Creative Realities, Inc.

Good morning. At this time, I would like to welcome everyone to Creative Realities 2025 Second Quarter Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at CRI.com following its completion. Creative Realities has prepared remarks summarizing the interim results of the quarter along with additional industry and company updates. Joining the call today is Rick Mills, Chairman and Chief Executive Officer George Shutter, Chief Strategy Officer and Head of Corporate Development, and Ryan Mudd, Interim Chief Financial Officer. Mr. Mudd, you may proceed.

Thank you, and good morning, everyone. Welcome to our earnings call for the second quarter ended June 30, 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 version 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 filings with the SEC. Any forward-looking statements 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, Ryan. Good morning, everybody. Thank you for joining the call. I'll start by giving some details of our Q2 financials. We posted revenue of $13 million in the second quarter, up 34% versus Q1, and roughly flat year over year. While gross profit was $5 million, in 2025 Q2 versus 6.8 million in Q2 2024. Q2 2024 gross margin of 6.8 was inflated due to the inclusion of 815k in media sales revenue as we exited the media sales business. Our consolidated gross margin was 39% versus 52 in the prior year period. With the lower profitability largely due to changes in revenue mix of more hardware versus services. This was driven by a few customers who chose to purchase hardware in advance due to the uncertainty of tariffs. We expect margins to rise in the third and fourth quarters as we are installing those products previously purchased in bulk. As of June 30, 2025, we had an annual recurring revenue run rate, or ARR, of $18.1 million versus $17.3 million at the end of the first quarter. As we have previously discussed, new deployments have a follow-on effect of growing SAS-based ARR. Adjusted EBITDA rose to $1.2 million for the second quarter of 2025 from $1.5 million in Q1 and was down slightly versus last year's $1.5 million. We anticipate this will improve further going forward as revenue increases and we continue to manage overhead expenses. In fact, we expect adjusted EBITDA as a percent of revenue rising back to 15% by year end. Notably, we were able to reduce approximately $3.1 million in debt this quarter due to operating cash generated during the period. While some short-term working capital issues impacted Q1, as previously discussed, we're pleased to now be able to once again focus on strategically using cash flow to pay down debt and de-lever the company whenever possible. Let me take this opportunity to address a question that we sometimes get. We have a lot of credit with a sweep account. At the end of Q2, the balance on that account was $16.1 million down $3.1 million from the end of Q1 due to the cash generation that I just outlined. At the end of Q2, we had 600K in cash on hand with additional availability of 6 million. We do not keep excess cash on hand, and the cash we have on hand at any point is not a proxy for our true working capital capacity. As stated last quarter, we have a very robust pipeline of opportunities on which we're bidding. reflecting strong demand for our technology as well as generally good economic conditions within our customer base during q2 we announced a significant engagement with a well-known upscale quick service restaurant chain with over a thousand locations across more than 25 states we're currently implementing a pilot program in select locations during q3 and Q4 and expect a national rollout to begin immediately following the completion of the pilot. This is another example of our ability to digitally transform an establishment's menu boards inside and out, shifting from static displays to dynamic digital engagement while increasing basket size and profitability and increase throughput in the drive-through operations. We are delivering a 100% turnkey solution, all powered by our proprietary CMS platform, Clarity, along with consulting, content strategy, hardware provisioning, deployment support, and ongoing day two service. I'll keep everyone updated on the progress of this important implementation, which will result in a more agile connected restaurant environment that meets guest expectations and provides flexibility for enhanced applications in the future. Our AdLogic CPM Plus platform continues to impress customers due to its power and flexibility. gives clients the tools to deliver targeted campaigns at significantly reduced cost, combining programming capabilities with a self-serve interface that simplifies campaign execution, enhances targeting precision, and eliminates unnecessary intermediation fees. This past quarter, we saw increased traction and interest from existing and new customers. We currently have three customers who are in the testing evaluation phase of the platform, which, if chosen, would power their in-store retail media networks. We have been in the retail media network business for some time and are currently delivering greater than 25 million ads daily. We expect in-store retail media networks to grow our revenue and recurring SaaS in 2026 and beyond. The bottom line is that we remain on track for another year of solid performance. As stated last quarter, we expect revenue to accelerate in the second half, backlog to grow, and margins to improve putting us in position for tremendous results in 2026. I'll turn it back over to Ryan to share some additional comments on our financials.