Good morning. At this time, I would like to welcome everyone to Creative Realities 2025 First Quarter Earnings Conference Call. This call will be recorded, and a copy will be available on the company's website at cri.com following the completion of the call. The company has prepared remarks summarizing the interim results for the first quarter, along with additional industry and company updates. Joining me on the call today is Rick Mills, Chief Executive Officer; George Sautter, Chief Strategy Officer; and Ryan Mudd, Chief Financial Officer. Mr. Mudd, you may begin.

Thank you, and good morning, everyone. Welcome to our earnings call for the first quarter ended March 31, 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 versions 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. Factors that could cause these results to differ materially are set forth in our Form 10-K and other subsequent filings with the SEC. 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 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. Investors are encouraged to review these materials. We believe the use of these non-GAAP measures such as adjusted EBITDA and several other important KPIs represent meaningful ways to track our performance. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Thanks, Ryan. Good morning everybody. Thank you for joining. I'll start by giving some details of our first quarter financials. We posted revenue of $9.7 million this quarter versus $12.3 million in Q1 of 2024. As I previously discussed, this revenue decrease is a direct result of installation timing on several large projects. We expect increased revenue as the year progresses. Gross profit was $4.5 million in the 2025 first quarter versus $5.8 million last year. Gross margin was 46%, roughly in-line with the prior year period. Annual recurring revenue, or ARR, was at a run rate of $17.3 million at the end of the quarter versus $16.8 million at the start of 2025. As we discussed on our last earnings call and similar to the fourth quarter, deployment timing was expected to impact the Q1 results, particularly our revenue and gross profit level. However, our adjusted EBITDA of $0.5 million was nominally changed versus last year and the previous quarter due to our active management of underlying overhead costs, such that the aggregate SG&A expenses were down 11% to $5.2 million this year versus $5.8 million in the first quarter of 2024. Operating costs were also down sequentially from $5.6 million in Q4. These reductions will improve profitability as revenue scales back for the balance of the year. And while our debt rose this quarter, it was largely due to the previously discussed settlement of our contingent liability. As a reminder, at December 31, 2024, CRI carried a contingent liability on its balance sheet of approximately $12.8 million from the merger with Reflex Systems, Inc. in 2022 that was to become payable in February of 2025. We ultimately resolved the matter for $3 million in cash, utilizing our credit agreement, a $4 million 30-month promissory note that includes a balloon payment in September of 2027 and the issuance of some warrants. We believe this settlement effectively provides us additional long-term financial visibility and flexibility. We replaced some $12.8 million in contingent liability risk and roughly $13 million of debt with $23.2 million of debt, which includes some short-term working capital increases as Ryan Mudd will review in a moment. We are now free to focus on growing the company, but we will also strategically use our cash flow to manage debt and optimize our capital structure in pursuit of commercial and perhaps strategic growth. We continue to work on an active pipeline of opportunities and are pleased with the win just recently announced. CRI was selected by a well-known upscale quick-service restaurant chain with over 1,000 locations across more than 25 states to help lead the transformation of its indoor and outdoor menu boards. The restaurant chain is nationally recognized for its cook-to-order food, farm-fresh ingredients and excellent customer service. After a successful pilot, which will begin in select locations during the third quarter of 2025, national rollout is expected to proceed. Through this partnership, we will play a key role in the chain's digital transformation strategy, shifting from static displays to dynamic, digitally driven customer engagement, including personalized messaging and real-time promotions. CRI will deliver a turnkey solution along with consulting, content strategy, hardware provisioning, deployment support and ongoing day two service, all powered by our proprietary CMS platform, Clarity. It's a great win for CRI and underscores our growing leadership position, leveraging digital applications to elevate a customer's experience and satisfaction. This leadership is not just a matter of our technology, but demonstrates our subject matter expertise in the actual underlying business of a vertical such as quick-service restaurants, something our competitors do not bring at all. We will help this client build a more agile, connected restaurant environment that meets guest expectations and provides flexibility for enhanced applications in the future. As stated last quarter, we remain on track for another year of record performance. We continue to expect revenue to accelerate beginning in Q2 and particularly in the second half of the year. We are engaged in numerous opportunities that will lead to backlog growth, revenue predictability and improved margins, even as we look to make headway strengthening our balance sheet through debt reduction whenever possible. We also expect adjusted EBITDA as a percentage of revenue to rise to 15% by year-end. The introduction of our AdLogic CPM platform has gone well with more potential clients looking at the power it brings to the enterprise. As a reminder, this innovative solution provides customers with the tool to deliver targeted high-performance campaigns at significantly reduced cost, delivering programmatic capabilities within a self-serve interface that simplifies campaign execution, enhances targeting precision and eliminates unnecessary intermediation fees. It positions CRI as a unique one-stop shop for hardware deployments, an array of day two services and the required ad tech solutions with new monetization models for the company and the customer. We will provide an update on this new innovation and the customers using it in the months to come. CRI remains at the forefront of improving the customer experience across a growing list of innovative clients and brands. We look forward to the year ahead, including growing revenue, expanding margins, solid cash flow and debt repayment. In short the future looks bright for CRI, and we appreciate our investors' continued enthusiasm and support. I'll turn it back over to Ryan Mudd to share some additional comments on our financials.

Thank you, Rick. An overview of our financial results for the first quarter of 2025 was provided in our earnings release and Form 10-Q filed earlier this morning, which included the condensed consolidated balance sheet as of March 31, 2025, the statement of operations and the statement of cash flows for the three months ended March 31, 2025, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended March 31, 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 March 31, 2025, the company had cash on hand of approximately $1.1 million versus $1 million at the end of 2024. As mentioned in prior calls, our consolidated balance sheets reflect minimal cash on hand as the company has set up a sweep instrument to apply against the revolving debt facility to further manage our interest expense. Our gross and net debt stood at approximately $23.2 million and $22.1 million, respectively, at the end of the first quarter as compared to $13 million and $12 million, respectively at the start of 2025. Our debt level rose, as Rick previously discussed, by resolving a $12.8 million contingent consideration liability for $7 million, which was satisfied with a $3 million payment from our credit facility, the issuance of a $4 million promissory note and some warrants. The additional $3.2 million increase quarter-to-quarter reflects short-term working capital uses. However, when reconstituting debt as it stood at December 31, 2024, to account for this contingent liability, there is an overall reduction of $2.6 million, which is the net of the $5.8 million reduction in the contingent liability through the settlement, offset by the $3.2 million increase for working capital needs as we ramp up for the new opportunities discussed herein. With an agreement now in place, we are returning to a strategy of optimizing capital structure and creating capacity on the balance sheet wherever possible. At the end of the first quarter, our leverage on a gross and net basis was 4.91 and 4.67, respectively, up from 2.59 and 2.39 at the beginning of fiscal 2025. However, we see improvement going forward and remain dedicated to managing our debt as we continue to evaluate and mitigate to an optimized capital structure in support of our growth. I will turn it back to Rick for additional comments on our results and customer activities.

Thanks, Ryan. Our engagement with potential customers and prospects is at an all-time high. We are pleased with the pipeline and the sheer number of discussions going on with potential prospects. Our sports and entertainment team has also been expanded to facilitate our anticipated growth in this sector as we move into 2025. The company completed an NHL arena during the third quarter of 2024, its largest deployment of this kind, and we have tremendous momentum in this market moving into the new year. In Q1 2025, we were awarded three MLB projects of varying sizes and types, and we have an additional seven proof-of-concepts ongoing at other venues across the U.S. Now, let's talk about BCTV. The BCTV project continues to move forward at a slower pace in the first two quarters of 2025. All total, we have completed 300-plus site installations to date and have recently received communication to move forward with the next 200 or so sites beginning in Q3. We would expect to install more than 50% of these locations through the balance of the year, which would generate approximately $3 million in revenue. Another additional network we have previously announced is the Digi Point Media Network. This is a retail media network on IceBoxes across groceries and convenience stores. It appears they are ready to move forward with deploying approximately 2,000 sites beginning in the third quarter. Assuming this moves forward and we install all locations in the second half of 2025, it would generate in excess of $4 million in hardware and installation revenue with additional SaaS revenue from our CMS and ad tech software solutions. Our cloud and software development teams have been working towards SOC 2 Type 2 compliance. CRI achieved SOC 2 type 1 compliance in Q1 of this year and expect to achieve type 2 by year-end. SOC 2 compliance is a valuable credential that demonstrates the trustworthiness and credibility of our products to enterprise customers. This is yet another indicator of our acceleration in the marketplace. One additional fact about Q1: We revamped our operations and warehouse facilities. We transitioned to a larger space in the same building and significantly increased the capacity of our warehouse to process orders and projects. This significant increase in capacity came at a minimal increase in our cost. We are well-positioned for the tremendous growth we expect in the second half of this year. With that, we'll now move to the Q&A portion of the call. Please go ahead, operator.

Thank you. Our first question comes from Brian Kinstlinger with Alliance Global Partners. Your line is now open.

Great. Thank you. Can you talk about the expectations as it relates to screen installs for your large quick-service restaurant win, maybe second half 2025 and 2026? And then what percentage of franchisees have expressed interest in opting in?

Brian, Rick here. Thanks. Great question. So it is our expectation that we've got proof-of-concepts actively happening with a couple of test sites literally this quarter, proof-of-concepts in Q3 and then beginning end of Q3, 20 locations or more per month. As we announced, they have over 1,000 locations, and 600 of those locations have already indicated interest or signed up to convert to digital. So excited about that. Overall, we look at it as, is it a two-year project? Probably not, probably three years. So probably about 300 sites a year, ballpark.

Great. That's helpful. And then you highlighted delays in the first quarter. Can you just give us some more detail of what led to those delays? And is it broad-based? Or is it one or two clients? And has that reversed yet in the second quarter?

We've started to see a reversal. It was actually three separate projects, okay? So it's not across the board, right? But we had three clients, three unique projects, each had its own set of difficulties. And that's why we saw that back in Q3 of last year. And it's why we wanted to communicate crisply to you and the investor base that Q4 and Q1 were going to be light. We are through that period, we're on track and feel very comfortable on a go-forward basis.

Now it is great to see the quick-service restaurant win taking over the goal line. I know you've talked about a handful that were right there. Can you talk about the pipeline of the other large procurements that you've highlighted in recent quarters? And with the global trade uncertainty, is that slowing decisions? Or are you still progressing with your discussions on some of the other large opportunities?

We are still progressing, but with a number of opportunities. Again, our top 10 opportunities, the quality and the size of the top 10 opportunities even versus 18 months ago are significantly enhanced and improved, number one. So very bullish on those opportunities. Number two, you talked about global uncertainty and tariffs. As of yet, our industry, when I say industry, the specific signage market has not yet been terribly affected by tariffs. All the screen manufacturers' products come out of Mexico, right? So as long as the U.S. and Mexico keep open and don't go crazy, there should not be an issue with screens. The other issue that we have concerns about are the mounts. Mounts are made of steel, and the price of steel coming into the U.S. could affect that. As of now, we don't have any customer that says, 'Hey, I'm putting this project on hold because of tariffs.' We have not had any of those conversations. However, I think we would all be conscious; all of us are looking around and trying to understand the new normal landscape, which appears to be very uncertain with the tariffs in play.

Great. My last question. The company's ad tech solution has gone through some significant upgrades and functionality. Can you talk about either how you're seeing any increased demand, how attach rates maybe are improving? Just any kind of progress or success you're seeing as it relates to that offering?

Well, first off, the ad tech or what — let me back up. The market our ad tech is very much focused on is what we would use the term retail media networks, right? Retail media networks are very much in the early game, okay? And why is that in the early game? Because retail media networks require significant capital outlay. Now the benefit of an end user who is flipping their signage to a retail media network is it now becomes an income-producing machine for the end user customer instead of an OpEx expense. So everybody is interested, everybody is looking, everybody is testing. As you know from our pedigree, we have 10 significant large retail customers. We talk about Macy’s, Verizon, Best Buy, et cetera. All of them are investigating media networks. And so we are primed and positioned with a number of current customers and prospective customers to deploy retail media networks. We see our ad tech having significant potential impact from a revenue perspective in 2026 and 2027.

Great. Thank you, Rick.

Thank you. And our next question coming from the line of Jason Kreyer from Craig-Hallum Capital Group. Your line is open.

This is Cal on for Jason. So first, maybe we can just revisit the large quick-service restaurant win that you had. Just curious why you won and if you believe that this win could also contribute to larger additional large wins as you continue to validate your position in the market?

Great question, Cal. So number one, the answer to the second half of the question is, will it give us credibility for additional wins? Absolutely. It's a first-class brand. And when you win first-class brands, people sit up and take notice, maybe I need to be talking to those folks, right? That's number one. Number two, this one was a unique circumstance in that they actually went through two RFP processes over a two-year period, and due to some internal shuffle at the customer, we actually won the first time, and they decided to repeat the process using third-party advisers, and then we ultimately won again. So we feel very comfortable that that's a sign of how strong we have emerged in this vertical over the last three or four years.

Great. And then maybe secondly, just curious what are the things that you guys are doing today? You kind of alluded to some things with the warehouse capacity. But just kind of curious the investments and different changes that you're making today to position your company to kind of build on the second half momentum and into 2026.

Yes, great question. Number one, we wanted to — we needed to reposition our facility a little bit. We had been in an older part of the building that hadn't been upgraded or remodeled. We took advantage to move to more space at a lower cost per square footage. It was a nice upgrade from the administrative operational side of the business. From the warehouse side of the business, we have effectively increased significantly. I'm not prepared to say is it 50% or 100%, but our cubic storage to move pallets of product through is significantly increased. Why? Because that we believe we need that for the second half of this year. Other than that, investments that we make tend to be on our technology. We don't spend a lot of money on brick-and-mortar, and the need for enhanced machinery and computer equipment tends to be very minimal in the overall scheme of things. So for us, it's investing in our platforms, and we continually invest in our platforms every month. But that is about it. Other than that, we don't anticipate any significant CapEx spends by any means.

Great. And then maybe just to kind of follow up on that one. You talked about the increased warehouse capacity. You kind of alluded to some of the tariff impacts earlier. But just curious if you're seeing anything as far as a pull-forward in demand for signage or deployments given kind of some of the tariff uncertainty and how things like expanded warehouse capacity can give you more flexibility to kind of adjust to any impacts that the tariff kind of back and forth can have on the business and customer demand.

We have had some minor hardware pull-forwards because people three months ago were concerned as the tariffs started to get implemented. Nobody knew the landscape. And I think today, nobody really knows the landscape at this moment on a go-forward basis. So we had a couple of smaller customers look at, hey, I'm going to go ahead and hedge my bets. They were relatively small, might be 200 screens here, 300 screens there. We do not have anybody that hedged their bets and said, I'm going to take 10,000 screens my next year, 1.5 years and put it in storage. We have not seen that at this point in time. If we do see that, we would see the use of a bonded warehouse type strategy to get the product in the country, but avoid tariffs, etc.

And our next question comes from Howard Halpern from Taglich Brothers Inc. Your line is now open.

Good morning guys. Could you talk a little bit more about the sports and entertainment vertical? You talked about you have seven proof-of-concepts coming down the road. But could you maybe discuss what's behind that? And what type of appetite those type of customers have for spending and deploying your product?

Great question. First, the sports and entertainment sector is eager to invest. Everyone is looking for ways to upgrade their facilities and make them more appealing to fans. As they enhance the fan experience, they also implement digital solutions, which increases their opportunities to generate revenue from screens. Sports and entertainment have been pioneers in generating income through screens for quite some time, and now they're all focused on further improving their offerings. Additionally, proof-of-concepts typically occur during the sports seasons, allowing for upgrades once the off-season arrives. For instance, we conducted numerous proof-of-concepts in baseball, and as the season wraps up, we anticipate some of these concepts will transition into finalized projects. It's important to consider the timing of each sport's season when thinking about these developments. Our team is currently in three to five discussions with organizations that have stadiums either in construction or planning stages. The advantage of working within the sports and entertainment industry is that as we approach 2026, we may secure agreements with timelines extending a year to a year and a half ahead, which will provide us with a reliable revenue forecast. I hope that clarifies things.

Can we discuss the Digi Point IceBox? If it’s deployed as anticipated, will it lead to an increase in revenue and day two services, particularly in relation to ad tech or the implementation of advertising technology on the hardware?

Spot on. The thing we really like about that particular network is they've adopted our entire tech stack from top to bottom. So it would use our CMS, it would use our ad server, and it uses our campaign planning management tool. So it's using all three of the major points of our SaaS and ad tech software. So we're looking forward to getting that deployed and running so that we can use that to show other retailers how it works when it's been deployed at scale at several thousand locations across America.

Okay. And one last one. How is the landscape looking in Mexico for opportunities down there?

We have some positive developments to share. Next week, we will initiate a proof-of-concept with one of the top three convenience store chains in Mexico, scheduled for installation around May 20. Additionally, we have a meeting this week with one of Mexico's top five major retailers to discuss a retail media network. We're making consistent progress and are also in talks with a couple of stadiums. We see Mexico as a potential revenue opportunity, possibly as early as 2026.

Okay, thanks guys. And keep it the great work.

Thank you.

And I'm showing no further questions from the phone lines. I will now turn it back to Mr. Ryan Mudd.

Thank you. And before we make any closing remarks, I do want to take a moment and acknowledge we did receive some questions through our investor inbox. Rick, can I ask you to go ahead and take a moment to address those questions?

Sure. Happy to. So a couple of investors took time to send us some questions. Number one, there were some questions about bowling, and I think we've kind of clarified that, so I won't really talk about that. Number two, somebody wanted an update on our win rate and what does that look like, our success rate and how many RFPs or competitive processes do we enter in a year. So typically, that number in the last 12 to 18 months realistically is between 30 and 40 per year. However, the main thing to understand is typically in a typical year, 50% of those customers will not make a decision. It will push for two or three years, just like we talked about the quick-service restaurant win that took two years. So just because we answer 30 to 40 RFPs, 50% of them never see the light of day — or I don't say see the light of day, 50% of them get pushed or rolled down the pike. Out of the others, we have still a healthy success rate. We've talked about a 70% win rate. Our track record shows that. However, then once you've won, the customer has to make the decision to go ahead and deploy. And that may take a year or two for a capital cycle. So as we've always talked about, our process tends to be long and drawn out. Another question about whether this customer was one of the customers at the 'one-inch line' or 'yard line.' The answer is yes, that recent win is. We have a couple more that we have been fostering for quite some time that we are very close to. We look forward to making some significant announcements throughout the balance of the year. I think — is there — were there any others, Ryan, that should look at?

I'm showing no more. No, sir.

All right. So — let me — I guess, go ahead and let me conclude the call by thanking all the shareholders, clients, partners, and employees for their continuing effort, commitment, and support as we work together to transform Creative Realities into the leading brand in digital signage solution. We look forward to speaking with you and everybody again next quarter. Thank you.

Thank you. This concludes today's conference call. Thank you all for your participation, and you may now disconnect.