Creative Realities, Inc.

Good morning. At this time, I would like to welcome everyone to the Creative Realities 2024 Fourth 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 fourth quarter along with additional industry and company updates. Joining the call today is Rick Mills, Chief Executive Officer, George Sautter, Chief Strategy Officer, and Ryan Mudd, Interim Chief Financial Officer. Mr. Mudd, you may begin.

Thank you, and good morning, everyone. Welcome to our earnings call for the fourth quarter into December 31, 2024. 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 these forward-looking statements. Factors that could cause these results to differ materially are set forth in our Form 10-K filed with the SEC Friday evening, March 14, 2025, and in our other 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 Friday evening, March 14, 2025. 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, Ryan. Good morning, everybody. Thanks for joining. Today, there are two big milestones to discuss. First, number one, we just closed out our best year in the company history. with revenue exceeding 50 million and adjusted EBITDA of 10%. Number two, we have resolved our outstanding contingent liability from the purchase of Reflect Systems in 2022. But first, let me review our fourth quarter highlights as follows. Revenue of 11 million versus 14.5 million a year ago. Gross profit of 4.9 million versus 7.5 million in 2023. Adjusted EBITDA of approximately a half a million against 2.8 million last year. And annual recurring revenue, or ARR, at a run rate of 16.8 million. While completing our best year ever, the fourth quarter, as expected, was negatively impacted by deployment timing. However, with an active pipeline of opportunities ahead of us, we remain on track for another period of record performance in fiscal 2025. As mentioned on our third quarter call, we have numerous large opportunities currently being pursued, all of which give us a great degree of confidence in the quarters to come. We see revenue accelerating as the year progresses with especially strong results in the second half. Demand for our unique solutions continues to grow. A trend we anticipate will continue, particularly with the introduction of our AdLogic CPM Plus platform. This integrated, innovative solution provides customers with the tools to deliver targeted, high-performing campaigns at significantly reduced cost. It combines robust programmatic capabilities with a user-friendly self-serve interface that simplifies campaign execution, enhances targeting precision, and eliminates unnecessary intermediation fees. It also positions creative realities uniquely as a one-stop shop for required ad tech solutions, and allows us to benefit from advertising revenue. From deploying on-premise screens to offering sophisticated ad serving and campaign execution tools, our full-service approach addresses the challenges faced by modern in-store retail media networks. We believe it's a game changer in the industry that can significantly enhance the in-store media experience. As we expect top line growth to accelerate in the second half, we should see stronger operating results driven by better economies of scale, higher margins, and increased cash flow. We see adjusted EBITDA as a percentage of revenue rising back to 15% by year end. Early today, pre-market, in a separate press release and filing, we announced a settlement related to our contingent consideration obligation with former Reflect shareholders, an issue which has been on our investors' minds for an extended period of time. We worked hard to resolve this liability in a way that was a win-win to the company, its investors, and the former Reflex stockholders. We believe that settlement accomplishes this objective and provides a great deal of financial flexibility while removing a substantial overhang on our shares. The key metrics are as follows. CRI will pay $3 million in cash utilizing the existing reserve in our current credit agreement. In addition, we entered into a $4 million 30-month promissory note that includes a balloon payment in September of 2027. This long-term note, along with warrants, provides us time to continue growing the company and enhance shareholder value while also giving former Reflex stockholders an additional return on their investment. Again, I think this is a win-win for all involved that quantifies a payment plan and eliminates uncertainty through a clear, simplified financing structure. We are very pleased with this development that allows us to focus on growth and improved operating results for the remainder of fiscal 2025. Going forward, the combination of our active pipeline and new AdLogic CPM Plus platform puts us on track for revenue acceleration and increased performance. with no further overhang or distraction from the dispute. As the quick serve restaurant and retail market requirements continue to become more complex and demand driven, CRI remains at the forefront of improving the customer experience in a growing list of innovative clients and brands. While we are not providing specific guidance at this time, we anticipate the year ahead will be one of accomplishment and new records. I'll turn it back over to Ryan to share some additional comments on our financials.

Thank you, Rick. An overview of our financial results for the fourth quarter of 2024 was provided in our earnings release and Form 10-K filed Friday evening, March 14, 2025, which included the consolidated balance sheet as of December 31, 2024. the statement of operations and the statement of cash flows for the 12 months ended December 31st, 2024, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended December 31st, 2024, as well as the preceding four quarters. Now, let me provide a couple of points of context relative to our balance sheet. As of December 31st, 2024, the company had cash on hand of approximately $1 million versus $2.9 million at the end of 2023. As previously mentioned, our consolidated balance sheet reflects 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 $13 million and $12 million, respectfully, at the end of the fourth quarter as compared to $15.1 million and $12.2 million, respectfully, at the start of 2024. Our debt level rose slightly from the end of Q3, as expected, due to seasonal working capital requirements and the timing of our SAS-based billings. As a side note, as Rick previously discussed, our settlement of the contingent consideration included a $3 million payment from our credit facility and the issuance of a $4 million note, so our debt levels will rise during the first half of 2025. Of course, our long-term vision remains the same, to deliver and strengthen the balance sheet whenever possible. At the end of fiscal 2024, our leverage on a gross and net basis was 2.59 and 2.39 times respectively, down from 2.97 and 2.4 times at the beginning of fiscal 2024. We remain dedicated to managing our debt as we continue to evaluate and migrate 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. In July of last year, we hired David Schultz to fill a new position at the company, VP of New Business Development. This was a much-needed person to fill the role and provide the dedicated focus required. We are pleased with the pipeline and the sheer number of discussions going on with potential prospects. Our sports and entertainment team has been expanded in order to continue to facilitate our anticipated growth in this sector as we move into 2025. The company completed its largest deployment of this kind during the third quarter of 2024, an NHL arena, and we have tremendous momentum in the market moving into the new year. In this Q1 2025, We have already been awarded three MLB projects of varying sizes and types, and we have an additional seven POCs going on at other venues across the U.S. With regard to BCTV, this project continues to move forward. We completed 56 site installations in the fourth quarter at an average sale price of $30,000. While we expect this number to increase moderately in the second half of 2025, we expect a smaller number of installations in the first two quarters of the year. Currently, we have minimal installs scheduled from now until June as BCTV had us pause for a 90-day period. Our operations team has been working towards SOC 2 compliance. SOC 2 compliance is a valuable credential that can strengthen the trustworthiness and credibility of our products to enterprise customers. The team has made a great deal of progress, and I'm pleased to report that our hard work resulted in our receiving our SOC 2 Type 1 compliance and certification. That is done and complete. We expect to achieve SOC 2 Type 2 certification prior to year end. We believe this will be yet another differentiator of CRI's enterprise grade offering. Before turning it over to the operator, let me just add one comment. We want to take a moment and wish our outgoing CFO, Will Logan, all the best in his new endeavors. As previously announced, Will will remain as an advisor to the company. With that, we'll now move to the Q&A portion of the call. Please go ahead, operator.

Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And one moment for our first question. Our first question will be coming from Craig Halem. Your line is open, Jason.

Great. Thank you, guys. Rick, just wondering if you can just give us some general commentary on the conversations you're having with your customers or maybe more so the potential customers just in regards to this kind of frozen pipeline that we're in right now and any prospects for that that's starting to open up in the coming months.

Hey, Jason. Good morning. Thanks. Great question. Yeah, we expect customers have had a frozen pipeline of projects that have been creeping to the finish line. And we have an incredible number of them. We do expect to have a couple come across the finish line here in the coming few months. But it's a little, the market is, trying to understand where tariffs might come into play or not. So those conversations are also starting to happen at customers. They're starting to ask questions about how tariffs could get in the way of their projects. That's currently the state, Jason.

Maybe you can double click on that second part just from a tariff perspective. Curious what kind of potential headwinds those can create for the business or maybe if there's any other opportunities you would see ahead, you know, competitively or otherwise.

There is tremendous pressure on these customers to build out their networks, right? Retail media networks are exploding and there's tremendous pressure on these companies to get them built out. For most of the industry, we expect minimal or no tariffs at all to be a problem. However, the mounts, most of the mounts are made here domestically and there's a steel problem. So we expect slight moderate increases in steel and we expect that not to really affect much. The question will be the display business. and how the display business, the actual screens themselves. And I think that will unfold over the next 30, 60, 90 days.

Perfect. Maybe stepping back, looking at just your opportunities in retail media. How do those conversations progress in terms of deal size and opportunity? And I'm curious if that's perhaps leading to some of the delays. I mean, it would seem as though when retail media gets added to a deal, there's broader conversations that need to be had, more strategic planning. And here's to what degree that's causing some of these deals to just slow down and not get past the finish line.

That is very astute as you look at it from the market, Jason, that is exactly what happens. When they look at deploying a retail media network, they look for, there's a tremendous amount of detail that the customer will go through, not only with us as a potential vendor, also internally. How are they going to run it? What does ad operations look like and how are they going to run it? So that tends to extend to the process, number one. Number two, the CapEx deployment by these customers for retail media networks is significant. These are not, and Jason, just to be clear, these are not five and 10 and $15 million projects. These are 40, 50, 80, $100 million projects in their size. Now, they bring tremendous returns to the customer who deploys them. Typically, if a customer has the foot traffic and has the locations and spends a hundred million to deploy a retail media network, they will see an ROI on that in certainly less than 24 months. So, tremendous opportunities, but they have slowed down the process of getting it across the finish line. And I'd just like to ask my compatriot, George Souter, who really runs all the ad tech, rolls up to George, who's our chief strategy officer. George, anything to comment there?

You know, Jason, I think you hit it on the head, and as Rick indicated, The complexity of these projects for the enterprise customers that we service can be pretty daunting, but all the more reason why what we've done by knitting together the solutions for retail media networks, our product suite, the CMS, the ad server, and now the new programmatic platform, As a one-stop shot, it is indeed a competitive advantage the way that we reckon it. The more complex, the more simplified solutions we provide to help our customers deploy those networks. But it does take time, and we provide advisory services in conjunction with walking them through the process. So, the dollars are big, as Rick has indicated, probably bigger dollars than we've seen historically in any one deal. And therefore, obviously, these are sophisticated operators who are doing their diligence and building their business case. There are huge CapEx dollars at play here. So, it takes time.

All right. Perfect. Thank you for the update, guys.

In one moment. Our next question will be coming from Howard Halpern of Taglit Brothers Inc. Your line is open, Howard.

Congratulations on a record here, guys. How are you? Okay, okay. In terms of your existing customer base, how have they begun to embrace the new ad logic platform? And how is that going to, you know, impact margins down the road?

Well, first and foremost, as our customers have decided to turn their digital operations from a signage network to a retail media network, because retail media network incorporates signage, Howard, but it's a whole lot more to it when you turn on the ad logic and those ad functions. I mean, our customers have embraced it. because it solves a problem for them. And we've updated the product to embrace all the different types of advertising around the AdLogic platform so that it can do programmatic just as quickly and deploy a programmatic ad in seconds. as it does non-programmatic. So those upgrades are out in the market being well embraced by our customers.

And Rick, if I can just add to that, Howard, you know, great question. Internally, we have a saying that infrastructure seeds retail media networks, and retail media networks sells infrastructure and SaaS. And I would tell you that the the addressable market has just gotten a lot bigger for CRIs. So we do have existing customers that have the infrastructure and have deployed the CapEx and, you know, and obviously converting that existing network into a retail media network represents new returns on those previously sunk costs. So there's a compelling business case that's driving that type of activity. So it's not only about new customer acquisition, but it's also about existing customers migrating up to a retail media network and, you know, all that new.

Okay. And in terms of, you know, you talk about how the first half and the second half and some of the hesitations, but how has the new ERP system given you the maybe visibility, flexibility to, control what your infrastructure is going forward?

Howard, this is Rick. I'll take that one. I tell you, you know, we completed the switch over July 1 last year, okay? So we're now actually moving into the third quarter where we are actually using it, but it's also the first quarter of our new budget year, right? in 2025. So, we literally redid the entire general ledger, et cetera, as we migrated to the new system. We see it paying significant cost management dividends, okay? And I will tell you, they're not in place today, some of them, but we expect to see real super strong expense controls and management of the key metrics of the business, which is something that we did not have as we entered 2024. So we feel very good about it, but we're still on the journey. But we're using every function. Ryan Mudd, is that correct? We're using every function of the software today is up and running. That's correct. Yes, sir. So we feel good about it.

Okay, and one last one. Could you talk about, I guess, channel partners, the progress you're making there, and what you're seeing in that area?

We continue to have demand from our channel partners. I'll turn that over to George. George ultimately owns the channel program.

Great question, Howard. We obviously committed to developing the channel and we see licenses and license demand ramping up. I think, as you know, last year, unfortunately, we had an executive that was heading up that part of the business for us who passed in an untimely way, tragically. We have now basically put a new team on that side of the business, and they're conducting outreach in addition to fielding all the inbound. But we're very much committed to that and see that business growing and are actively recruiting and signing on new customers. Okay. Sounds great.

Keep up the good work, guys.

Thanks, Howard. And one moment for our next question. Our next question will be coming from Brian Kintzlinger of Alliance Global Partners. Your line is open, Brian.

Good morning. Thanks for taking my questions, and it's nice to see the settlement for the contingent consideration in the rearview mirror. Can you quantify the number of warrants, I didn't see it, that will be issued to reflect what the strike price is and when the expiration date is?

Yes, it's a six-year warrant, Brian. Strike price is $3.25. Quantity of warrants would match the quantity of shares that was originally issued back two years ago. So the number is 777-790, just under $800,000 in warrants. Great, thanks.

And then can you speak to... You commented that you expected revenue growth to accelerate in the second half of the year. I think you're talking about growth but not dollars. I'm not sure. And as you exit the year, 15% EBITDA margin. First, I guess I'm curious because the fourth quarter is seasonally weak. So I'm curious what gives you confidence that the second half will be stronger, whether it's scale or revenue growth. And then... You didn't say anything about the first half of the year. Should we expect year over year declines? Do you expect to be adjusted EBITDA profitable? Just maybe just a little bit more high level commentary.

We expect to be adjusted EBITDA profitable, but just barely, certainly in Q1, the first part of the year. And I think we've made no, you know, we've articulated that even on the last calls. We have A number of projects, Brian, that give us great comfort in understanding that the moment a trigger is pulled, revenue will grow tremendously. We expect to see year-over-year growth on 2025 will exceed 2024. And we expect nice growth in there and also growth in the EBITDA. So we're very bold.

Yeah. When you're, um, I'm sure it varies, but can you help us understand what a project with an MLB or an AHL stadium, uh, what an average, uh, total contract value is, does it range from, you know, a couple of hundred thousand dollars to a couple of million? Is it, is it more a couple of.

Great question. So there's, there's two types. Okay. We go into an MLB stadium and they may have already deployed an IPTV system, right? So they already have bought that piece. And then typically where they embrace us is, can you help me with the menu board? So we would do all of the menu boards inside a stadium. Right, some might need hardware replacement, but most of it's just software and content. So that would be on the low end. That would be $150,000 project a year because a combination of SAS on the menu boards and some content refresh and updating of menu boards. That's the low end of the equation. Other side of the equation, typical ballpark has somewhere between 600 and a thousand displays, and they're really looking to deploy IPTV throughout and refresh the entire stadium. That project is always typically in the two, between two and three million dollars. It's a million for the IPTV system, software deployment, et cetera, and then it's another million for the screen.

And your MLB projects that you've won, are those more on the full solution side, or are they more on the menu boards?

It's really a mix. It's really a mix. I've got seven POCs going on right now, and I believe out of those seven, if they were to decide to move forward, four of them would be full stadium refresher. So four of them would be in the quote $2 million and up range.

Got it. And to achieve that second half acceleration, do we need a handful of these large projects to materialize, just one or two? How do you think about what it takes to achieve your internal targets?

We're just looking for a handful. Okay, we've got... two or three very large retail media networks ready to pull the trigger. We have a couple of significant QSRs ready to potentially head to full deployment. And then we have a whole series of these sports entertainment facilities. So tremendous amount going on. I just can't talk about it at this moment. And then one more on... I was just going to comment, thanks for recognizing the importance of solving the RSI. It's taken a lot of time, a lot of effort, but we're glad to get that done and behind us.

Yeah, for sure. Can you share just a little bit more information on what led to the 90-day pause on BCTV, and could it possibly be longer than that?

Yeah, that's... That's BCTV on its side. I believe they have continued the private equity firm that invested money and is the primary controller of that. I think put a pause on additional funding so BCTV would get caught up. And I believe that's really it. It's a discussion between BCTV and its funding vendors. We do believe that BCTV will roll out starting again in the June timeframe.

Great. Thank you so much. Thank you.

And one moment for our next question. Our next question will be coming from Lawrence Linton of Second Line Capital. Your line is open, Lawrence.

Good morning. Thank you. The credit facility, on a pro forma basis, it's like $16 million outstanding on the revolver. What's available, if any, beyond that $16 million today?

This is a great question.

I'll turn that over to Ryan Mudd. Yeah, we've got, you know, the revolver we have set up today has us at 22.1 million in max capacity. I think at the end of the year we just reported, we were at about 12 million, and obviously this 3 million added on will come from there in this settlement. So that cash settlement will come through, and that 3 million will hit as well. So that's kind of where we stand today going into the end of the first quarter.

So the implication being you may have close to $6 or $7 million available as of year end?

Correct. Yeah, you'll have from that $4 million reserve we had, there will be $1 million that kind of freed up as we settled it at $3 million. So that's correct.

Okay. And then there was some comment in the 10-K about $5 million potential additionally available. Is there any chance that that comes into play or $22 is a hard cap?

um this is rick that's a you know that's a a complex uh math that our bank does based upon earnings trailing 12 months earnings uh several things go into that calculation okay but currently we are not uh currently we're comfortable with our credit facility so is that

Obviously, you don't want to raise equity here. Do you feel comfortable that you won't have to?

Currently, we do not expect to raise equity now, unless we have some transaction that we would announce. So currently, we have been on that track, and we currently have stayed that away.

Okay, and since you bring it up, transaction would be an acquisition candidate or are you talking about a large program that needs some financing, for example?

It could be one or the other, but primarily an acquisition.

Okay. Can you comment either on the magnitude of the pipeline or the backlog or where they are relative to six months ago, for example?

You know, I think six months ago I would have told you they were at the 10-yard line. And some of them today, I would tell you they're at the one-inch line. So the magnitude of these projects is significant. Okay. Far larger than any project we've announced historically.

Okay. And what's the cash flow on a major project, either these projects a full-scale baseball stadium or some of these other programs you're thinking about, do they out of the gate for a quarter to have kind of a meaningful negative cashflow or does the customer fund them positively almost immediately?

It's that's a great question. It's about a 50 50. Think about it as if it's a private owned stadium and facility, right? we would typically ask for a significant deposit you know if it's two million dollar project we may ask for a million dollar deposit sometimes if not more but if it's a public partnership like it's owned by the city or it's owned by the state you're working under a standard state construction contract and that one would come with negative cash flow up front because that's where you get reimbursed as project percentage completion. Correct, Ryan? That's correct. Yeah. So that one typically has some negative cash flow for the first probably 90 days is a practical number.

Okay. And lastly, I just want to come back to a prior question that I don't think you fully answered. In your comments, you talk about exiting the year at a 15% adjusted EBITDA margin. What are you trying to say there? The fourth quarter, you're hoping, has that margin, or going into next year, you think that's where the run rate should be?

No, it's just where we believe we will finish this year. Margins were a little compressed. Revenue was a little down, as we've articulated to the market, just because of timing of projects, but we see those coming back here, and so we see, and again, as you've we would always point to look at the leverage in our business model. When our revenue is at $15 million a quarter, the company is very profitable. And so we believe we will exceed that as we enter the second half of the year.

Okay, so exceed that. But you're not talking about a full year of 15% or potentially you are?

Yes, we are.

Okay. And because this year you did 10%, so revenues will grow and you could do 15% for the year.

We believe that is our goal.

Okay. Thanks so much.

And one moment for our next question. Our next question is a follow-up from Brian Kitzlinger of Alliance Global Partners. Your line is open, Brian.

Okay. Thanks. Because that EBITDA and revenue acceleration depends on some of these projects on the goal line getting over the finish line. Can you talk about, in general, how long it takes to ramp contracts? Do you see them immediately happening with your inventory? Do you think it takes a couple of months? Does it vary? I guess just try and understand that timeframe from when deals are won.

Okay. Okay. Great question, Brian. It always takes extended time. So number one, you'll work a long time to finally sign a project, and now it is signed. The first thing the customer will always do is a POC, proof of concept. Okay, we're now ready to go. Now let's go deploy a subset. So we're talking to a QSR, about a thousand store rollout. We're right on the cusp. they're going to do a POC of the first 40 locations just to see how it rolls out before they launch the rest. Same thing on a large media network. They're looking at several thousand locations. They want to do a POC for 80 locations. And so those POCs will typically take 90 days. to get deployed and then the customer will evaluate it for 60 or 90 and then they'll say, now let's go and run hard.

Okay.

George, anything to add to that?

Yeah. Brian, just to build on that and double back on a previous question that you posed about the revenue slope for the year and adjusted EBITDA on top of that. Obviously, we've made a big announcement with AdLogic CPM Plus, basically developing that programmatic platform and knitting together with AdLogic, which is our ad server and, of course, our CMS. Some of these opportunities that we're speaking about, they've been in motion now for an extended period of time. And Rick previously said we expect several to crystallize to some outcome, whether it's a POC, an award of business, or an expansion of business in the coming months. And obviously, we're careful about representations we make about the probability of that happening. But the quantum of these opportunities are incredibly significant, and therein lies the challenge to us providing guidance. But we do anticipate that we're in good position on a number of these opportunities. The one thing I did want to double back on and just expand upon, because it's really important, is the new monetization models that align with our retail media network product suite. We all know we sell infrastructure, digital signage. There's a hardware component to that. You know, we've talked extensively about what our margins are on that. The infrastructure, SEED, SAS, SAS obviously is very, is much higher margin for us, and we've talked extensively about that. What's net new here is our ability to monetize, new monetization models in conjunction with our ad server and our programmatic platform. And these follow more in line with platform access fees, user licenses, SAS dollars, and more importantly, particularly with CPM Plus, an ability to participate in the ad revenue that is flowing through the stack. So can't overstate the importance of that to us in terms of on a go-forward basis. incremental revenue opportunities that previously we probably wouldn't have had access to, but also the enhanced margins, the superior margins of the new revenues that we see flowing through that stack. And we're well positioned for all of that, and it's been an ongoing process. We've been previewing CPM Plus with certain customers in conjunction with RFP opportunities now, for well over six months. And so when we talk about how long does it take to convert one of these opportunities, it can vary. But many of them have been gestating already for an extended period of time. And as Rick indicated, we expect that they're going to crystallize to one outcome or another very shortly. We're just unfortunately not in a position to make any representations about that. But we fully expect by the time that we present on Q1, we would have known that we've won a piece of business or not, or that we have a POC and are executing on it and can provide much better information as to the quantum of the opportunity. Thank you, Maureen. Great. Thanks so much.

And our next question will be coming from Ben Howard of Pivotal Group. Your line is open, Ben.

Hey, guys, congrats on the Reflex settlement. It sounds like it's really mutually beneficial for all parties, and glad to finally put this behind us as well. And then when we look at ARR, especially as we see kind of, you know, subsequent growth throughout the year, quarter over quarter in managed services, it's kind of a trend we like to follow. It looks like an exit rate of $20 million on the managed service line, but then you reported a $16.8 million increase. ARR number to exit the year. Is that a big customer loss or can you kind of explain that discrepancy and the quarter over quarter decline from 18.1 exit? Yeah.

This is Rick. We had two large customers who were both SaaS customers. One of them is actually its own retail media network that they run and they They had a product that was out in the field that was installed in thousands of their customer locations, and they retreated some of those. They retired some of those. We had another large customer who has over 50,000 screens also do some inter-adjustments on its contract. Neither of them is a lost customer. but certainly one of them, its revenue did decline in annual basis about a million bucks. So that's the short-term reduction. We expect to make that back up as we continue through 2025, but there was an absolute reduction in that SAS due to those two customer adjustments. Again, I use the term adjustments not lost.

Rick, that makes sense. And then when we look at customers, are there other customers in the book currently that have similar dynamics where they run their own retail media network that are potentially at risk of reductions? And are these two specifically, are they chances of win back to get that back to prior revenue levels?

Certainly one of them, one of them is not because one of them is adjusted its business model. but we don't see them doing reductions over their current spend, so we're comfortable with their status. The other one has been a long-time customer for 13 plus years, and we see potential expansion in that network, but that network will expand in 2026, not 2025.

And then just to answer that first question, are there other customers in your book that you're, you know, have similar dynamics where you can see them pulling back like these two?

No, not really.

We, we do not. And then when we look also at kind of the media sales and ad advertisement sales as well, we saw a pretty big drop in Q4 from, I think it was 1.4 million in other services and then to 200,000, I believe. When we look at AdLogic CPM+, do you believe that'll be, you know, higher attach rate when you get that, you know, out and rolling for some of the retail media networks? And do you think that provides a substantial uplift to that ad services and media sales category?

Yeah. This is George Sauter. Yes, we do see that. We definitely have executed the pivot internally. We previously had a media sales team. that was selling advertising. We had different accountabilities to certain retail media networks to either sell into those networks exclusively or to have the option to sell into them. But candidly, that wasn't really aligning with our business model. We're a software and a technology company, and most customers who are deploying retail media networks aren't looking for assistance in media sales. So all the more reason why we've committed to ad tech and the revenue streams that are going to come along with that tech. And, you know, this goes back several years. One of the key reasons we merged with Reflect was for their ad serving platform. And then we immediately set upon building the programmatic layer up or developing the programmatic layer, looking to knit together all of these solutions. So while the media sales might have gone down and those weren't very high margin dollars the way that they were very labor intensive, and we had partners in order to generate those sales. On a go-forward basis, it'll flow through the stack at significantly increased margins. And we do see the attachment rate escalating throughout the year. We're just not in a position to make representations about how big that can get. But as I indicated previously, we're well down the path with a number of customers on activating our retail media network product suite. And therefore, we certainly, it's a strategic thrust, and we see that to be a very important part of our business and something that can scale very quickly and, again, have much higher margins than the very labor-intensive way we were going at media sales.

It makes sense. And then when we think of the ad tech platform, is that going to flow into managed services or is that still going to be any other services line item? I don't know if that's better suited for you, Ryan, or not.

Yeah, I would imagine it'll be under the managed services as we'll see that continue to flow.

Perfect. All right, guys. Thank you so much. Congrats on the record year. And most of all, congrats on the Reflex settlement. It's exciting to move forward with that behind us now.

Yeah.

Thank you.

And I'm showing no further questions at this time. I would now like to turn the call back to Rick for closing remarks.

Thank you, everybody, for joining the call. Let me conclude the call by thanking all our shareholders, clients, partners, and employees for their continuing efforts, commitment, and support as we work together to transform CRI into a leading brand of digital signage solutions. Again, we look forward to speaking with everybody next quarter. Thank you and goodbye.

And this concludes today's conference call. Thank you for participating. You may now disconnect.