Creative Realities (CREX) Stock: Why The Price Increased Today

By Amit Chowdhry ● Mar 23, 2022
  • The stock price of Creative Realities Inc (NASDAQ: CREX) increased by 8.28% today. This is why.

The stock price of Creative Realities Inc (NASDAQ: CREX) – a leading provider of digital signage solutions – increased by 8.28% today. Investors are responding positively to Creative Realities announcing its financial results for the year ended December 31, 2021, including the quarter ended as of the same date.

2021 Financial Overview
All the results represent the financial results of Creative Realities and exclude any results of Reflect Systems as the merger was closed February 17, 2022. And the first quarter of 2022 will include financial results for Reflect Systems for the period February 17, 2022 – March 31, 2022 during which Reflect operated as a wholly owned subsidiary of Creative Realities.

Key Highlights:

— Revenue growth of $1.0 million, or 5.6%

— Digital signage revenue growth of $2.9 million, or 20.5%

— Net income of $0.2 million as compared to net loss of $16.8 million in 2020

— EBITDA of $3.9 million as compared to an EBITDA loss of $13.9 million in 2020

Revenue, gross profit, and gross margin:

— Revenues were $18.4 million for the year ended December 31, 2021, an increase of $1.0 million, or 5.6%, as compared to the same period in 2020. Removing our Safe Space Solutions revenue in each period, revenues from our core digital signage solutions were $16.8 million in 2021, an increase of $2.9 million, or 20.5%, as compared to 2020.

— Hardware revenues were $9.5 million for the year ended December 31, 2021, an increase of $0.5 million, or 5.1% as compared to the same period in 2020; digital signage hardware solutions revenue increased $2.1 million in 2021 compared to 2020, offset by reductions in sales of our Safe Space Solutions products. Gross margin on hardware revenue was 26.8% during 2021 as compared to 30.5% during 2020 primarily due to the reduction in revenue from Safe Space Solutions products, which have historically generated higher gross profit on a per unit basis.

— Services and other revenues were $9.0 million for the year ended December 31, 2021, an increase of $0.5 million, or 6.2%, as compared to the same period in 2020, driven primarily by a $0.2 million, or 44%, increase, in software development services for a single key customer for custom development in our platform.

— Managed services revenue, which includes both software-as-a-service (“SaaS”) and help desk technical subscription services for our traditional digital signage and Safe Space Solutions product offerings, were $5.6 million for the year ended December 31, 2021, an increase of $0.2 million, or 4.0%, as our base business and related deployments continued to rebound following customers opening their venues/locations upon release of COVID-19 vaccines.

— Gross profit was $8.4 million for the year ended December 31, 2021, an increase of $0.2 million, or 3%, compared to the same period in 2020. Consolidated gross margin decreased to 45.3% for the year ended December 31, 2021 from 46.5% in the prior year, driven primarily by a reduction in Safe Space Solutions sales, which have historically generated higher margin on a per unit basis.

— These reductions were partially offset by an increase in stock compensation amortization expense of $1.2 million related to incremental employee and directors’ awards.
—Excluding the consideration of those Employee Retention Credits recorded in the period and the year-over-year impact of bad debt expense and recovers, total general and administrative expenses decreased $0.8 million, or 10.2%, during 2021 as compared to 2020.

Operating loss, net loss, and EBITDA:

— Operating loss was $2.5 million for the year ended December 31, 2021 as compared to an operating loss of $16.1 million during the same period in 2020. The current year operating loss included $0.5 million in costs associated with pursuit of acquisition activities, including the Reflect transaction.

— Net income was $0.2 million for the year ended December 31, 2021 as compared to net loss of $16.8 million for the same period in 2020.

— EBITDA was $3.9 million for the year ended December 31, 2021 as compared to an EBITDA loss of $13.9 million for the same period in 2020. Adjusted EBITDA was $1.2 million in 2021 as compared to an Adjusted EBITDA loss of $3.2 million in 2020. See below for a description of these non-GAAP financial measures and reconciliation to our net loss.

KEY QUOTES:

“CRI’s fourth quarter 2021 revenue was approximately $5.4 million, bringing full year 2021 revenue to $18.4 million, which represents an increase of 8.3% and 5.6% as compared to the same periods in the prior year. Removing the year-over-year revenue generated from our Safe Space Solutions products, which we launched in response to the COVID-19 pandemic, our core digital signage revenue grew 32.2% and 20.5% in the three- and twelve-month periods ended December 31, 2021 as compared to the same periods in the prior year, despite facing supply chain difficulties. We continue to experience strong and growing demand for our digital signage solutions into 2022 and beyond.”

“Our primary focus is growing CRI into the market leader in end-to-end digital signage solutions for enterprise customers, expanding the number of devices managed via our digital signage software, and increasing the value of our Company through expansion in our recurring services revenue. During the fourth quarter of 2021, CRI won a significant new theme park customer that will continue to deploy hardware throughout 2022 and we expect to ultimately add more than 1,300 billable devices, generating monthly recurring subscription revenue to our content management software platforms.”

“The tremendous momentum and return to double-digit growth that we experienced in core digital signage solutions throughout 2022 has only accelerated with our acquisition of Reflect Systems, Inc. (“Reflect”) in February 2022. In December 2021, CRI and Reflect went to market on our first joint sales effort, which resulted in a major win – a project to deploy digital experiences for a retail customer at hundreds of locations nationwide for an expected total contract value in excess of $10 million. Our merger with Reflect and this win immediately validated what we’ve been saying since Reflect and CRI first began discussing a merger: we believe our combined offerings are stronger than anything else in the industry. Winning a project of this value and prominence sends a powerful message to existing and potential customers – we have something new and exciting that they need to consider.”

“I could not be more excited about the opportunity to join forces with Reflect, which has an incredible track record for growing annual recurring revenues via software subscriptions to its digital signage software platforms. In addition, it brings CRI a tremendous, patented AdTech platform (Reflect AdLogic) and a media sales capability that will enable the company to directly productize solutions and participate in the out-of-home advertising industry, including the potential for integrated programmatic high value digital advertising solutions. With our recent theme park and retail wins, combined with the outlook for our expanded customer base and growth prospects, we expect the combined company to generate revenue in excess of $43 million during 2022, representing an organic growth rate in excess of 35% on a combined company basis as compared to 2021. This expectation includes the consolidation of Reflect operations for the period beginning February 17, 2022.”

“We are proud of the work we have done to prepare the Company for long-term success and are excited about recent customer developments, both those we have previously announced and those we anticipate will come to fruition throughout 2022. Now more than ever, we believe our end-to-end offering has positioned CRI well within the industry to compete for new and growing opportunities with partners, particularly enterprise customers in a variety of key verticals.”

— Rick Mills, Chief Executive Officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.