Good morning. At this time, I would like to welcome everyone to the Creative Realities Inc. Q1 2023 Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at cri.com following the completion of the call. The company has prepared remarks summarizing the interim results along with additional industry and company updates. Joining me on the call today is Rick Mills, CEO, and Will Logan, CFO. Thank you very much. Mr. Logan, you may begin. Thanks, Livia. Good morning. This is Will Logan, Chief Financial Officer of Creative Realities, Inc. Welcome to our financial results and earnings call for the three months ended March 31st, 2023. I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose, and similar expressions of the negative versions of such words or expressions as they relate to us or our management are intended to identify forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in our quarterly financial statements on Form 10-Q to be filed with the SEC later today, May 15th, 2023, and in our annual report on Form 10-K filed with the SEC on March 30th, 2023. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our public filings and in our earnings release that was released earlier this morning. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities, Inc. Thanks, Will. Good morning, everybody. Thanks for joining the call. What a great quarter. Our Q1 2023 revenue of $9.9 million includes a record Q1 gross profit of $5.1 million and a record Q1 Adjusted EBITDA of $960,000. This is on the heels of our recent fiscal 2022 earnings call, where we announced record revenue last year of $43.3 million and record Adjusted EBITDA of $3.8 million for last year. We believe our Q1 results continue to demonstrate the ongoing growth in our revenue as this is the fifth consecutive quarter for which our revenue has approximated or exceeded $10 million, benefiting from increasing our record recurring revenue. Notably, we had previously communicated that annual recurring revenue is approaching a level where it covers our operating expenses, something we call the golden rule. Past this point, we project significant improvements in our Adjusted EBITDA margin as every new dollar flows through to the bottom line at higher and more favorable margins. We see this in our Q1 results, where revenue mix is driving gross profit and working in conjunction with scale, driving Adjusted EBITDA. In fact, although revenue for the Q1 was actually lower than the same period in 2022 by $800,000, our gross profit and Adjusted EBITDA increased by over $1 million and $300,000, respectively, due primarily to the increase of $1.3 million in services revenue. It is important to understand these effects as we scale and drive SaaS-based annual recurring revenue. On our last call, we issued full year 2023 guidance of $60 million in revenue, with 2023 exit annualized run rates of $17 million in ARR and a 15% Adjusted EBITDA margin. We also communicated a backlog of approximately $110 million. I'd like to reaffirm this guidance. We expect to see our business ramp up even further as we get deeper into executing on existing and new client contracts and deployments throughout 2023 and beyond. As you may recall, we had a number of other noteworthy announcements on our last call. In addition to announcing annual records for revenue and earnings, we also provided updates on significant new client contracts, which included winning an RFP for a national fast casual restaurant chain and securing an agreement to be an exclusive deployment partner for a new digital ad-supported network. We have announced an additional agreement with Starlite Media to supply and deploy up to 5,000 displays in conjunction with the expansion of that network at an initial deployment commitment valued at $2 million to CRI and approximately $50 million of additional backlog at full deployment. We also announced enhanced client engagements with Freshëns, Road Runner Sports, and others. We are still working through an announcement with the national fast casual restaurant chain and hope to be in a position to issue that in the near future. It will be worth the wait. As you can see, we have terrific momentum in the business and are seeing productivity from our business strategy. Very simply, we continue to win in the market with a corresponding reduction in the timeline to new customer acquisition and believe the company is uniquely situated to exploit the tremendous growth opportunities in our industry. I will turn it back over to Will for a few notes on our business activities. Thanks, Rick. We've stated previously and want to reiterate that the next few years look to be transformational for Creative Realities from a profit standpoint. As a management team, we're excited about the inflection point the company has reached with respect to its operating leverage and remain optimistic about the results that we anticipate producing throughout the remainder of calendar year 2023 as we capitalize on expanding revenue and particularly our ARR to drive Adjusted EBITDA free cash flow and bottom-line results. As we discussed in our call March 30th, we expect and continue to expect that the H1 of 2023 will fare similarly to the H2 of 2022 from a PNL perspective, with an anticipation of a material increase in both our revenue and profitability run rates beginning in the Q3 of 2023 and beyond, including throughout 2024, to a new level of normal for this business. The combination of continued expansion from existing customer engagements and contracts won incrementally in the current year has set the stage for the company's quarterly revenue to double from Q3 of 2023 and into the foreseeable future. Our Q1 results, including revenue of approximately $10 million, are in line with our expectations as we exited 2022 and keep us on track to achieve our previously stated growth targets for the full year of 2023 for both revenue and Adjusted EBITDA. As we scale revenue, and particularly ARR, we're positioned to drive value creation that is transformational to the profitability of our business. Management is committed to continuing to exploit this position for the benefit of its shareholders and stakeholders. A few highlights with respect to the period as of and for the three months ended March 31st, 2023. The company's cash on hand as of March 31st, 2023 increased to $3.9 million from $1.6 million as of December 31st, 2022, as a result of collections on accounts receivable and annual billings associated with our 2023 SaaS-based contracts. As of today's date, the company has $3.3 million cash on hand. With respect to our debt, the company continues to service all of its debt facilities, including two instruments which are currently amortizing, a Reflect Seller Note and a 2022 Term Note. With respect to the currently amortizing instruments, the company has repaid approximately $1.5 million in principal on the Reflex Seller Note since February 2022, and approximately $1 million in principal on the 2022 Term Note since February of this year. We've highlighted our reverse stock split on March 30th call. Effective March 27th, the company effectuated a 1-for-3 reverse stock split to regain compliance with the Nasdaq minimum bid rule. We believe access to the Nasdaq Capital Market is necessary to bridge the gap and the continued disparity between the observed trading price for the company shares and our intrinsic value. The financial statements for the 3 months ended March 31st, 2023 reflect adjustments to equity to effectuate the split. Post reverse split, the company now has $7.4 million common shares outstanding, inclusive of any insider holdings. With respect to offer to acquire shares of CRI, subsequent to the quarter end date but prior to our interim reporting date, the company received an updated offer from Pegasus Capital Advisors to acquire all outstanding shares of the company's common stock. The proposal was for a purchase price of $2.85 per share in cash. The special committee of the company's board of directors is working diligently to evaluate this offer, but has not concluded that process at this time. We will update all shareholders at the appropriate time. Rick, with that, would you please provide any updates on customer acquisition activities or our previously announced customer acquisitions? Sure, Will. Thanks. Okay. Regarding new business development activity, again, I use the phrase CRI continues to win in the marketplace. We have been actively engaged in a number of discussions with many nationally recognized venues, brands, or chains. During 2023, the company has continued to receive invitations to RFPs with total deployment values in an excess of $10 million. Since the beginning of 2022, CRI has a win rate in excess of 80% on a dollar value basis of all RFPs in which we participate. We look forward to winning more this year. Some updates on other previous announcements that we made. we remain in advanced discussions on two additional engagements via a partner relationship to deploy and support digital out-of-home networks in key verticals. These opportunities are similar in scale and economics with the recently announced Starlite Media contract. Should the company ultimately secure these opportunities, it would result in hardware, installation, day two service, and SaaS revenues for up to a combined 2,000 locations and would add up to $32 million in our backlog with an anticipated delivery over a 24- to 36-month period. Our drive-thru solution. We continue to secure commitments for our drive-thru products. In recent weeks, we've entered into discussions with 2 potential new drive-thru customers with plans for 300 locations each. The momentum for this product is real. We expect to deploy up to 1,000 drive-thru locations over the next 18 months, driving both hardware and installation and incremental software subscription license revenue. To be clear, we are winning customers and closing deals in record time. Prior to COVID, our new customer acquisition timeline often exceeded 18 months. For those customers we've secured in the current year, the longest conversion cycle has been 6 months from introduction to execution of an MSA and initial deployment. This acceleration in customer close rates and adoption of our products and services is a key driver in our optimism and expectations for this business. Finally, let's talk about backlog. We have previously announced a backlog of approximately $110 million. Having delivered our Q1 results, our backlog remains at this historic level, and we expect our backlog to grow in advance of our next earnings call. Despite continued revenue production, these results are primarily driven by previously existing customers as we have yet to begin deployment at scale for any of the recently announced key customer wins. As a reminder, our calculation of backlog is comprised of the anticipated rollout of projects as indicated by our current customers under contract, and includes all revenues that would be received by the company by deploying the products and services necessary to service these projects, and includes projected revenues that are not currently subject to binding purchase orders or commitments. Will, any further comments you'd like to add to our Q1 results? Thanks, Rick. Historically, we've provided an overview on this call of our financial results for the year. Those results were published this morning in our earnings release report, which included the condensed consolidated balance sheet as of March 31st, 2023, along with the condensed consolidated statement of operations and statement of cash flows for the 3 months ended the same day, as well as a detailed reconciliation of net income to EBITDA and Adjusted EBITDA. Regarding the results for the 3 months ended March 31st, 2023, we note that the MD&A section of our interim report on Form 10-Q, which will be published later today, provides that reviewed financial information. In the interest of time and in light of the insights and comments provided earlier in this call, as opposed to rehash those numbers on this call, we will move to Q&A portion of the call. Thank you. Ladies and gentlemen, as a reminder at this time, if you'd like to ask a question, please press star 11 on your telephone and wait for your name to be announced. Please stand by while we compile the Good morning, Brian. Thanks for all the details. I joined a few minutes late, so sorry if I rehash, certain aspects. You've had tons of success or early success, with your drive-thru product. I know you just talked about it as well. Are you seeing more brands with drive-thru fast casual coming to you? Are you increasing your outreach? Just take us through the market dynamics now as you're becoming a meaningful player in this space. I would tell you. Brian, this is Rick. Thanks for joining the call. Thanks for the question. Number one, I would tell you that it's a combination of both. We have significantly increased our outreach, okay? We added some sales assets over the last 18, 12, 18 months, if not a little sooner than that. We are really in touch with a lot of the fast-growing QSR drive-thrus. That's number one. Number two, there's intense pressure on their side, quote, "whoever is a brand that has a drive-thru." How can I increase my drive-thru throughput and accuracy? If I can just improve my thru-throughput by 3 seconds or 5 seconds per order through the drive-thru, it's a tremendous amount to profitability to the bottom line. That industry in particular is under pressure to become as efficient as impossible through the drive-thru, and that almost always includes digital conversion. Hopefully, that helps. Yeah, great. Then maybe talk about the challenges in the economy right now, how they plan to deploy. Do they wanna limit their capital investment early on? Just talk about the factors that weigh into them accepting product and beginning these projects. Certainly everybody's concerned about the cash outlay. In most cases, the ROI on investments in digital is certainly less than 12 months, particularly if you do the inside of a store. A drive-through might extend to 14, 15 months ROI, but that's about it. The ROI is very quick and realizable. Second piece, we have also offered and have the ability to offer drive-through operators, if you will, an OpEx model, where they, instead of writing a CapEx check up front, they can pay for it out of their OpEx ROI dollars via, think of it as a pseudo leasing program type approach. We have a financial partner that backstops that. We have those two approaches. Yeah. We would say, Brian, that you know, QSR and retail are going through incredible transformations in their own right? Regardless of our business, we happen to be... You know, that's a tailwind for our business in this regard because those business models are requiring transformation, adoption of digital technologies, and improvements in their own operations to stay relevant and current in the current business environment. Great. I asked this in the last few quarters, I think every time, you've got this big backlog. Talk about the supply chain, your ability to, if a customer decided to, you know, increase the pace of wanting shipments. Talk about how that works with your business, given, A, the balance sheet, B, whatever's happening in the supply chain world. I'll take the first part of that, Will. Supply chain, no longer an issue, in terms of what we're dealing with. There's a couple minor pieces and parts that tends to affect our one-off custom store business where we're doing 1 flagship. Okay? When it gets to the production rollout of many, you know, standard rollout across many locations, we just simply do not have supply issues, or we've navigated them well in advance. Number 2, second thing I would tell you, we spent the Q1, and also in the Q2, we've been adding in some key folks, just additional personnel. They'll see a slight growth because we expect in Q3, as we stated, our revenue is going to double in one quarter. We've been poking along now at $10 million a quarter for the last five quarters. We're gonna do the same $10 million or so in Q2. In Q3, we do expect a step up, a significant increase in revenue and gross margin associated with it. We expect to go to about $20 million a quarter on a go-forward basis, starting with Q3. Brian, I would add on the supply chain side, there's a little bit of network equipment that's been hanging out there. We only have one deployment in the pipeline today that really leverages that. It doesn't begin deploying until, you know, early Q3. We have line of sight and visibility and access to product ahead of that time. To reiterate, no real issues on supply chain. With respect to the kinda working capital question as we expand and grow, on these larger deployments in particular, we're leveraging material deposit on the hardware up front in advance, somewhere typically anywhere between 10% and 50% of the hardware deployment, often on a rolling basis. We're mitigating some of that gap, if you will, between accounts receivable and accounts payable. Most of our accounts payable at this time has moved into a 60-day tranche, so we're relatively aligned between accounts receivable and accounts payable. Great. Two more questions. The first one, I gotta ask it. Your growth clearly isn't dependent on it anymore. While we thought maybe a long time ago it was, talk about where the BCTV contract is. Do we have signed contract? You know, are you moving forward? Just remind us on where that stands. Great question. Yeah. 100% contracts are executed, done, product has been ordered. We expect to begin significant deployments starting in the month of July. I may squeeze some into June. Most likely, it's gonna hit hard in July. We expect that alone is as much as a $1.5 million a month in additional revenue starting in Q3. Great. Yeah. Big, big, big transaction partners. Had the kickoff call, you know, had a big kickoff meeting late last month or earlier this month. Everything's queued up, lined up. We're talking to friendly sites and already getting those deployed to get the kinks out of the system so that we can scale efficiently and quickly. Congrats on that. It's a long time coming for you guys. Last question I have is: It sounds like your EBITDA margin clearly will be much higher than 15% in the second half of the year to get to 15% for the full year. Talk about what's the cash conversion from EBITDA to cash flow, please? On a timeline basis or dollar value? Yeah, I mean, if you generate $3 million EBITDA, will that lead to $1 million of free cash flow, $2 million? Yep. even on a cash basis? Talk about that, if you will. Even over the last year, Brian, we've been relatively from an operations standpoint, we've been effectively cash flow neutral. As we've talked about in prior calls, we've had some incremental or enhanced investment into a platform conversion, particularly in our iShowroom automotive platform. The last year and a half on an R&D basis and CapEx basis, we look a little more rich or a little more expensive than we have, and we expect to be going forward. We got those projects wrapping up September, October this year, and would expect the CapEx, particularly on the software side, to go back into a more normalized range, somewhere in the ballpark of a $1.5 million a year. As we enter the Q4 and certainly throughout 2024, we would expect a material, you know, 70% of that EBITDA to start converting into cash. We've been a little hamstrung on that actual conversion during this investment period. Okay. Thanks, guys. Thanks, Brian, as always. Our next question coming from the line of Howard Halpern, Taglich Brothers. Your line is open. Congratulations, guys. Great quarter. A lot of the questions were asked and answered, but I do have a couple. Sure. In terms of in the second half compared to the first half, what do you envision, especially with the, you know, deployment of projects, the sales mix between hardware and services in the second half compared to the first half? Yeah. I think we've talked about, Howard, in this period of, you know, hypergrowth or super growth that we're going through, this year, next year, that we'll look similarly in aggregate to what we did in 2022, which is kind of a 50/50 split, hardware and services. Okay. Certainly as we scale beyond that and continue to grow the ARR and services base, we would expect at scale as we approach a $100 million top line business that'll settle in at about 1/3 hardware and 2/3 services, but would tell you that that's more of a 50/50 look on a full year basis this year and next year. Okay. Then one clarification on your Adjusted EBITDA margin. You anticipate getting to that 15% by the Q4, not for the full year of the current year or the 15%? Yeah. Our exit run rate should exceed $15. You know. Okay. We're expecting that Q3 and Q4, to Brian's point earlier, will certainly exceed that clip to bring our full year- Okay. to that number. Okay. Would expect that to be a go-forward basis for 2024. Okay. with updated, you know, forward projections as we get into the second half. Okay. Then one last one that I think I asked about last time too. The deployment of the advertisement. Now that, you know, you're getting to scale, are customers coming to you to, you know, deploy the advertising on the screens? What type of margin are we looking for as you are able to ramp this up over the next couple of years, the advertising portion? The answer is, yes, we are in discussions with customers all the time now about helping them, quote, "monetize their network." Some customers want counsel and advice, others want us to be the lead partner and go and secure the ad commitments. It's a mixture of both. Howard, I would add, you know, as we split that monetization out, there's kinda two revenue plays for the business, right? The first is incremental software subscription revenue to the ad-based platform in order to deliver those ads. That's gonna look, smell, and feel a whole lot like the ARR that exists today, something like an 80% margin basis. The actual incremental upsell opportunity, if we are the ad sales agent, looks probably more like 40% gross margin in the current environment, but we expect that that would expand to 50% over time as we get some scale and a little bit more control over the networks. Okay. Okay, guys. Keep up the great work. Appreciate the call, Howard. Thanks, Howard. Thank you. That completes the questions from the line today. Mr. Logan, are there any additional inquiries from the investor relations that you would like to address? Nothing else in the, in the IR inbox today. With that, please let me conclude the call by thanking all of our shareholders, clients, partners, and employees for their continuing efforts, commitment, and support as we work together to transform Creative Realities into the leading brand in digital signage solutions. This concludes the Creative Realities' 2023 Q1 earnings call. Ladies and gentlemen, that does end our conference call today. Thank you for your participation. You may now disconnect.