Creative Realities sees strong pipeline despite delays; new CRO aims to accelerate customer conversions and drive revenue growth.

Rick - (00:00:00)

We do not believe this revenue has been lost; it's just been delayed. As we have discussed previously, we often don't control the sales cycle or the cadence of deployments by our customers and working with our target enterprise customers can involve delays. Our pipeline still remains strong and we believe that we are close to converting significant engagements that will reward our shareholders for their patience. However, we also recognize the need to improve the rate of conversion. Yesterday we announced the hiring of a Chief revenue officer, Dan McAllister. Dan joins CRI this coming Monday with a clear mandate to improve our new customer acquisition velocity across North America. Dan and I will be working hand in hand to reorganize our sales force and reorganize our go to market strategy with a shared vision, grow our recurring revenue and push opportunities through the pipeline quicker. With that said, our third quarter consolidated gross margin was 45%, roughly in line with last year's 46%. As of December 30, 2025, we had an annual recurring run rate or ARR of 12.3 versus 18.1 at the end of the third quarter. In 2024, adjusted EBITDA was 0.8 million for the third quarter versus 2.3 million last year. Now let's talk a little bit more about our acquisition. We purchased CDM for 70 million Canadian, approximately 50 million U.S. after many months of due diligence and negotiation. The business is a great addition to Creative Realities and as I first discussed on a call following our announcement, the company is a leader in providing data experienced based digital marketing solutions across North America. Over 60% of the revenue is recurring in approximately 84% of sales are based in Canada. CDM posted revenue of just under 56 million Canadian dollars in 2024 and is on track to deliver 25% top line year over year growth in 2025. It operates in more than 6,000 locations, that it has signage deployments in approximately 30,000 endpoints including such well known brands as Scotiabank, RBC, AMC Theaters here in the US and of course Tim Hortons in Canada. And it was recently made the exclusive partner for the North Carolina Educational Lottery Retail Deployment. This in itself was a huge win. It's a $54 million deployment over a 10 year period. In addition, with the acquisition of CDM, we acquired Canada's largest mall Retail Media Network which will generate over 32 million Canadian or 25 million U.S. approximately of advertising sales revenue this year. This Digital out of Home or DOOH Media Network has over 750 screens with exclusive representation and revenue sharing across 95 shopping destinations. These locations include 76 out of the hundred most productive Canadian shopping centers, 9 out of the 10 busiest malls in Canada, and we serve approximately 750 million visitor or shopper visits annually. And by the way, this is the first and only mall network certified by the Canadian out of Home Marketing and Measurement Bureau or what is referred to as COMMB. All in all, through this transaction we have more than doubled the size of the company, significantly increased our operations outside the us, Opened new avenues for accelerating growth going forward. CDM served thousands of QSR restaurants, financial institutions and retail establishments across Canada. Combine that with our U.S. coverage and it immediately places us in a strong position to take advantage of the explosive growth going on in retail media networks across North America. From a technology standpoint, these CDM customers bring a strong opportunity for CRI's broad product portfolio of solutions to improve the customer purchase experience driven by digital hardware installations, the management of retail media networks and professional support services. By the way, in addition, CDM has a creative agency of record credentials. They do very high end quality content all around content design and creation. In addition, while CDM currently licenses certain software applications for from third party providers, the combination with CRI including our ReflectView and Clarity CMS platforms as well as our AdLogic ad server and AdLogic CPM plus our CMS and Ad Tech platforms will provide significant synergies to accelerate growth across the business. Overall, we believe CDM will rapidly evolve, elevate our data science and content capabilities while adding the scale we need to thrive in an increasingly competitive, rapidly expanding marketplace. Given CDM's large customer base and operating footprint, we expect that our unified organization will see higher top line performance and improved bottom line results in the quarters to come. As previously disclosed, the acquisition is anticipated to provide synergies of at least 10 million across North America on an annualized basis by the end of 2026. This is really a reflection of the operating efficiencies, margin enhancement opportunities and the adoption of our CMS and ad tech platforms throughout the CDM customer base. Taking these synergies into account across the new combined company and based on CDM's business for the 12 month period ending September 30, 2025, we calculate our purchase price to be somewhere between 3 and 4 times the adjusted EBITDA of CDM on a forward looking basis, we anticipate total company revenue to exceed 100 million in 2026 with the adjusted EBITDA margins in the high teens. Once all the synergies are realized, we expect adjusted EBITDA margins will exceed 20% and free cash flow generation will be significant. We financed the CDM acquisition through a combination of debt and preferred equity, as George will discuss shortly. He'll go into the details. Simultaneous with the transaction, the company increased the size of its board from four to seven individuals, appointing three new directors I want to take this time to welcome Dan McGrath, who is the Chief Operating Officer of Cineplex, along with Tom Ellis and Mike Bosco from Northrun Capital. These individuals, each with unique capabilities and expertise, will help lead us through our next phase of expansion across North America and potentially overseas. It's an exciting time to be here and we can't wait to see what the future holds. We continue to have an extremely large pipeline of opportunities under consideration, including new potential business opportunities due to the acquisition of cdm. I'll go through our Market outlook more detailed moment in a moment, but we are on track with our previously announced deal with a large QSR chain that has over 1,000 locations across more than 25 states. We completed the pilot program in select locations during the third quarter and are in process of rolling out nationally in Q4. We are delivering turnkey solutions along with consulting, content, strategy, the hardware deployment and then of course ongoing Day two service, all powered by our proprietary CMS platform clarity. Our AdLogic ad server and CPM plus programmatic applications also continue to see increasing traction and and interest from existing and new customers. As a reminder, historically we've already delivered up to 50 million ads daily via this advertising platform. I believe this technology will play a key role in driving top line growth going forward, particularly now with CDM under our belt. With all our advances in proprietary platforms, the future looks very bright for the new, much larger creative realities. We expect revenue to accelerate, backlog to grow and margins to improve, putting us in position for much better results in 2026. I'll turn it back over to George to share some additional comments on our financials. George thank you Rick.

George - Chief Financial Officer - (00:10:42)

An overview of our financial Results for the third quarter of 2025 was provided in our earnings release and Form 10Q, which included the condensed consolidated balance sheet as of September 30, 2025, the statement of Operations and Statement of Cash flows for the three and nine months ended September 30, 2025, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended September 30, 2025, as well as the preceding four quarters. While Rick reviewed our operational results in detail, let me provide a couple of points of Context Relating to the Balance Sheet cash as of September 30, 2025, the company had cash on hand of approximately $0.3 million versus $0.6 million at the end of the second quarter 2025. As previously mentioned, our consolidated balance sheet reflects minimal cash on hand as the Company has a sweep instrument to apply cash against the revolving debt facility to further manage our interest expense. Our gross and net debt stood at approximately $22.2 million and $21.9 million respectively at the end of the third quarter as compared to $20.1 million and $19.5 million respectively at the end of the second quarter of 2025. At the end of the third quarter, our leverage on a gross and net basis was 7.56 times and 7.46 times respectively, versus 4.53 times and 4.40 times at the end of the second quarter of 2025. Please be reminded that the Q2 and Q3 2025 debt balances reported herein contain the contingent liability from the merger of Reflect Systems in 2022. Since the end of the quarter, as Rick discussed, our balance sheet has changed significantly due to the acquisition of CDM. We financed the transaction through a combination of debt and preferred equity including a three year $36 million senior term loan with Birch Merchants bank and $30 million of convertible preferred equity with a $3 conversion price provided by affiliates of Northfront Capital. With this financing in place, we have a total of $39.9 million in debt as of November 7, 2025 and retain a credit facility of 22.5 million with availability of $17.7 million. I will turn it back to Rick for any additional comments.

Rick - (00:13:39)

Thanks George, Just a few updates and then we'll go to Q&A. But number one, we have been notified by a very large QSR that they have chosen CRI as a result of a competitive RFP process. We are in the process of finalizing the contract and expect to make an announcement in mid December at the latest. They have over 4,000 locations in the US alone and our drive-through pricing was one of the key deciding factors as they have not rolled out digital drive-through yet and so we expect a large expansion with that customer in 2026. Our largest C store customer we've talked about before has begun a test utilizing their current in store screens and updating the configuration of those screens and configuring it into a retail media network utilizing our AdLogic ad serving technology. So they're running our CMS, and now they're running AdLogic. Assuming the test is successful, the 8,000 in store screens, approximately 2,000 locations, would grow significantly as the rest of the screens would be added to the retail media network. We expect that decision in April of 2026. Assuming they move forward, this would result in an additional 1 million in annual recurring SaaS from that customer alone. We remain well positioned in the digital transformation landscape. Look forward to delivering further improved operating results. With that, we'll now move to the Q&A portion of the call. Please go ahead operator.

OPERATOR - (00:15:29)

Thank you. At this time we'll conduct the question and answer session as a reminder to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster in Our first question comes from the line of Jason Crier of Greg Hallam your line is now open.

Jason Crier - (00:15:53)

Great.

UNKNOWN - (00:15:53)

Thank you guys. Rick, I was just wondering if you.

Jason Crier - (00:15:56)

Can provide some feedback on what you've been hearing from customers and partners and partners since you announced the CDM acquisition a few weeks ago and any enthusiasm that's built up in the channel.

Rick - (00:16:09)

Yeah, Jason, great question. So comment. All of the customers have been very positive and certainly appreciate how it gives us tremendous scale. And as you may or may not know, I flew 10,000 miles in one week to virtually visit every customer of CDM's in the week prior to the closing. So the CDM customers understand the acquisition. There is no issue. I will tell you the one area you mentioned, you use the term the channel in the competitive landscape among our industry. I will tell you this was a very large statement and everybody has acknowledged CRI is absolutely now one of the top 2, 3, 4 digital signage integrators in North America, period. So a lot of acknowledgement around that. As you know or folks on this call know, we have always stated that this is all about get scale, go big or go home. Well, guess what, we've got scale and we went big and we're glad to be here.

Jason Crier - (00:17:21)

Appreciate that you've had a lot of success in qsr, so maybe you can. Just talk about how you go to. market in Canada following the acquisition. I'm curious when you think about that, like do you lead with existing CDM customers in Canada or do you feel like there's an opportunity to lead with existing CRI customers that have somewhat of a presence.

Rick - (00:17:45)

A footprint in Canada? A little bit of both. There's certainly some CRI customers have a footprint in Canada you better believe we are already knocking on their door, right? Number two, we believe there is a tremendous opportunity to lead with our drive thru opportunity for a number of customers throughout Canada. Canadian QSRs, generally speaking have not gone digital at all. And so we have a tremendous opportunity to help these QSR customers in Canada to go digital. Today we service a portion of A number of QSRs in Canada specifically A&W, also Dairy Queen of Canada. Also we do all the content for Tim Hortons. So certainly three rich opportunities there alone. But we do expect to reach out to what I would call the tier 2 QSR operators throughout Canada, those folks with 500 to 1500 locations. So that's really a strategy that we are embarking upon virtually immediately.

Jason Crier - (00:18:58)

Lastly, for me, we've talked the last few quarters about the retail media opportunity. We've talked about how scale matters there. Can you reframe that opportunity now with CDM in the fold, how this increases your scale, how this increases your capabilities and if you feel any differently about CRI's ability to win in that market.

Rick - (00:19:24)

Yes, the answer clearly is just yes. But let me tell you why we now you know before we have always had the credibility of having a very qualified ad tech stack, number one. Number two, that has delivered millions of ads on a daily basis. So we've always had that credibility. Now what we bring to the market or to the table is we can look customers in the eye and say yes, we understand about how to run a retail media network. We own one. We own the largest retail mall retail media network in Canada. We're delivering over 32 million Canadian in ad sales. We understand the entire ecosystem from A to Z, Mr. Customer. So it brings a whole new level of credibility. Oh, by the way, it brings some of the retail media expertise which CDM has a lot of because of running those networks in Canada. So we expect to bring that expertise down in front of our US Customers and gain traction quicker.

Jason Crier - (00:20:35)

Thanks a lot Rick.

Rick - (00:20:36)

Appreciate it. Thanks Jason.

OPERATOR - (00:20:39)

Thank you. One moment for our next question. Our next question comes from the line of Brian Kinzinger of Alliance Global Partners. Your line is now open.

Brian Kinzinger - (00:20:50)

Hi guys. Thanks for taking my questions. While it's only been a month since you announced the acquisition, I'm curious if you've learned anything more about the state lottery pipeline and RFPs when those might be competed and maybe if you could size that opportunity collectively.

Rick - (00:21:09)

Sure. Great question, Brian. Number one, as you know, we talked about North Carolina Lottery. That alone was 54 million, with approximately 8 to 10 million in hardware. And then the rest is SaaS over a 10 year period. So number two, the opportunity, what we had heard early is There were about 10 or so states in the US that were planning RFPs. We since currently have received our first RFP from down here in the US and expect to participate in more. We believe the opportunity in lottery is robust. Okay, and then can you talk about.

Brian Kinzinger - (00:21:53)

Your go to market strategy in US malls as you leverage CDM's positioning in Canada?

Rick - (00:22:03)

We are currently talking with a couple mall like properties that have the ability to expand our retail media network from Canada down into the U.S. brian, we expect over the next two quarters to engage with a number of the mall ownership properties here in the U.S. You know, think folks like a Westfield, like a Simon that we would engage with. We have not had meaningful discussions yet, but we expect to do that one of just one general note. Throughout the U.S. mall there is nobody that has been able to construct a mall network that is as successful as our Canadian mall network in Canada. No one's been able to put it together in the US we expect to be able to bring some of that knowledge and potentially participate in that in the US over the next year or two.

Brian Kinzinger - (00:23:07)

Okay, we heard comments on QSR and retail. One vertical I didn't hear about is stadium. So maybe you can provide an update on how that's materializing if at all.

Rick - (00:23:21)

Our stadium business continues to grow. This is year three, 2026, year three that we've been in that vertical market really going hard. We have a couple signature wins that are waiting for signatures as we speak. We expect 2026 to be our best year. You know, everything in my DNA tells me that is going to that business vertical is going to be up between 30 and 40% in 2026 alone.

Brian Kinzinger - (00:23:53)

Okay, my last question I want to. Make sure I understand there was a. Lot of discussion of different size, customers, potential wins, things you've already won. I heard 1,000 store location. I thought I heard a QSR that had a 4000 store location. Then I heard an 8000 store sound like three separate ones. I can only assume that 8000 is 711 you talked about specifically last quarter, am I right? There were three separate opportunities and one of those had been signed versus not signed. I was confused. And then lastly on customer specific, is that moving forward this quarter? So those are four different customers I think.

Rick - (00:24:33)

Yeah. So you know the Icebox network was as we talked about was the $2 million that got pushed from Q3 to Q4 because of a funding snafu and we are literally still waiting to Launch that. We're waiting on a daily basis for them to resolve that so we can launch that network number one. Number two, yes, you were correct when you talked about the 8,000 screens in 7-Eleven. Yeah. So we have dramatically worked with them to move approximately 8,000 screens into a true retail media network test and that test started end of October, runs through the end of March. Assuming it's a success, they will turn all the rest of the screens utilizing our AdTech and our ad-serving technology and that will grow our SaaS revenue relatively significantly. The third one I talked about was another it's another QSR win. We received the verbal. We are in daily discussions, contracts are going back and forth, lawyers, red lines, et cetera. We expect that contract to be signed by mid December and at which point in time we would make an official announcement. I still do not anticipate getting permission to articulate the name. As you know that's always a challenge in our industry. But that particular one is conversion of a number of the number of their 4,000 locations have already gone digital. They will be migrating all of that to our platform and most importantly out of all their locations they have less than a handful of digital drive thrus and that's the number one area of growth for them in 2026. So we expect that alone to be add some significant revenue in 2026 assuming the franchisees have the desire to buy a digital drive thru for their location. So number of things going on there.

Brian Kinzinger - (00:26:36)

Okay, thank you.

Rick - (00:26:38)

Thanks Brian.

OPERATOR - (00:26:39)

Thank you. One moment for our next Our next question comes online of John Hickman of Ladenburg Doll man. Your line is now open.

Rick - (00:26:50)

Hey John.

John Hickman - (00:26:51)

Hey. I'm intrigued with this new chief revenue officer. What exact I mean it's no secret that you've had trouble or the sometimes the addition of new customers has been slower than you thought it should be. But can you elaborate on what you think this guy can do to push customers like over the goal line to actually sign with you?

Rick - (00:27:23)

First and foremost John, that was most gracefully said and articulated. Yes. We've had a challenge getting them across the finish line. I need somebody who can really be a strong closer out there as a chief revenue officer who really owns the revenue number this business is now at over 100 million. There's not enough of Rick Mills as the CEO founder to go around, and I need help and so I really this is an individual I've spent eight, nine months back and forth. We originally met in June time frame George and I were together and had a meeting with the fellow and really Were intrigued and spent a number of months in conversations. He has been in and around our industry for 20 years, knows a bunch of customers, a bunch of even industry professionals. When you bring on somebody like a chief revenue officer, you expect them to bring in some of the industry professionals. So we expect a lot of potential inbound customer opportunities. The ability to convert some of these customers who have, who have been lingering, just haven't got them across the finish line. So I'm very intrigued to have help. Hope that answers your question, John.

John Hickman - (00:28:47)

So with him, how many sales guys will you actually have besides yourself?

Rick - (00:28:54)

Well, between the CDM sales organization and the CRI sales organization, we have about approximately somewhere between 40 and 43 customer facing individuals. So it's a dramatic expansion of our sales effort. Okay, okay.

John Hickman - (00:29:18)

All my other questions got answered by the previous questioners. So thank you.

Rick - (00:29:27)

Thanks, John.

UNKNOWN - (00:29:28)

Great.

OPERATOR - (00:29:30)

Thank you. One moment for our next question. Our next question comes from the line of Howard Halpern of Danvik Brothers. Your line is now open.

Howard Halpern - (00:29:42)

Hi guys.

Rick - (00:29:43)

Hey, Howard.

Howard Halpern - (00:29:45)

How does having now a little bit of a content creation team help across your existing customer base?

Rick - (00:29:58)

You know, Howard, I would tell you we've always had content creation. We had a relatively smaller team as part of CRI and predominant content creation and content manage. Management was focused on QSR and C Store. With the CDM team. Now they're adding at least they have 15 people in just in content creation alone. They do high end agency work. They will actually go in and do a photo shoot. They will do high end agency of record type content and we expect to chase that. Our content business, I think in 2026 will, I think we've budgeted somewhere between five and a half or six million US for content. And over the next couple of years we expect to drive the content team. Ultimately the goal is to get it to about 10 million over the next 24 months. So we expect content to grow.

Howard Halpern - (00:31:05)

Okay. And with the funding that occurred through the transaction, you're comfortable with. With the. Growth potential and the capital you have in place?

Rick - (00:31:21)

Yes, matter of fact, our wonderful partners at Northrun, Tom Ellis, Mike Bosco, one of the key elements of discussion about them making the investment was making sure we had enough cash and available credit facility to run this business and grow this business. And that was a key tenet of them even making the investment. And I'd have to defer to George if George is on the line. But I believe George, don't we have about 17 million or 17.5 million available today?

George - Chief Financial Officer - (00:32:00)

That's correct.

Rick - (00:32:01)

Rick yeah. So lots of headroom to run the business on a go forward basis. Thanks, George.

Howard Halpern - (00:32:10)

And just one final one more of a Numbers question. Entering 2026, the end of this year, what do you anticipate combined companies ARR to be?

Rick - (00:32:28)

We expect as we enter the year, the combined ARR. It's a combination of arrangement plus our ad revenue, which we indicate is ARR like those two will exceed 40 million US combined.

Howard Halpern - (00:32:46)

Okay. Okay, so that's good. Higher margin revenue going into 2026. That sounds great.

Rick - (00:32:54)

Very much so. And you know, that's why we're very bullish on our adjusted earnings targets.

Howard Halpern - (00:33:02)

Okay, thanks. And keep up the good work.

Rick - (00:33:05)

Thank you.

OPERATOR - (00:33:08)

Thank you. I'm showing no further questions at this time. I'll now turn it back to Rick Mills for closing remarks.

Rick - (00:33:15)

Okay. Let me conclude this call by thanking all the shareholders, clients, partners, CRI employees, all the CDM employees who logged in for the first time for all of the continuing effort, commitment and support as we continue to grow the Creative Realities platform. You know, the next four months, we have a lot of integration to do, a lot of hard work, but it will be fun work. And we look forward to speaking with you again next quarter.

OPERATOR - (00:33:47)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.