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CREATIVE REALITIES, INC. (CREX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue declined to $10.55M, down 27% YoY and sequentially from Q2’s $13.03M, missing Wall Street revenue consensus of $11.12M; GAAP diluted EPS was $(0.75), far below the consensus of $(0.11) as a $5.7M non-cash software impairment drove a larger loss .*
  • Gross margin held at 45.3% (vs. 45.6% YoY), but Adjusted EBITDA fell to $0.77M from $2.27M in Q3 2024 and $1.23M in Q2 2025; management cited a $2M order slip into Q4 and lower SaaS/media volumes as drivers .
  • Strategic inflection: closed the CAD $70M (≈$42.7M) acquisition of Cineplex Digital Media (CDM) post-quarter and added three directors; management now targets 2026 revenue to exceed $100M with high-teens adjusted EBITDA margins, >20% post-synergies (≥$10M by end-2026) .
  • Near-term catalysts: expected mid-December signing of a large U.S. QSR (≈4,000 locations) 2026 drive-thru rollout; 7‑Eleven retail media network test across ~8,000 screens through March; a $2M “Icebox” network slipped from Q3 to Q4 due to funding, and a national QSR (≈1,000 locations) pilot completed in Q3 with rollout in Q4 .

What Went Well and What Went Wrong

What Went Well

  • Transformational scale via CDM: “We purchased CDM for CAD 70 million… Over 60% of the revenue is recurring… on track to deliver 25% YoY growth in 2025… we anticipate total company revenue to exceed $100 million in 2026” .
  • Retail media capabilities and credibility expanded: “We own the largest retail media network in Canada… delivering over CAD 32 million in ad sales… It brings a whole new level of credibility” .
  • Pipeline conversion initiatives: appointment of Dan McAllister as CRO to accelerate customer acquisition velocity and reorganize GTM to push opportunities through the pipeline quicker .

What Went Wrong

  • Revenue/EPS miss: Revenue ($10.55M) missed the $11.12M consensus and GAAP diluted EPS $(0.75) was far below the $(0.11) consensus; Adjusted EBITDA declined to $0.77M (vs. $2.27M YoY) .*
  • Order and SaaS/media headwinds: a $2M order slipped into Q4; managed services revenue declined YoY due to a customer insourcing work and the prior exit from media sales effective Oct 1, 2024 .
  • Non-cash impairment and leverage: $5.7M software impairment tied to Stellantis engagement; quarter-end gross/net leverage rose to 7.56x/7.46x, with debt at ~$22.2M (pre-CDM close), though liquidity improved post-financing .

Financial Results

Core Financials (USD)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$9.73 $13.03 $10.55
Gross Margin %45.7% 38.5% 45.3%
Adjusted EBITDA ($USD Millions)$0.47 $1.23 $0.77
Diluted EPS ($USD)$0.32 $(0.17) $(0.75)

Segment Breakdown and Margins

MetricQ1 2025Q2 2025Q3 2025
Hardware Revenue ($USD Millions)$3.39 $7.07 $4.17
Hardware Gross Margin %32.1% 25.1% 30.0%
Services & Other Revenue ($USD Millions)$6.34 $5.96 $6.38
Services Gross Margin %53.0% 54.4% 55.3%

KPIs and Balance Sheet Snapshots

MetricQ1 2025Q2 2025Q3 2025
ARR ($USD Millions)$17.3 $18.1 $12.3
Cash ($USD Millions)$1.15 $0.57 $0.31
Debt Outstanding ($USD Millions)~$23.2 (incl. contingent) ~$20.1 ~$22.2
Gross / Net Leverage (TTM Adjusted EBITDA)4.91x / 4.67x 4.53x / 4.40x 7.56x / 7.46x

Results vs. Wall Street Consensus (Q3 2025)

MetricConsensusActualSurprise
Revenue ($USD)$11.12M*$10.55M Miss: $(0.57)M*
Primary EPS ($USD)$(0.11)*$(0.75) Miss: $(0.64)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Company RevenueFY 2026Not previously quantified“Revenue to exceed $100M” Raised to numeric target
Adjusted EBITDA MarginFY 2026Not previously quantifiedHigh-teens; >20% post-synergies Introduced margin targets
Synergies (annualized)By end-2026Not previously quantified≥$10M annualized Introduced
Liquidity/AvailabilityAs of Nov 7, 2025N/A$22.5M revolver; $17.7M availability Added facility/availability
ARR + Ad Revenue Run-RateEntering 2026N/A>$40M combined Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Retail Media & AdTech scaleExited media sales Oct 2024; continued AdLogic delivery; ARR steady Owns Canada’s largest mall retail media network; CAD 32M ad sales; increased credibility to win U.S. retail media Strongly improving
QSR expansion & digital drive-thruAnnounced upscale restaurant chain pilot (1,000+ locations) with Q3 pilot/Q4 rollout Verbal award for ~4,000-location U.S. QSR, mid-December signing expected; drive-thru as 2026 growth vector Accelerating
Supply chain/tariffsHardware purchases pulled forward due to tariff pricing uncertainty in Q2 No new tariff impact commentary; mix-driven margins in Q3 Stabilizing
Stadia/venuesHardware ramp in Q2 tied to sports/entertainment installs Stadium vertical expected up 30–40% in 2026 with signature wins pending Positive outlook
Lottery pipelineNo prior detailNC Lottery: $54M over 10 years via CDM; U.S. states issuing RFPs; first U.S. RFP received Emerging growth
Canada expansionN/ACDM adds 6,000+ locations, ~30,000 endpoints; heavy Canadian footprint; targeting tier-2 Canadian QSRs Structural expansion
Legal/regulatoryN/APatent infringement lawsuit filed by Alpha Modus vs CREX platforms (Sept) Risk to monitor
Product/platformsClarity CMS, ReflectView, AdLogic foundations Synergy plan to adopt CRI CMS/AdTech across CDM customers; millions of ads served daily Integration/scale

Management Commentary

  • “We posted revenue of $10.5 million in Q3 versus $14.4 million in the prior year… A $2 million order slipped from the third quarter into the fourth quarter… Our third quarter consolidated gross margin was 45%” .
  • “We purchased CDM for CAD 70 million… Over 60% of the revenue is recurring… We anticipate total company revenue to exceed $100 million in 2026, with adjusted EBITDA margins in the high teens… and >20% once synergies are realized” .
  • “We have been notified by a very large QSR… over 4,000 U.S. locations… drive-through pricing was one of the key deciding factors… we expect a large expansion… in 2026” .
  • “Our largest C-store customer… moved approximately 8,000 screens into a retail media network test… assuming success… [would] grow our SaaS revenue relatively significantly” .

Q&A Highlights

  • Channel/customer reception to CDM: management emphasized scale benefits; industry acknowledges CRI among top integrators; targeting Canadian QSRs for digital drive-thru .
  • Retail media network credibility: “We own the largest retail media network in Canada… delivering over CAD 32 million in ad sales” to accelerate U.S. wins .
  • Lottery opportunity: NC Lottery $54M over 10 years; first U.S. state RFP received; pipeline viewed as robust .
  • U.S. malls: plans to engage owners (Westfield, Simon) to extend mall network model into U.S. over next 1–2 years .
  • CRO mandate: new CRO to close lingering prospects; sales organization expanded to ~40–43 customer-facing individuals post-CDM .
  • Deal clarifications: 1k-location QSR pilot completed; ~4k-location QSR verbal award pending mid-December; 7‑Eleven ~8k-screen test; $2M Icebox network delayed to Q4 on funding .

Estimates Context

  • Q3 2025 Revenue: $11.12M consensus vs. $10.55M actual (miss). Q3 2025 EPS: $(0.11) consensus vs. $(0.75) actual (miss). Estimate counts: EPS (3), Revenue (4). Values retrieved from S&P Global.*

Where estimates may need to adjust:

  • 2026 revenue/EBITDA trajectory likely revised higher to incorporate CDM consolidation and guided synergies; near-term Q4/Q1 estimates should reflect slipped $2M order, potential mid-December QSR signing, and 7‑Eleven test outcome by March .

Key Takeaways for Investors

  • Near-term print was weak on revenue/EPS with a large non-cash impairment; however, mix-supported margins and positive Adj. EBITDA demonstrate underlying resilience .
  • CDM acquisition is a structural step-up in recurring revenue, retail media scale, and geographic diversification; it materially strengthens the medium-term thesis (2026 revenue >$100M; high-teens EBITDA margins) .
  • Pipeline quality appears high: large U.S. QSR award pending, 7‑Eleven retail media test through March, and stadium vertical expected up 30–40% in 2026; watch for December contract signing and Q4 deployment ramp .
  • Liquidity and capacity improved post-close: $36M term loan and $22.5M revolver with ~$17.7M availability offer flexibility to fund integration and growth; preferred equity adds capital with conversion mechanics to monitor .
  • Risks to monitor: leverage temporarily elevated pre-close; ARR dipped to $12.3M at Q3-end (pre-CDM); patent litigation (Alpha Modus) introduces legal overhang; execution on CMS/AdTech migration and synergy realization is critical .
  • Trading implications: into Q4, focus on contract sign/announce cadence (QSR), confirmation of Icebox deployment, and early CDM integration synergies; estimate revisions likely bifurcate—near-term cautious, medium-term higher .
  • Medium-term: expanded board and CRO hire aim to accelerate conversions; retail media credibility should enhance win rates in U.S. malls and lottery verticals .