Revenue Growth and Sources - The company reported continuous growth in recurring SaaS revenue as digital signage adoption expands across various vertical markets [154]. - The company’s revenue sources include services revenue from digital signage network management and hardware sales from OEMs like Samsung and BrightSign [169]. - Managed services revenue grew by 156% year-over-year, reaching $14,320 in 2022, compared to $5,596 in 2021, due to Reflect's SaaS subscription revenue [184]. - Total sales increased by $24,913, or 135%, in 2022 compared to 2021, largely due to the Reflect acquisition and enhanced sales activities [204]. - Services and other revenues rose by $14,468 to $23,455 in 2022, attributed to the acquisition of Reflect and successful post-Merger sales activities [184]. - The company’s recurring subscription licensing and support revenue is primarily generated from its SaaS digital signage software platforms [307]. Acquisitions and Strategic Moves - The company acquired Reflect Systems, Inc. in February 2022 as part of its strategic acquisition strategy to enhance growth [302]. - The company rejected an unsolicited acquisition proposal from Pegasus Capital Advisors, stating it undervalued the company based on its intrinsic value and future prospects [157]. - The company’s management team continuously evaluates acquisition opportunities to accelerate growth in targeted markets [309]. Financial Performance - Net income for 2022 was $1,876, a significant increase of $1,644, or 709%, compared to $232 in 2021 [203]. - The company's EBITDA for the year was $9,220 million, with an adjusted EBITDA of $3,845 million, reflecting a significant increase from the previous year's adjusted EBITDA of $1,221 million [226]. - The company incurred a loss on debt waiver consent amounting to $1,212 million, which impacted the overall financial performance [226]. - The fair value of warrant liability resulted in a loss of $7,902 million, indicating a significant adjustment in the company's financial statements [226]. - The company recorded a gain of $1,624 million related to the settlement of the Seller Note, which positively influenced the financial results for the year ended December 31, 2021 [224]. - The company has generally incurred losses and may never become or remain profitable [261]. Expenses and Cost Management - The company’s expenses are primarily categorized into sales and marketing, research and development, and general and administrative costs [155]. - General and administrative expenses rose by $4,571, or 62%, primarily due to increased headcount and operations following the Reflect acquisition [187]. - Research and development expenses increased by $701, or 127%, for the year ended December 31, 2022, driven by the acquisition of Reflect and the retention of its software development team [207]. - Sales and marketing expenses surged by $2,498, or 217%, in 2022, influenced by the Reflect acquisition and increased investments in marketing activities [206]. - Depreciation and amortization expenses increased by $1,469, or 108%, in 2022, due to the addition of $17,160 in amortizing intangible assets from the Merger [209]. Market Position and Competitive Advantages - The company emphasizes its competitive advantages, including a managed labor pool and network scalability, which enhance service delivery and customer satisfaction [147][148]. - The company’s digital signage solutions cater to various sectors, including retail, healthcare, and automotive, showcasing its market versatility [139]. - The company has in-house media sales expertise, which differentiates it from competitors and provides an additional revenue stream [232]. - The company has a curated labor pool of thousands of qualified field technicians, enabling quick service nationwide [303]. Risks and Challenges - The company is facing challenges in ensuring the long-term successful operation of its digital marketing business due to a rapidly changing market [233]. - The company faces significant risks related to the unpredictability in financing markets, which could impair its ability to grow through acquisitions [264]. - The company’s business operations are susceptible to interruptions caused by events beyond its control [294]. - The company’s reliance on information management and transaction systems exposes it to cyber incidents and hacking risks [269]. - The company faces risks related to the timely development of new technologies and the retention of key personnel in a competitive market [321]. Customer Concentration and Demand - In 2022, three customers accounted for 44.0% of the company's revenue, indicating a significant customer concentration risk [316]. - The company anticipates increased demand for its services due to new construction and remodeling activities in retail and event venues [314]. Stock and Financing - Following a reverse stock split effective March 27, 2023, the total number of authorized shares was reduced from 200 million to 66.67 million [156]. - The company relies on the continued support of a related party for adequate financing of its operations [241]. - The company does not intend to pay dividends on its common stock for the foreseeable future [251]. - The aggregate market value of the voting and non-voting common equity held by non-affiliates was $13,263,727 as of the last business day of the registrant's most recently completed second fiscal quarter [257]. Advertising and Engagement - The company’s ad management platform, Reflect AdLogic, currently delivers approximately 50 million ads daily, indicating strong engagement and monetization capabilities [170]. - The company achieved approximately 50 million ads delivered daily through its ad management platform, Reflect AdLogic [307].
Creative Realities(CREX) - 2022 Q4 - Annual Report