Creative Realities, Inc.
Q3 2020 Earnings Call Transcript

Published: 13 Nov 2020

[Will Logan:]

Apologies all. There were some technical difficulties with our initial webcast. We will begin the call now. Good morning and welcome to the Creative Realities Third Quarter 2020 Earnings Call. All lines have been placed on mute to prevent any background noise. After the company’s remarks, there will be a question-and-answer session. Alternatively, questions can be submitted during the call via e-mail to IR at cri.com. This call will be recorded and a copy will be available on our website at cri.com following completion of the call. The call today, you'll be hearing from myself, Will Logan, Chief Financial Officer, and I'll be joined by Rick Mills, Chief Executive Officer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. The words anticipates, beliefs, expects, intends, plans, estimates, projects, should, may, propose and similar expressions or the negative versions of such words or expression as it relate to us or our management are intended to identify forward-looking statements.

[Rick Mills:]

Thanks, Will. Sorry everybody but the technical difficulty. First and foremost, good morning to everyone. Thanks for joining the call. We exited the third quarter with a tremendous amount of optimism and momentum. As I've discussed on our past two earnings calls. We've moved the impact of the COVID-19 pandemic on the digital signage industry and CRI would be significant. Several of our key verticals have been severely impacted by the pandemic. Specifically, our movie theater, and stadium arena verticals have been hit hard. However, the good news is activity has resumed in our other verticals such as retail, C-store, and quick serve restaurants. And while these verticals have not bounced back to 100% pre-pandemic levels, there is activity and engagement. I believe we have seen the worst of the pandemic and not only survived we are beginning to thrive. Our Thermal Mirror product has become an entire suite of products with a new name, Safe Space Solutions. It's one platform with many use cases. We adopted the best practices globally. That's Q&A screening along with temperature taking and we implemented them in our solution. We added mobile capability for Q&A screen. We add screen of employee badges for identification. And finally, we added in a touch enabled tablet for Q&A screening, which has become a must have product in the nursing home and retirement community environment. I do want to take a moment to thank our software partner in this endeavor, Ron Lovak and his entire team in reality, they've been an outstanding partner. As we previously announced, three of the major distributors of technology products as Ingram micro, Tech Data and Synnex. They picked up the entire Safe Space solution product line, including our SaaS subscription offerings to customers. And now we have added a fourth distributor in the mix. ELMO Corporation. For those of you who don't know ELMO, ELMO corporation is the largest independent distributor of appliances, consumer electronics, professional audio video equipment, furniture and housewares in the United States.

[Will Logan:]

Thanks, Rick. I'll now summarize our financial results for the three months ended September 30, 2020 compared to 2019. Regarding our third quarter 2020 results, we note that MD&A section of our quarterly report on Form 10-Q provides unaudited 2020 and 2019 quarterly financial information derived from the company's annual and quarterly financial statements. We've also provided a reconciliation of GAAP net income to non-GAAP quarterly EBITDA and adjusted EBITDA for the current and previous four quarters therein.

[Rick Mills:]

Thanks, Will. Appreciate the update. As you can tell folks on the call, I am very bullish on our business and expect to return to a growth mode throughout 2021. We believe that we have weathered the worst of the COVID-19 pandemic with respect to its impact on our business, and are optimistic about our opportunities with our core digital signage business and the immediate opportunities for the Safe Space Solutions product line. CRI has remained open, flexible and transparent business partner to our vendors and customers. And we believe this flexibility and responsiveness during this crisis will contribute to our success as businesses reopen in the marketplace stabilizes.

[A - Will Logan:]

Yes. Here we have a couple of questions that have come in with the email. We'll start there. Brian Kinsler from Alliance Global has asked you mentioned the pickup and expected installations for the digital signage business. Can you comment on what industries are the driver of this demand?

[Rick Mills:]

Great question Brian. Two industries specifically we're seeing rapid expansion in the C-store space. And then also entertainment venues while not fully engaged today in terms of signing POs, they're in advanced planning stages of large deployments to re-engage their customers as they flow back into entertainment spaces. So those are really the two that we're seeing primary drivers in. And then the third one, I would probably articulate QSR space, a lot of emphasis on Drive Thru, and a lot of emphasis on in-store tax in the QSR. space.

[Will Logan:]

Is there any context you can provide to the backlog of quarters that you discussed that we'll be working from and any dollar value that you would share around opportunities?

[Rick Mills:]

Well, we tend to look at each installation each. We call it a screen/ player combination. And as it relates to our revenue, each screen/player combination equates to about 3,000 in revenue as a onetime installation, and then of course, there's the recurring fast and it leaves behind. Today, so with each, each screen player being in 3,000, today, we have a backlog or are in discussions, significant advanced discussions for over 15,000 new screens to be deployed in 2021. So, I think folks can do the math.

[Will Logan:]

Great. And then are you seeing are we seeing any pricing differences in signage products today and moving forward versus what we have typically seen pre pandemic?

[Rick Mills:]

Not really have not seen much of any price degradation. We are seeing screens come on board with more advanced features. But the actual price points tend to stay the same. We transitioned from 46 inch to 49 inch glass over a three year period, but the price effectively stayed about the same. Now we're seeing a transition from 49 inch glass to 50 inch glass price is going to be about the same.

[Will Logan:]

Great, those were the questions via the email inbox. We will now look to the phones to see if there anyone that has raised their hand. It appears that there are no other questions at this time have responded to all questions. Let me conclude today's call by thanking all of our shareholders, clients, partners and employees for their continuing efforts, commitment and support during these unprecedented times. This now concludes the Creative Realities third quarter 2020 earnings call.