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Creative Realities Reports Fiscal 2024 Third Quarter Results
| CREATIVE REALITIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) | ||||||||
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 868 | $ | 2,910 | ||||
| Accounts receivable, net | 11,300 | 12,468 | ||||||
| Inventories, net | 3,054 | 2,567 | ||||||
| Prepaid expenses and other current assets | 743 | 665 | ||||||
| Total Current Assets | $ | 15,965 | $ | 18,610 | ||||
| Property and equipment, net | 369 | 499 | ||||||
| Goodwill | 26,453 | 26,453 | ||||||
| Other intangible assets, net | 23,519 | 24,062 | ||||||
| Operating lease right-of-use assets | 901 | 1,041 | ||||||
| Other non-current assets | 355 | 112 | ||||||
| Total Assets | $ | 67,562 | $ | 70,777 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 6,446 | $ | 7,876 | ||||
| Accrued expenses and other current liabilities | 3,649 | 3,761 | ||||||
| Deferred revenues | 2,769 | 1,132 | ||||||
| Customer deposits | 3,398 | 3,233 | ||||||
| Current maturities of operating leases | 461 | 505 | ||||||
| Short-term portion of related party term debt | - | 3,690 | ||||||
| Short-term portion of contingent consideration, at fair value | 10,794 | - | ||||||
| Total Current Liabilities | 27,517 | 20,197 | ||||||
| Revolving credit facility | 10,979 | - | ||||||
| Long-term related party term debt | - | 9,829 | ||||||
| Long-term obligations under operating leases | 463 | 536 | ||||||
| Long-term contingent consideration, at fair value | - | 11,208 | ||||||
| Other non-current liabilities | 309 | 176 | ||||||
| Total Liabilities | 39,268 | 41,946 | ||||||
| Shareholders' Equity | ||||||||
| Common stock, $0.01 par value, 66,666 shares authorized; 10,447 and 10,409 shares issued and outstanding, respectively | 104 | 104 | ||||||
| Additional paid-in capital | 82,206 | 82,073 | ||||||
| Accumulated deficit | (54,016 | ) | (53,346 | ) | ||||
| Total Shareholders' Equity | 28,294 | 28,831 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 67,562 | $ | 70,777 |
| CREATIVE REALITIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) | ||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Sales | ||||||||||||||||
| Hardware | $ | 5,241 | $ | 4,847 | $ | 14,409 | $ | 12,606 | ||||||||
| Services and other | 9,201 | 6,721 | 25,433 | 18,102 | ||||||||||||
| Total sales | 14,442 | 11,568 | 39,842 | 30,708 | ||||||||||||
| Cost of sales | ||||||||||||||||
| Hardware | 3,979 | 3,384 | 10,682 | 9,314 | ||||||||||||
| Services and other | 3,874 | 2,881 | 10,019 | 6,704 | ||||||||||||
| Total cost of sales | 7,853 | 6,265 | 20,701 | 16,018 | ||||||||||||
| Gross profit | 6,589 | 5,303 | 19,141 | 14,690 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | 1,525 | 1,301 | 4,655 | 3,666 | ||||||||||||
| General and administrative expenses | 3,928 | 3,842 | 12,834 | 11,654 | ||||||||||||
| Total operating expenses | 5,453 | 5,143 | 17,489 | 15,320 | ||||||||||||
| Operating income (loss) | 1,136 | 160 | 1,652 | (630 | ) | |||||||||||
| Other expenses (income): | ||||||||||||||||
| Interest expense, including amortization of debt discount | 303 | 734 | 1,479 | 2,324 | ||||||||||||
| (Gain) loss on change in fair value of contingent consideration | 598 | 1,369 | (414 | ) | 1,461 | |||||||||||
| Loss on debt extinguishment | - | - | 1,059 | - | ||||||||||||
| Other expense (income) | (11 | ) | 3 | (28 | ) | (132 | ) | |||||||||
| Total other expenses (income) | 890 | 2,106 | 2,096 | 3,653 | ||||||||||||
| Net income (loss) before income taxes | 246 | (1,946 | ) | (444 | ) | (4,283 | ) | |||||||||
| Benefit (provision) for income taxes | (192 | ) | 15 | (226 | ) | (73 | ) | |||||||||
| Net income (loss) | $ | 54 | $ | (1,931 | ) | $ | (670 | ) | $ | (4,356 | ) | |||||
| Basic earning (loss) per common share | $ | 0.01 | $ | (0.22 | ) | $ | (0.06 | ) | $ | (0.56 | ) | |||||
| Diluted earning (loss) per common share | $ | 0.01 | $ | (0.22 | ) | $ | (0.06 | ) | $ | (0.56 | ) | |||||
| Weighted average shares outstanding - basic | 10,447 | 8,713 | 10,438 | 7,775 | ||||||||||||
| Weighted average shares outstanding - diluted | 10,634 | 8,713 | 10,438 | 7,775 |
| CREATIVE REALITIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share per share amounts) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (670 | ) | $ | (4,356 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 2,901 | 2,393 | ||||||
| Amortization of debt discount | 569 | 1,078 | ||||||
| Amortization of stock-based compensation | 9 | 539 | ||||||
| Amortization of deferred financing costs | 37 | - | ||||||
| Loss on extinguishment of debt | 1,059 | - | ||||||
| Bad debt expense | 186 | 318 | ||||||
| Provision for inventory reserves | (65 | ) | 141 | |||||
| (Gain) loss on change in fair value of contingent consideration | (414 | ) | 1,461 | |||||
| Deferred income taxes | 157 | 44 | ||||||
| Changes to operating assets and liabilities: | ||||||||
| Accounts receivable | 982 | 2,080 | ||||||
| Inventories | (422 | ) | (180 | ) | ||||
| Prepaid expenses and other current assets | (78 | ) | 859 | |||||
| Accounts payable | (1,360 | ) | (53 | ) | ||||
| Accrued expenses and other current liabilities | 8 | 683 | ||||||
| Deferred revenue | 1,637 | 2,284 | ||||||
| Customer deposits | 165 | 1,054 | ||||||
| Other, net | 49 | (39 | ) | |||||
| Net cash provided by operating activities | 4,750 | 8,306 | ||||||
| Investing activities | ||||||||
| Purchases of property and equipment | (9 | ) | (287 | ) | ||||
| Capitalization of labor for software development | (2,293 | ) | (2,851 | ) | ||||
| Net cash used in investing activities | (2,302 | ) | (3,138 | ) | ||||
| Financing activities | ||||||||
| Proceeds from sale of common stock, net of offering expenses | - | 5,454 | ||||||
| Proceeds from borrowings under revolving credit facility | 21,854 | - | ||||||
| Repayment of borrowings under revolving credit facility | (10,875 | ) | - | |||||
| Payment of deferred financing costs | (289 | ) | - | |||||
| Repayment of term debt | (15,147 | ) | (3,865 | ) | ||||
| Principal payments on finance leases | (33 | ) | (14 | ) | ||||
| Net cash used in financing activities | (4,490 | ) | 1,575 | |||||
| Increase (decrease) in cash and cash equivalents | (2,042 | ) | 6,743 | |||||
| Cash and cash equivalents, beginning of period | 2,910 | 1,633 | ||||||
| Cash and cash equivalents, end of period | $ | 868 | $ | 8,376 |
RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA
(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” and“Adjusted EBITDA.” 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.
EBITDA and Adjusted EBITDA 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 financial metrics because they allow external users of CRI's financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate CRI's 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 also 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 and Adjusted EBITDA exclude some, but not all, items that affect net income (loss) and may vary among companies, the EBITDA and Adjusted EBITDA 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.
| Quarters Ended | ||||||||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | ||||||||||||||||
| Quarters ended | 2024 | 2024 | 2024 | 2023 | 2023 | |||||||||||||||
| GAAP net (loss) income | $ | 54 | $ | (615 | ) | $ | (109 | ) | $ | 1,419 | $ | (1,931 | ) | |||||||
| Interest expense: | ||||||||||||||||||||
| Amortization of debt discount | - | 209 | 360 | 366 | 363 | |||||||||||||||
| Other interest, net | 303 | 304 | 303 | 302 | 371 | |||||||||||||||
| Depreciation/amortization: | ||||||||||||||||||||
| Amortization of intangible assets | 1,081 | 878 | 790 | 781 | 766 | |||||||||||||||
| Amortization of employee share-based awards | 3 | 3 | 3 | 4 | 3 | |||||||||||||||
| Depreciation of property & equipment | 51 | 52 | 49 | 48 | 50 | |||||||||||||||
| Income tax (benefit) expense | 192 | 25 | 9 | 10 | (15 | ) | ||||||||||||||
| EBITDA | $ | 1,684 | $ | 856 | $ | 1,405 | $ | 2,930 | $ | (393 | ) | |||||||||
| Adjustments | ||||||||||||||||||||
| Loss (Gain) on fair value of contingent consideration | 598 | (408 | ) | (604 | ) | (42 | ) | 1,369 | ||||||||||||
| Loss on debt extinguishment | - | 1,059 | - | - | - | |||||||||||||||
| Stock-based compensation – Director grants | - | - | - | 21 | 43 | |||||||||||||||
| Other (income) expense | (11 | ) | 18 | (35 | ) | (79 | ) | 3 | ||||||||||||
| Adjusted EBITDA | $ | 2,271 | $ | 1,525 | $ | 766 | $ | 2,830 | 1,022 |
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