenty one calendar year as a reaction to the COVID-19 pandemic. As many of our current and prospective customers enter into the twenty twenty two budget cycle, we are witnessing a significant expansion in both marketing and IT budgets with respect to the allocation of funds for digital transformation and specifically signage projects. We are engaged in meaningful conversations, which we believe will translate into a return to strong top line growth beginning in the fourth quarter and continuing throughout twenty twenty two. Despite continued disruptions in delivering and executing sold engagements due to the supply chain or lack of availability of semiconductor chips, which have delayed the delivery of digital displays and players to CRI, we have received ongoing shout-outs from customers and our vendor partners for consistent and transparent communications, which frankly have helped further build trust and engagement with these customers and vendor partners. While we have seen a significant increase in market activity and remain bullish on the number of opportunities, as we move into twenty twenty two, we expect to continue to experience some of the disruptions and delays related to the fulfillment of inventory purchases from vendors and the associated services well into the first half of twenty twenty two. Despite these industry challenges, specifically, the lack of availability of these displays, I'm proud of our team's ability to have generated positive EBITDA for the fifth consecutive quarter. We gained two new significant customers in the last half of the year. The first is in the process of placing orders, and in Q1 twenty twenty two, we expect to bring online an additional fourteen hundred players and screens to our CMS platform from this one customer. The other significant new customer is a national pet store brand with over fifteen hundred locations. We are installing their first digital experience store. The expectations and discussions are that they expect to convert an additional three hundred plus stores in twenty twenty two. As it concerns Q4 revenue, we expect our Q4 revenue to come in certainly north of six million, and assuming we continue to receive the screens and players that have been committed, we believe our revenue will exceed seven million. And when combined with Reflect Systems for the fourth quarter of twenty twenty one, we believe revenue would have exceeded ten million. On an additional note, CRI and Reflect will exit Q4 with a combined backlog of four million in orders, which we have not fulfilled due to the supply chain issues previously discussed. As I close out my remarks, I want again to thank all of the employees of CRI and a special shout-out to Lee Summers and the employee team at Reflect. Our combined company is a significant supplier for enterprise customers in the digital signage industry. As we fully integrate our offerings and business operations, it is clear we provide the most competitive product and service offerings available for the digital signage market, including the potential for integrated programmatic advertising solutions. We expect the merger with Reflect to close in the first quarter of twenty twenty two.

Thanks, Rick. We will now open the phone lines in order to respond to any questions. If you would like to ask a question, please use the raise hand function within the webcast. We do have a few questions that were sent into the IR inbox. These first few were from Kevin Sheldon. Kevin, thanks for sending in the questions. Rick, the first question is, has the large contract for the automotive dealer in Canada that you referenced on the prior call executed, and if so, what is the projected revenue from that project?

Great question, Kevin. So first off, it's an automotive manufacturer with four hundred and forty plus dealerships. That contract has been executed, purchase order received. We are in the process of planning, and that will be deployed throughout or during the first quarter, certainly beginning April one of twenty twenty two. That adds approximately a little less than zero point five million dollars a year in recurring revenue.

Perfect. Thanks.

And one other issue, there is a press release going out on that, I believe tomorrow. Is that right, Will?

That is correct.

Yeah. So, look for the press release tomorrow; we're announcing it.

Great. Thanks, Rick. Next question, are you still on track for the large contract that has been discussed for the last eighteen months? When do you believe that may be announced or further detail?

Yeah. Obviously, that's been really delayed, first obviously by the pandemic and the closing of the number of their facilities across the U.S., but now as entertainment facilities have reopened, then we got into a little bit of a supply chain issue. But it's interesting. I have a meeting with that customer today to close the business at the end of the day to begin the process of executing contracts and announcing rollout schedules, etc. So look for that shortly.

Great. Next question. Without getting into specifics, are there any additional merger targets that are being evaluated presently?

Yeah. We launched a sales or buy-side program. We brought in a third-party consultant who has been on board now for six months. We had engagement for five to six months. We've identified and targeted well over one hundred potential targets. We are in outreach and in various levels of discussion with all types of supply or potential acquisition candidates. Obviously, our short-term focus is closing the Reflect transaction and integrating with Reflect, but expect additional news on acquisitions throughout twenty twenty-two.

Great. Thanks, Rick. There was a question about the criteria for granting stock to our senior management team?

I'll take that one, Rick. That is outlined in our public filings. Effectively, we have stock compensation that's time invested, and then the Board of Directors, specifically, the compensation committee does an assessment of competitive like-sized entities and has put in place performance-restricted awards. So those awards typically vest when the company hits certain milestones. Again, additional detail for that is available in our 10-Q.

Again, thank you, Kevin for the questions. We'll look at the line now to see if there are any other raised hands. Okay. It looks like there are no other questions on the line at the moment. So with that, let me conclude by thanking all of our shareholders, clients, partners, and employees for their continuing efforts, commitment, and support as we work together to transform CRI into the leading brand in digital marketing solutions. This now concludes CRI twenty twenty one third quarter earnings call.