Le Lézard
Classified in: Science and technology, Business, Covid-19 virus
Subjects: ERN, CCA, FVT

Creative Realities Reports Second Quarter 2020 Results


LOUISVILLE, Ky., Aug. 13, 2020 /PRNewswire/ -- Creative Realities, Inc. ("Creative Realities," "CRI," or the "Company") (NASDAQ: CREX, CREXW), a leading provider of digital marketing solutions, announced its financial results for the three- and six-months ended June 30, 2020.

Rick Mills, Chief Executive Officer, commented "I would first like to thank all CRI employees, customers, suppliers, and partners for their unwavering support of our Company during these unprecedented, dynamic times. I am proud of the adaptability and commitment that our personnel have shown in the face of adversity in light of the COVID-19 pandemic."

Mr. Mills continued, "Entering the second quarter, we anticipated that the COVID-19 pandemic would disrupt the digital signage industry and the business operations in each of the vertical markets we serve as it forced companies to address both stay-at-home orders along with social distancing, increased sanitation protocols, masks, temperature checks and other procedures. In response, we implemented a series of cost-cutting measures and, more importantly, adjusted our product offering to launch the Thermal Mirror to assist businesses responding to newly developed COVID-19 protocols."

Mr. Mills added, "We launched the Thermal Mirror in late-April to exceptional market reception. We worked throughout May and June to enhance features and functionality of the product, building our upstream and downstream supply chain capabilities to support the eventual sale of thousands of units throughout the United States and Canada, and to launch a substantial trial unit program focused on customers throughout the United States. During July and August, we have seen a consistent flow of Thermal Mirror orders on a weekly basis. Similar to our digital signage customer base, our mix of customers for the Thermal Mirror includes enterprise corporations, K-12 and higher education institutions, sports and entertainment venues, and small and medium businesses. We believe this market continues to represent a significant opportunity for the Company throughout the remainder of 2020 as we have positioned ourselves as a clear market leader in this space. With the product, including our cloud subscription services, having recently been made available via the distribution channel, we have seen increasing demand week-over-week throughout July and August. As we continue to develop and evolve the product offering and as businesses continue to reopen throughout the United States and Canada, we fully expect the Thermal Mirror to be a go-to consideration for safe space solutions."

Business Update

Second Quarter Financial Update

Mr. Mills concluded, "We believe that we have weathered the worst of the COVID-19 pandemic with respect to its impact on our business and are optimistic about CRI's opportunities with respect to our traditional digital marketing technologies and the immediate opportunity with respect to the Thermal Mirror. CRI has remained an open, flexible, and transparent business partner to our vendors and customers and we believe our flexibility and responsiveness during this crisis will contribute to our success as businesses reopen and markets stabilize. We believe the long-term opportunity for both the digital signage industry and CRI remain bright and we look forward to supporting our customers in their pursuit to reopen as we move forward together."

Conference Call Details
The Company will host a conference call to review the first quarter results and provide additional commentary about the Company's recent performance, which is scheduled for Friday, August 14, 2020 at 9:00 am Eastern Time.

Prior to the call, participants should register at http://bit.ly/criearnings2020Q2. Once registered, participants can use the weblink provided in the registration email to listen to the live webcast. An archived edition of the second quarter earnings conference call will also be posted on our website at www.cri.com later that same day and will remain available to interested parties via the same link for one year.

About Creative Realities, Inc.
Creative Realities helps clients use the latest omnichannel technologies to inspire better customer experiences. Founded over 15 years ago, CRI designs, develops and deploys consumer experiences for high-end enterprise level networks, and is actively providing recurring SaaS and support services for more than fifteen diverse vertical markets, including Automotive, Advertising Networks, Apparel & Accessories, Convenience Stores, Foodservice/QSR, Gaming, Theater, and Stadium Venues. The Company acquired Allure Global Solutions, Inc. in November 2018, expanding the Company's operations to five offices across North America with active installations in more than 10 countries.

Use of Non-GAAP Measures
Creative Realities, Inc. prepares its consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP"). In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding "EBITDA," "Adjusted EBITDA," and "Adjusted Operating Income." CRI defines "EBITDA" as earnings before interest, income taxes, depreciation and amortization of intangibles. CRI defines "Adjusted EBITDA" as EBITDA excluding stock-based compensation, fair value adjustments and both cash and non-cash non-recurring gains and charges. CRI defines "Adjusted Operating Income" as GAAP operating income/loss, excluding deal & transition costs, bad debt charges related to customer bankruptcies, and the addition of estimated loan forgiveness income. EBITDA, Adjusted EBITDA and Adjusted Operating Income are not measures of performance defined in accordance with GAAP. Management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of the Company's operations that, when coupled with the GAAP results, provides a more complete understanding of the Company's financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income/(loss) or to net cash used in operating activities as measures of operating results or liquidity, and Adjusted Operating Income should not be considered as an alternative to operating income/(loss). Our calculation of EBITDA, Adjusted EBITDA and Adjusted Operating Income may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating the Company's performance. A reconciliation of EBITDA and Adjusted EBITDA to GAAP net income/(loss), and a reconciliation of Adjusted Operating Income to GAAP operating loss is included in the accompanying financial schedules.

For further information, please refer to Creative Realities, Inc.'s Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or about August 13, 2020, available online at www.sec.gov.

Cautionary Note on Forward-Looking Statements
This press release contains certain statements that are deemed "forward-looking statements" under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and includes, among other things, discussions of our business strategies, future operations and capital resources. Words such as "may," "likely," "anticipate," "expect," "intend," "plans," "seeks," will," should," "future," "propose," "believe" and variations of these words or similar expressions (or the negative versions of such words or expressions) indicate forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Some of these risks are discussed in the "Risk Factors" section contained in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2019, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and the Company's subsequent filings with the U.S. Securities and Exchange Commission. Important factors, among others, that may affect actual results or outcomes include: the inability to recognize the anticipated benefits of our acquisition of Allure Global Solutions, Inc.; our ability to meet Nasdaq's continued listing standards; our ability to execute on our business plan; our ability to retain key personnel; potential litigation; and general economic and market conditions impacting demand for our products and services, including those as a result of the COVID-19 pandemic.

Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA
and
RECONCILIATION OF GAAP OPERATING LOSS TO ADJUSTED OPERATING INCOME
(in thousands, unaudited)

Creative Realities, Inc. prepares its consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP"). In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding "EBITDA", "Adjusted EBITDA", and "Adjusted Operating Income". CRI defines "EBITDA" as earnings before interest, income taxes, depreciation and amortization of intangibles. CRI defines "Adjusted EBITDA" as EBITDA excluding stock-based compensation, fair value adjustments and both cash and non-cash non-recurring gains and charges. CRI defines "Adjusted Operating Income" as GAAP operating income/loss, excluding deal & transition costs, bad debt charges related to customer bankruptcies, and the addition of estimated loan forgiveness income.

EBITDA, Adjusted EBITDA, and Adjusted Operating Income are non-GAAP financial measures and should not be considered as a substitute for net income (loss), operating income (loss) or any other performance measure derived in accordance with United States generally accepted accounting principles ("GAAP") or as an alternative to net cash provided by operating activities as a measure of CRI's profitability or liquidity. CRI's management believes EBITDA and Adjusted EBITDA are useful because they allow external users of its financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance, compare the results of its operations from period to period and against CRI's peers without regard to CRI's financing methods, hedging positions or capital structure and because it highlights trends in CRI's business that may not otherwise be apparent when relying solely on GAAP measures. CRI's management believes Adjusted Operating Income is useful in light of the COVID-19 pandemic because they allow external users of its financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate its operating performance in normalized market conditions. CRI presents EBITDA and Adjusted EBITDA because it believes EBITDA and Adjusted EBITDA are important supplemental measures of its performance that are frequently used by others in evaluating companies in its industry. Because EBITDA, Adjusted EBITDA, and Adjusted Operating Income exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA, Adjusted EBITDA, and Adjusted Operating Income CRI presents may not be comparable to similarly titled measures of other companies.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA from net loss, CRI's most directly comparable financial measure calculated and presented in accordance with GAAP.



June 30,



March 31,



June 30,


Quarters ended


2020



2020



2019


GAAP net loss


$

(2,459)



$

(13,183)



$

417


Interest expense:













Amortization of debt discount



84




85




158


Other interest, net



176




142




55


Depreciation/amortization:













 Amortization of intangible assets



158




159




147


 Amortization of finance lease assets



5




7




8


 Amortization of share-based awards



100




50




41


 Depreciation of property, equipment & software



216




200




152


Income tax expense/(benefit)



4




(155)




(107)


EBITDA


$

(1,716)



$

(12,695)



$

871


Adjustments













Change in warrant liability



-




-




(22)


Change in fair value of Special Loan



551




151




-


Gain on settlement of obligations



(1)




(40)




(6)


Gain on earnout liability



-




-




-


Loss on goodwill impairment



-




10,646




-


Stock-based compensation ? Director grants



19




31






Stock-based compensation ? PRSU vesting



-




-




250


Adjusted EBITDA


$

(1,147)



$

(1,907)



$

1,093


The following table presents a reconciliation of Adjusted Operating Income from operating loss, CRI's most directly comparable financial measure calculated and presented in accordance with GAAP.

Quarters ended


Three Months
Ended June
30, 2020


GAAP operating loss


$

(1,644)


Bad debt expense (customer bankruptcy)



468


Deal and transaction costs (ATM offering)



160


Implied forgiveness of PPP loan



1,164


Adjusted Operating Income


$

148


 

SOURCE Creative Realities, Inc.


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