Creative Realities(US:CREX)2025-08-13 14:00Financial Data and Key Metrics Changes - The company reported revenue of $13 million for Q2 2025, a 34% increase compared to Q1 and roughly flat year-over-year [6] - Gross profit was $5 million in Q2 2025, down from $6.8 million in Q2 2024, with a gross margin of 39% compared to 52% in the prior year [7] - Adjusted EBITDA rose to $1.2 million for Q2 2025 from $500,000 in Q1, but was down slightly from $1.5 million in the previous year [8] - The annual recurring revenue (ARR) run rate was $18.1 million at the end of Q2 2025, up from $17.3 million at the end of Q1 [7] Business Line Data and Key Metrics Changes - The company experienced a shift in revenue mix towards more hardware sales, impacting profitability due to fewer service revenues [7] - The company is focusing on four primary vertical markets: Quick Service Restaurants (QSR), Convenience Stores (C store), Retail, and Sports & Entertainment [17] Market Data and Key Metrics Changes - The company announced a significant engagement with a well-known upscale quick service restaurant chain with over 1,000 locations, currently in pilot program [10] - The retail media network business is expected to grow revenue and recurring SaaS in 2026 and beyond, with over 25 million ads delivered daily [12] Company Strategy and Development Direction - The company aims to improve drive-thru performance in the QSR vertical, with a new digital display solution priced at $14,999, which is 20% lower than competitors [18] - The company is also expanding its presence in the C store vertical, with plans from a long-time customer, 7-Eleven, to open 1,100 new restaurants [19] - The company is focused on digital transformation and expects to see significant growth in the live venue IPTV market [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue acceleration in the second half of the year, driven by a backlog of installations and new customer engagements [13][30] - The management noted that the transition to digital solutions is creating pressure on businesses, particularly in the QSR sector [34] Other Important Information - The company achieved SOC 2 Type 2 certification, enhancing its credibility with enterprise customers [23] - The company reduced approximately $3.1 million in debt during the quarter, reflecting improved cash flow management [8][15] Q&A Session Summary Question: Update on the progression of deals in the pipeline - Management indicated that deals are moving forward slowly but expects announcements in the calendar year [28] Question: Confidence in revenue and profitability acceleration - Confidence stems from a backlog of installations and new customer engagements, with significant deployments expected soon [30] Question: Pressure on businesses to modernize technology - The most pressure is seen in the QSR drive-thru sector, where digital solutions can significantly improve efficiency [34] Question: Impact of pre-buys of screens on hardware side - Pre-buys may create some pressure on hardware revenue but will lead to increased service revenue in subsequent quarters [52] Question: Updates on 7-Eleven deployments - The company expects to service 1,100 new restaurants and 1,300 enhanced stores over the next five years [55] Question: Importance of Circle K project in Mexico - The Circle K project is a proof of concept, with potential for future deployments in Latin America [67] Question: Acquisition strategy update - The company remains interested in acquisitions but is focused on finding the right fit [72] Question: Expectations for debt reduction - Future debt reduction will depend on cash generation and working capital needs, with no drastic reductions expected [74] Question: Competitors' SOC 2 compliance status - The top competitors have achieved SOC 2 compliance, while many smaller companies have not [80] Question: Breakeven quarter expectations - Management anticipates reaching breakeven as they exit the year, driven by revenue growth and operational efficiency [82]