LOUISVILLE, Ky., March 12, 2020 /PRNewswire/ -- Creative
Realities, Inc. ("Creative Realities," "CRI," or the "Company")
(NASDAQ: CREX, CREXW), a leading provider of digital marketing
solutions, announced its financial results for the year ended
December 31, 2019, including the
quarter ended as of the same date.
Rick Mills, Chief Executive
Officer, remarked, "During 2019, we were focused on and achieved
three primary goals: continuing the rapid acceleration of our
top-line revenue growth, furthering the integration of our
acquisition of Allure Global Solutions, Inc. ("Allure"), which
closed on November 20, 2018, and
driving improvements in our operating model to achieve
profitability. Our revenue grew approximately 41%, which included
approximately 20% organic growth in addition to the contribution of
Allure and continues to significantly outpace our competitors and
the industry as a whole, while maintaining stable margins."
"Our 2019 results include the incremental operations of Allure
for a full year. Despite the completion of the Allure acquisition
in late 2018, our total operating expenses were effectively flat
year-over-year when adjusted for one-time, non-cash activities, and
decreased by 6%, or approximately $0.8
million in reported results. This evidences our previous
statements about the operating leverage of our business and the
ability of our management team to successfully integrate the
operations of multiple businesses in a manner that maximizes the
synergies between those businesses while producing only limited
disruption to our ongoing operations."
2019 Financial Overview
- Revenues were $31.6 million for
the year ended December 31, 2019, an
increase of $9.1 million, or 41%,
compared to the same period in 2018. Organic growth accounted for
approximately $4.4 million of the
increase, representing an organic growth rate of approximately 20%
as compared to 2018. The remaining growth of approximately
$4.7 million year-over-year
represents the revenue growth contributed by the inclusion of
Allure in our consolidated results for a full year in 2019.
- Hardware revenue increased approximately $1.2 million, or 18%, in 2019 as compared to
prior year. Gross margin on hardware revenue was 24% in 2019 as
compared to 32% in 2018. The current year margin on hardware is
more in-line with our expectations for the business moving forward
than the margin provided in 2018, which was buoyed by a material,
one-time transaction.
- Services and other revenue grew approximately $7.9 million, or 51%, in 2019 as compared to the
prior year. Gross margin on services and other revenue was
consistent year-over-year at 50% in 2019 compared to 52% in
2018.
- Managed services revenue, which includes both SaaS and help
desk technical subscription services, represented approximately
$6.6 million revenue in 2019, an
increase of $3.6 million, or 122%, as
compared to the same period in the prior year.
- Gross profit was $13.8 million
for the year ended December 31, 2019,
an increase of $3.5 million, or 34%,
compared to the same period in 2019. Gross margin decreased to 43%
in 2019 from 45% in 2018, driven primarily by the mix of hardware
and services and other revenue.
- Total operating expenses decreased $0.9
million, or 6%, to $13.8
million in 2019 as compared to $14.7
million in 2018 despite the inclusion of a full year of
operating results of Allure in our 2019 results.
- The Company had an operating loss of $0.1 million during 2019, an improvement of
$4.4 million as compared to the
operating loss of $4.5 million in
2018.
- The Company produced net income of $1.0
million during 2019 as compared to a net loss of
$10.6 million for the same period in
2018, an improvement of $11.7
million.
- EBITDA was $3.2 million for the
year ended December 31, 2019 compared
to ($7.2) million the same period in
2018. Adjusted EBITDA was $1.3
million for the year ended December
31, 2019, compared to ($0.3)
million in Adjusted EBITDA for the same period in 2018.
Mr. Mills concluded, "We continue to believe that market data
and our acquisition of Allure supports three key factors about the
digital signage industry moving forward: (1) the industry is ripe
for consolidation amongst smaller and mid-size competitors into an
enterprise provider, (2) the industry offers significant synergies
through those consolidations, and (3) that there will ultimately be
a handful of enterprise-level companies which own a dominant
portion of the market share within the digital signage industry. We
continue to believe that our ability to both outgrow our
competition and successfully integrate acquisition opportunities
positions Creative Realities to be amongst those enterprise-level
providers. Our end-to-end services offering positions us well
within the industry to compete for new and growing opportunities
with partners, particularly potential enterprise customers in a
variety of key verticals. We remain committed to further execution
of our strategy to gain more scale and act as a key participant in
what we believe should be an industry rollup aimed at driving
shareholder value."
Conference Call Details
The Company will host a
conference call to review the results and provide additional
commentary about the Company's recent performance, which is
scheduled for Friday, March 13, 2020
at 9:00 am Eastern Time.
Prior to the call, participants should register at
http://bit.ly/criearnings2019. Once registered, participants can
use the weblink provided in the registration email to listen to the
live webcast. An archived edition of the second quarter
earnings 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, Inc.
Creative Realities
helps clients use the latest omnichannel technologies to inspire
better customer experiences. Founded over 15 years ago, CRI
designs, develops and deploys consumer experiences for high-end
enterprise level networks, and is actively providing recurring SaaS
and support services for more than fifteen diverse vertical
markets, including Automotive, Advertising Networks, Apparel &
Accessories, Convenience Stores, Foodservice/QSR, Gaming, Theater,
and Stadium Venues. The Company acquired Allure Global Solutions,
Inc. in November 2018, expanding the
Company's operations to five offices across North America with active installations in
more than 10 countries.
Use of Non-GAAP Measures
Creative Realities, Inc.
prepares its consolidated financial statements in accordance with
United States generally accepted
accounting principles ("GAAP"). In addition to disclosing financial
results prepared in accordance with GAAP, the Company discloses
information regarding EBITDA and Adjusted EBITDA, which differs
from the term EBITDA as it is commonly used. Adjusted EBITDA
excludes share-based compensation, impairment charges, fair value
adjustments, and other cash and non-cash charges and gains. EBITDA
and Adjusted EBITDA are not measures of performance defined in
accordance with GAAP. However, EBITDA and Adjusted EBITDA are used
internally in planning and evaluating the Company's operating
performance. Accordingly, management believes that disclosure of
these metrics offers investors, bankers and other stakeholders an
additional view of the Company's operations that, when coupled with
the GAAP results, provides a more complete understanding of the
Company's financial results.
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 Annual Report on Form 10-K to be filed with the Securities
and Exchange Commission on or about March
12, 2020, available online at www.sec.gov.
Cautionary Note on Forward-Looking Statements
This
press release contains certain statements that are deemed
"forward-looking statements" under Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and includes, among other things, discussions of our business
strategies, future operations and capital resources. Words
such as "may," "likely," "anticipate," "expect," "intend," "plans,"
"seeks," will," should," "future," "propose," "believe" and
variations of these words or similar expressions (or the negative
versions of such words or expressions) indicate forward-looking
statements. These forward-looking statements are not
guarantees of future performance, conditions or results, and
involve a number of known and unknown risks, uncertainties,
assumptions and other important factors, many of which are outside
the Company, that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking
statements. Some of these risks are discussed in the "Risk
Factors" section contained in Item 1A in our Annual Report on Form
10-K for the year ended December 31,
2019 and the Company's subsequent filings with the
Securities Exchange Commission. Important factors, among
others, that may affect actual results or outcomes include: the
inability to recognize the anticipated benefits of the Allure
Acquisition; the ability to meet Nasdaq's continued listing
standards; our ability to execute on our business plan; our ability
to retain key personnel; potential litigation; and general economic
and market conditions impacting demand for our products and
services.
Except where required by law, the Company assumes no obligation
to update forward-looking statements to reflect actual results or
changes in factors or assumptions affecting such forward-looking
statements.
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 United States
generally accepted accounting principles ("GAAP") or as an
alternative to net cash provided by operating activities as a
measure of CRI's profitability or liquidity. CRI's management
believes EBITDA and Adjusted EBITDA are useful because they allow
external users of its financial statements, such as industry
analysts, investors, lenders and rating agencies, to more
effectively evaluate its operating performance, compare the results
of its operations from period to period and against CRI's peers
without regard to CRI's financing methods, hedging positions or
capital structure and because it highlights trends in CRI's
business that may not otherwise be apparent when relying solely on
GAAP measures. CRI presents EBITDA and Adjusted EBITDA because it
believes EBITDA and Adjusted EBITDA are important supplemental
measures of its performance that are frequently used by others in
evaluating companies in its industry. Because EBITDA and Adjusted
EBITDA exclude some, but not all, items that affect net income
(loss) and may vary among companies, the EBITDA and Adjusted EBITDA
CRI presents may not be comparable to similarly titled measures of
other companies. CRI defines EBITDA as earnings before interest,
income taxes, depreciation and amortization of intangibles. CRI
defines Adjusted EBITDA as EBITDA excluding stock-based
compensation, fair value adjustments and both cash and non-cash
non-recurring gains and charges.
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.
|
|
December
31,
|
|
December
31,
|
Years
ended
|
|
2019
|
|
2018
|
GAAP net
income/(loss)
|
|
$
|
1,038
|
|
$
|
(10,620)
|
Interest
expense:
|
|
|
|
|
|
|
Amortization of debt
discount
|
|
|
524
|
|
|
1,694
|
Other interest,
net
|
|
|
306
|
|
|
912
|
Depreciation/amortization
|
|
|
1,250
|
|
|
1,185
|
Income tax
expense/(benefit)
|
|
|
93
|
|
|
(398)
|
EBITDA
|
|
$
|
3,211
|
|
$
|
(7,227)
|
Adjustments
|
|
|
|
|
|
|
Change in warrant
liability
|
|
|
(21)
|
|
|
(837)
|
Gain on settlement of
obligations
|
|
|
(2,051)
|
|
|
(294)
|
Gain on earnout
liability
|
|
|
(250)
|
|
|
-
|
Lease termination
expense
|
|
|
-
|
|
|
474
|
Debt conversion
expense
|
|
|
-
|
|
|
5,055
|
CEO share grant
compensation expense
|
|
|
-
|
|
|
1,000
|
Stock-based
compensation
|
|
|
447
|
|
|
1,383
|
Severance
charges
|
|
|
-
|
|
|
385
|
Deal & transaction
costs
|
|
|
-
|
|
|
710
|
Other
expense/(income)
|
|
|
-
|
|
|
6
|
Adjusted
EBITDA
|
|
$
|
1,336
|
|
$
|
(345)
|
|
|
|
|
|
|
|
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SOURCE Creative Realities, Inc.