Creative Realities, Inc.

Good day, and thank you for standing by. Welcome to Creative Realities Incorporated's earnings call for quarter-ended March 31st, 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Logan, Chief Financial Officer. Please go ahead, sir.

Thank you, and good morning, everyone. Welcome to our earnings call for the first quarter ended March 31, 2024. I would like to take this opportunity to remind you that our 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 these forward-looking statements. Factors that could cause these results to differ materially are set forth in our Form 10-Q filed with the SEC this morning, May 10, 2024, and in our annual report on Form 10-K filed with the SEC on March 21, 2024. 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. 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. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Thanks, Will, and good morning, everybody. Thank you for joining. Once again, we posted record quarterly results for the first quarter. I want to thank everyone at CRI. Your dedication to our customers and our company mission is what makes me excited to come in every day. I am pleased to report the following for Q1 2024. First quarter revenue of $12.3 million, up 23.5% from $9.9 million in the prior year. Record first quarter gross profit of $5.8 million, up from $5.1 million in 2023. Adjusted EBITDA of approximately $0.8 million against $1 million last year. And finally, annual recurring revenue, or ARR, at an annual run rate of 17.7 million versus 16.3 million at the end of the fourth quarter. We are off to a great start in fiscal 2024 with strong revenue growth and solid margins. Plus, our sales funnel continues to expand, which is very encouraging. we remain on track to deliver record results for the full year. First quarter revenue increased by 23.5 percent versus 2023, despite typical first quarter seasonality, as deployments are initiated or restarted and budget cycles reset. While our consolidated gross margin was lower than the first quarter in 2023 on a percentage basis, it increased in absolute dollars. This reflected our revenue mix. The 45% year-over-year growth in service revenue included significantly higher installations, where the margins are not as high as those for our other services, including SAS. Hence, the slightly lower gross margin year-over-year. However, it is important to note that greater installation activity ultimately leads to higher subscription revenue going forward as deployed hardware utilizes our SAS solutions. At the end of the first quarter, our ARR stood at an all-time high of approximately 17.7 million on an annual run rate basis. This is an increase of 1.4 million from where we ended 2023 at 16.3 million. When we announced our 2023 fourth quarter results this past March, we increased our ARR guidance for exiting 2024 from 18 million to 20 million run rate. We affirmed that guidance today. As we have stated repeatedly, this is an all-important metric as it provides enhanced visibility into higher margin revenue and improve cash flow generation, as well as the increasing trust our customers place in our technology-enhanced solution. Now, let's take a moment to go through our recent refinancing announcement. The company has entered into a commitment letter to secure a new $20 million loan senior revolving credit facility with an additional $5 million accordion feature on top of the $20 million. We expect to finalize the credit facility next week. I cannot overstate the strategic importance and potential value creation implications of this new facility. As you know, the company has demonstrated a commitment to disciplined debt deleveraging over the past 18 months. working in lockstep with our revenue growth and improved profitability. While we were initially targeting the back half of 2024 for a recapitalization of our existing debt, which was scheduled to mature in 2025, we have always articulated a desire to do so sooner if practical and attractive. Due to the company's strong performance, we are taking advantage of the opportunity to secure this financing earlier than anticipated, under favorable terms, and a more conventional banking partner. The company has clearly earned the trust of a number of financial institutions. I want to restate the implications of this financing. Number one, it is transformable in nature with potential for significant lending capacity. Two, provides a tremendous upgrade to our balance sheet by shifting debt from short-term to long-term in nature. Three, it allows for flexibility and support for a strong pipeline of organic and acquisition growth opportunities. Finally, it has the capability of unlocking strategic options for the company. Proceeds from the new credit facility will initially be utilized to repay all outstanding debt held by Slipstream Communications, which currently stands at approximately $13.6 million. There are no prepayment penalties associated with refinancing the existing debt. We want to thank Slipstream and their parent, Pegasus Capital Advisors, who remains a shareholder, for supporting our management's vision and collaborating to build a world-class digital signage and digital media platform. While the new facility will have a Variable interest rate that currently is equivalent to the weighted cost of our existing debt, but with the opportunity to decrease as interest rates decline. We look forward to updating our shareholders once the credit facility has been finalized. This is a tremendous turn of events for CRI, and I want to thank Will Logan, George Souder, and the entire finance team for putting this package together. It is great news for CRI. Now, I'll turn it back over to Will to share some additional comments on our financials.