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CREATIVE REALITIES, INC. (CREX)·Q1 2025 Earnings Summary

Executive Summary

  • Revenue of $9.73M declined 20.8% year over year and 11.6% sequentially, driven by deployment/install timing; gross margin held at 45.7% . Consensus revenue was $10.55M*, implying a miss; EPS was a headline $0.32 vs consensus of -$0.155*, a non-recurring gain-driven beat .
  • Management reiterated second-half acceleration with a large QSR menu-board win and pilots commencing in Q3; target Adjusted EBITDA margin of ~15% by year-end .
  • Balance sheet actions resolved $12.8M contingent consideration via a $3M cash payment and $4M note; total debt rose to $23.2M, with TTM gross/net leverage of 4.91x/4.67x, expected to improve as revenue ramps .
  • Operational catalysts include BCTV (~200 sites starting Q3; ~$3M 2H revenue) and DigiPoint (~2,000 sites starting Q3; >$4M hardware/install 2H revenue), plus SOC 2 Type 2 targeted by year-end to support enterprise wins .
  • Near-term stock narrative hinges on credibility of the second-half ramp, pipeline conversion (QSR franchise opt-ins ~600 of ~1,000 locations), and de-leveraging prospects as Adjusted EBITDA scales .

What Went Well and What Went Wrong

What Went Well

  • QSR win with >1,000 locations across >25 states; pilots begin in Q3 with rollout expected thereafter. “We’re delivering a unique, turnkey solution…powered by our proprietary CMS platform – Clarity™” .
  • SG&A discipline: operating expenses fell to $5.18M from $5.84M YoY; Adjusted EBITDA held at ~$0.47M despite lower revenue .
  • ARR grew to ~$17.3M from ~$16.8M at year-end, underpinning recurring revenue durability .

What Went Wrong

  • Revenue miss vs consensus ($9.73M actual vs $10.55M* estimate) and sharp YoY decline due to installation timing across three clients/projects .
  • Services margin compressed to 53.0% (from 59.1%) given reduced SaaS subscriptions and prior exit from media sales as of Oct 1, 2024 .
  • Leverage increased materially on settlement mechanics and working capital mobilization; TTM leverage ratios rose to 4.91x/4.67x from 2.59x/2.39x at start of 2025 .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$12.29 $14.44 $11.01 $9.73
Diluted EPS ($USD)$(0.01) $0.01 $(0.27) $0.32
Gross Margin %46.9% 45.6% 44.2% 45.7%
Operating Income (Loss) ($USD Millions)$(0.08) $1.14 $(0.71) $(0.72)
Net Income (Loss) ($USD Millions)$(0.11) $0.05 $(2.84) $3.37
SegmentQ1 2024Q3 2024Q4 2024Q1 2025
Hardware Revenue ($USD Millions)$4.14 $5.24 $3.85 $3.39
Hardware Gross Margin %22.9% 24.1% 26.3% 32.1%
Services Revenue ($USD Millions)$8.14 $9.20 $7.16 $6.34
Services Gross Margin %59.1% 57.9% 53.9% 53.0%
KPIQ1 2024Q3 2024Q4 2024Q1 2025
Adjusted EBITDA ($USD Millions)$0.77 $2.27 $0.50 $0.47
ARR ($USD Millions)N/A$18.10 $16.80 $17.30
TTM Gross Leverage (x)N/A1.49x 2.59x 4.91x
TTM Net Leverage (x)N/A1.37x 2.39x 4.67x
Estimates vs Actuals (Q1 2025)ConsensusActual
Revenue ($USD Millions)$10.55*$9.73
Primary EPS ($USD)$(0.155)*$0.32
# of Estimates (Revenue / EPS)4* / 4*—

Values marked with * were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue trajectoryFY 2025“On track for fiscal 2025 being another period of record performance” “Revenue to accelerate beginning in Q2; particularly strong 2H” Maintained directionally; timing emphasized
Adjusted EBITDA Margin %FY 2025 ExitPrior 2024 exit run-rate ~12% (context for margin scaling) Target ~15% by year-end 2025 Raised trajectory vs prior year run-rate
BCTV deployments revenue2H 2025Not previously quantifiedExpect >50% of next ~200 sites installed in 2H; ≈$3M revenue New quantified operational guide
DigiPoint deployments revenue2H 2025Not previously quantified~2,000 sites beginning Q3; >$4M hardware/install revenue 2H New quantified operational guide
QSR rollout2025–2027Announced selection; pilot in Q3 Begin pilots Q3; ~20+ locations/month from late Q3; ~600 franchisees opted-in; ~3-year rollout (~300 sites/year) Operational detail expanded
Debt/capital structureFY 2025Working to resolve contingent liabilities Post-settlement focus on using cash flow to reduce debt; optimize capital structure Maintained with execution update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024; Q-1: Q4 2024)Current Period (Q1 2025)Trend
Deployment timing impactProjected Q4 shortfall; opportunities pushed into 2025 Q1 light due to three client/project delays; reversal starting Q2 Near-term pressure easing
AdTech/retail media2024 commentary on AdLogic and programmatic AdLogic CPM update; early-stage demand; revenue impact seen in 2026–2027 Building pipeline; longer-dated monetization
QSR vertical momentumN/ALarge QSR win; pilots Q3; opt-ins ~600; turnkey Clarity™ solution Strong execution; credibility catalyst
Sports & entertainmentNHL arena completed; momentum into 2025 (context spans Q4)3 MLB projects; 7 POCs; off-season upgrade cycle Expanding activity
Supply chain/tariffsN/ALimited impact so far; screens sourced from Mexico; mounts (steel) could be affected Watchful; manageable
Security/complianceN/ASOC 2 Type 1 achieved; aiming Type 2 by year-end Strengthening enterprise posture
Regional expansion (Mexico)N/AUpcoming C-store POC; retail media discussions; possible 2026 revenue Early-stage development

Management Commentary

  • “We remain on track for our best year ever…we continue to believe the second half of 2025 will show strong growth and momentum…we will once again focus on using cash flow to reduce debt” — Rick Mills, CEO .
  • On QSR win: “We’ll play a key role…shifting from static displays to dynamic, digitally driven customer engagement…powered by our proprietary CMS platform, Clarity” .
  • On margin/EBITDA targets: “We also expect adjusted EBITDA as a percentage of revenue to rise to 15% by year-end” .
  • On capital structure: settlement replaced $12.8M contingent liability and ~$13M debt with ~$23.2M debt; strategy focuses on balance sheet optimization and debt reduction as revenue scales .

Q&A Highlights

  • QSR rollout cadence and adoption: pilots in Q3, ~20+ locations/month from late Q3; ~600 of ~1,000 franchisees indicated opt-in; likely ~3-year rollout (~300 sites/year) .
  • Delay drivers: three distinct projects/clients drove Q1 softness; reversal underway as deployments resume .
  • Tariffs: minimal impact to date; screens largely sourced from Mexico; steel mounts a watch item; no projects on hold due to tariffs .
  • AdTech attachment and timing: retail media network demand in “early game”; significant potential impact in 2026–2027 .
  • Capacity investments: larger warehouse space, materially increased cubic storage with minimal cost; ongoing platform investment; limited capex needs .
  • Pipeline: sports/entertainment POCs aligned to off-season scheduling; predictable revenue potential from longer-dated stadium agreements .
  • Regional: Mexico POC in a top-3 C-store; discussions with top-5 retailer on retail media network; potential contribution in 2026 .

Estimates Context

  • Revenue missed consensus by ~$0.82M ($9.73M actual vs $10.55M*), reflecting deployment timing slippage across three projects .
  • EPS beat vs -$0.155* consensus was driven by a $4.78M gain on contingent consideration settlement; underlying operations posted a $0.72M operating loss and Adjusted EBITDA of ~$0.47M .
  • With second-half revenue ramp and an Adjusted EBITDA margin target of ~15%, sell-side models likely need to shift mix from Q1 actuals toward 2H weighted revenue/EBITDA, and normalize EPS for non-GAAP items .
    Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • The headline EPS beat is non-recurring; core profitability remains modest (Adj. EBITDA ~$0.47M on $9.73M revenue) pending 2H ramp; focus on normalized operating metrics over GAAP EPS .
  • Execution on QSR pilots and franchise opt-in conversion (~600 indicated) is a visible catalyst; sustained monthly deployment pace by late Q3 will validate the trajectory .
  • Near-term revenue visibility improves with BCTV (~$3M 2H revenue) and DigiPoint (> $4M 2H hardware/install), providing offsets to prior timing headwinds .
  • Margin mix should benefit from higher services/software attachment over time, but services margin has compressed near-term (53.0% vs 59.1% YoY) with media exit; monitor SaaS ARR growth .
  • Leverage metrics are elevated post-settlement (4.91x/4.67x TTM); deleveraging depends on 2H revenue scale and cash generation; watch revolver usage and working capital swings .
  • Tariff risk manageable near-term (Mexico sourcing for screens); steel mounts could pressure costs; expanded warehouse capacity provides flexibility for supply chain hedging .
  • SOC 2 Type 2 pursuit and platform investment underpin enterprise credibility; together with AdLogic CPM, these support mid- to long-term monetization via retail media networks .