Creative Realities (CREX) Q4 2024 Earnings Call March 17, 2025 09:00 AM ET Company Participants Ryan Mudd - Interim CFORick Mills - CEOGeorge Sautter - Chief Strategy Officer & Head of Corporate DevelopmentBrian Kinstlinger - MD, Director of Research & Head of Technology ResearchBen Howard - Private Equity Associate Conference Call Participants Jason Kreyer - Senior Research AnalystHoward Halpern - Principal Equity AnalystNone - Analyst Operator Good morning. At this time, I would like to welcome everyone t ...

Financial Data and Key Metrics Changes - The company reported almost $14 billion in revenue for Q4, with an adjusted operating income rate of 4.9% and adjusted earnings per share of $2.58, reflecting a 5% decrease in adjusted diluted earnings per share compared to the previous year [10][11][62]. - The enterprise comparable sales growth was 0.5%, with a 2.3% decline on a 52-week basis, indicating the company's ability to maintain profitability in a challenging sales environment [11][62]. - The domestic segment saw a 0.2% increase in comparable sales, while revenue decreased by 5.2% to $12.7 billion, primarily due to the impact of the previous year's extra week [63]. Business Line Data and Key Metrics Changes - The computing and tablet categories experienced a 9% growth in comparable sales, with laptop sales specifically increasing to 10% growth compared to 7% in Q3 [14][15]. - Sales in appliances, home theater, and gaming categories declined, impacting overall performance [14]. - The domestic gross profit rate increased by 50 basis points to 20.9%, driven by improvements in the services category, while the international gross profit rate rose by 40 basis points to 21.4% due to favorable supply chain expenses [65]. Market Data and Key Metrics Changes - Digital sales accounted for almost 40% of total domestic sales in Q4, with significant growth in the Best Buy app, which ranked as the 1 shopping app on the Apple App Store during Black Friday [13]. - International comparable sales increased by 3.8%, although revenue decreased by 0.2% due to the previous year's extra week and negative foreign currency impacts [64]. Company Strategy and Development Direction - The company aims to strengthen its position as a leading omnichannel destination for technology, focusing on improving customer experiences and launching new profit streams such as Best Buy Marketplace and Best Buy Ads [19][40]. - Fiscal '26 priorities include enhancing omnichannel experiences, scaling new profit streams, and driving operational effectiveness to offset pressures [19][50]. - The company plans to leverage AI for improved digital experiences and enhance physical store merchandising while closing less profitable locations [32][36]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about consumer resilience despite high inflation, anticipating flat to slightly up growth in the U.S. consumer electronics industry [22]. - The company expects comparable sales growth in the range of flat to 2% for the year, with growth weighted more in the second half due to product launches [23]. - Management acknowledged the potential impact of tariffs on pricing and consumer behavior, emphasizing the need for strategic navigation in a volatile environment [25][121]. Other Important Information - The company recorded a goodwill impairment charge of $475 million related to Best Buy Health, which is excluded from adjusted earnings [66]. - Capital expenditures for fiscal '25 were $706 million, down from $795 million in fiscal '24, reflecting a reduction in store-related investments [67]. - The quarterly dividend was increased to $0.95 per share, marking the 12th consecutive year of dividend increases [68]. Q&A Session Summary Question: Impact of tariffs on pricing and sales - Management indicated that the 10% tariff from China could result in a negative impact of approximately 1 point on comparable sales, with potential price increases depending on vendor actions and consumer reactions [77][80]. Question: Flexibility in supply chain regarding tariffs - Management highlighted their experienced team and ongoing communication with vendors to navigate supply chain adjustments and mitigate tariff impacts [95][97]. Question: Comparison of company performance to industry growth - Management stated that for Q4, the company's market share was flattish compared to last year, with notable share gains in computing and gaming categories [132][134].