Creative Realities Reports 2014 Third Quarter and Nine-Month Results

NEW YORK, Dec. 1, 2014 /PRNewswire/ -- Creative Realities, Inc. ("Creative Realities" or the "Company") (OTCQB: CREX), today announced financial results for its third quarter and nine months ended September 30, 2014.  The Company had previously filed its Form 10-Q with the Securities and Exchange Commission on November 26, 2014.

On August 20, 2014, Creative Realities and Wireless Ronin Technologies, Inc. ("WRT") successfully completed their merger, resulting in one of the largest and most innovative marketing technology solutions companies in the world.  Creative Realities, LLC was the "accounting acquirer" in the merger transaction, while WRT (the registrant) was the "legal acquirer," and therefore the merger was accounted for as a reverse acquisition.  In accordance with reverse acquisition accounting, the historical financial statements of the registrant will become those of Creative Realities, with the financial results of WRT included only beginning with the merger date.  The Company changed its name from Wireless Ronin Technologies, Inc. to Creative Realities, Inc. shortly after the merger.

Operational Highlights:

During the 2014 third quarter, the Company was both awarded and had completed several projects with leading venue operators, companies and well-known brands.  Among the highlights include:

• Deployed a unique interactive shopping experience for a leading global fashion designer at a world famous department store location in New York City, incorporating various marketing technologies. 
• Hired by one of the largest bottled water companies in the world to deliver predictive video experiences, using an attraction kiosk with push to mobile features. 
• Won and successfully executed a large-scale deployment of various marketing technologies and content curation for one of the most prominent luxury malls in America. 
• Continued successful deployments of large-scale, multi-purpose digital signage programs at over 75 premium automotive dealerships across North America.  Additional programs awarded since.
• Completed a 13-door pilot at a national supermarket chain for interactive shopping kiosks, with the ability to print and email coupons, and redeem them while in-store, thus increasing additional sales potential.
• Won a competitive bid for one of the largest apparel and footwear retailers in the U.S. to develop and deploy an interactive marketing technology experience; expected to begin in early 2015.
• Hired by a leading retailer to develop an endless aisle experience; expected to run in 2015. 
• Hired by a large global marketer to support an in-store digital merchandising initiative across multiple locations, with an anticipated deployment in early to mid-2015.
• Successful deployments with several financial services industry leaders; projects vary in scope and size but typically include digital signage, interactive displays and other innovative marketing technologies.

Paul Price, Chief Executive Officer of Creative Realities stated, "Our third quarter results include only five weeks of the combined entity so while it may be hard to gauge our progress from our public filings, we believe we have made significant year-over-year and quarterly improvements.  The combination of our software, consulting and design services, and the manner in which we deploy and support a broad range of marketing technology solutions has been a key differentiator and we've been successful in winning several competitive bids.  Our fourth quarter is expected to be better, as we'll have a full quarter to show with both companies, and we expect to be at or near break-even by year-end.  Our team is focused on realizing the synergies this merger brought, and through integration efforts thus far, we reduced our payroll related expenses by more than 25 percent, among other actions, with future additional savings to come as we continue to execute our plan.  Every member of our team remains committed to our customers and enhancing value for all stakeholders."

Corporate Integration Updates:

Since closing, the Company has completed various post-merger integration activities, resulting in one-time restructuring related expenses as noted in the Company's Form 10-Q filing with the Securities and Exchange Commission.  The net result of these actions thus far is expected to reduce payroll related expenses by approximately 25-30% on an annualized basis, among other actions, and improve the Company's operating efficiencies.  During the quarter, the Company:

• Realigned its sales & marketing, account management and service delivery organizations.
• Improved its supply chain management capabilities by replacing certain vendors and contractors, resulting in greater control over delivery and lowered expenses.
• Consolidated network operation center and related staff to our Fairfield, NJ facility.
• Consolidated facilities and operations, including subletting approximately 50% of the square footage of the Company's office space in one location and terminated a lease in another.

Mr. Price continued, "From a financial perspective, our key near-term priorities are to increase our sales and pipeline; pursue higher-margin business; and lower expenses through integration and restructuring benefits and more efficient capital allocation.  Operationally, we are focused on productivity and ensuring that we have the best operations and infrastructure to support our clients.  We are confident of a strong 2015 as our pipeline continues to grow.  I believe that Creative Realities is better positioned to become the world leader in helping retailers and brands use the latest technologies to improve shopping experiences and look forward to updating our shareholders on our progress."

Three-Month Comparisons

For the three months ended September 30, 2014, the Company reported net sales of $4.4 million as compared to $4.1 million reported for the three months ended September 30, 2013, an increase of approximately 7.7%.  Driving this increase were higher sales of professional services and other sales, as the Company was awarded several new marketing technology programs in the 2014 period.

Gross profit margin on a percentage basis increased to 29.9% in the 2014 period compared to 14.3% in the comparable 2013 period.  This increase was driven primarily by product mix shift, and specifically higher margin services associated with the WRT business and merger.

Total operating expenses for the three months ended September 30, 2014 were $2.8 million, an increase of approximately $1.9 million as compared to operating expenses of $0.8 million in the comparable 2013 period.  The increase in operating expenses was primarily a result of higher payroll related expenses, some of which are non-recurring, as the third quarter of 2014 includes approximately $0.6 million of one-time severance costs.  Additionally, the Company incurred higher sales and marketing expenses, and an increase in research and development expenses associated with the maintenance and support of the Company's proprietary platforms and systems acquired in connection with the merger transactions. 

Since the merger was completed in August 2014, the Company has worked to integrate the three companies (Creative Realities, WRT and Broadcast International, Inc.) and has taken steps to reduce its fixed overhead, while remaining opportunistic in its capital-allocation strategy.  As of November 26, 2014, the Company had reduced headcount from June 2014 by over 30% while growing its sales and business pipeline, and thereby reduced its monthly recurring salary expense by 28% (excluding benefits, severance costs and other one-time adjustments). 

The Company reported an operating loss of $1.4 million for the three months ended September 30, 2014 as compared to an operating loss of $0.2 million for the comparable prior period.   The Company reported a net loss of $0.9 million or a loss per diluted share of $0.02 as compared to a net loss of $0.2 million or a loss per diluted share of $0.01 for the periods ended September 30, 2014 and September 30, 2013, respectively.

Nine-Month Comparisons

For the nine months ended September 30, 2014, the Company reported net sales of $9.7 million as compared to $7.9 million reported for the nine months ended September 30, 2013, an increase of approximately 23.3%.  The increase in sales was driven by higher deployment activities and improvements across multiple product offerings.

Gross profit margin on a percentage basis for the nine months ended September 30, 2014 was 20.0% as compared to 7.5% reported for the comparable 2013 nine-month period. 

Total operating expenses for the nine months ended September 30, 2014 were $4.9 million, an increase of approximately $2.2 million as compared to total operating expenses of $2.7 million reported for the nine months ended September 30, 2013.  This increase, similar to the third quarter comparisons, was driven primarily by increases in sales and marketing expenses, and research and development expenses, as well as higher depreciation and amortization expense for the comparable periods.  Additionally, general and administrative expenses increased by $1.7 million during the nine months ended September 30, 2014 as compared to the same period in 2013.  This increase is mainly the result of an increase in payroll related expenses, some of which are non-recurring, including severance expenses, professional legal fees and various other increases in other general and administrative expenses associated with consolidation efforts. 

The Company reported an operating loss of $3.0 million for the nine months ended September 30, 2014 as compared to an operating loss of $2.1 million for the comparable prior period.  Additionally, the Company reported a net loss of $2.4 million or a loss per diluted share of $0.08 as compared to a net loss of $2.1 million or a loss per diluted share of $0.07 for the 2014 and 2013 nine-month periods, respectively. 

Pro forma Results

As previously indicated, on August 20, 2014, Creative Realities and Wireless Ronin Technologies, Inc. ("WRT") successfully completed their merger.  The results reported in this release take into account approximately five weeks' worth of consolidated results.  On a pro forma basis, taking into account the results of Creative Realities, Inc. and Wireless Ronin Technologies, and assuming the merger took place on January 1, 2014, the Company would have reported pro forma revenues of approximately $13 million for the nine-month period ended September 30, 2014.  The pro forma results are non-GAAP financial metrics and are not meant to be considered in isolation or as a substitute for the comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.  The Company from time to time, uses supplemental non-GAAP financial measures internally to understand and manage its business and forecast future periods; as such, we believe it is useful for investors to understand the effects of these items on our results of operations.

Mr. Price concluded, "We remain focused on building out our management team and believe the additions of senior talent will help improve delivery of the services we provide to our clients, each and every day.  The retail industry is changing at exponential speeds and technology is a driving force behind it.  We are proud of what we have accomplished to date, but at the same time, believe we have only scratched the surface of our potential."

About Creative Realities

Creative Realities helps retailers and brands use the latest technologies to create better shopping experiences.  Founded 16 years ago, the firm's evolving client base has led to recognized leadership in marketing technology, consulting, design, and deployment.  The firm has worked with brands such as Footlocker, Bank of America, Calvin Klein, Macy's, Sunglass Hut, Under Armour and 7-Eleven, among other Global Fortune 500 companies, to design, build and manage marketing technology-based experiences that drive business results.

Cautionary Note on Forward-Looking Statements

This press release contains certain statements that would be deemed "forward-looking statements" under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and includes, among other things, discussions of our business strategies, future operations and capital resources.  Words such as "may," "likely," "anticipate," "expect" and "believe" indicate forward-looking statements.

These forward-looking statements may reflect management's present expectations and estimates regarding future expenses, revenue and profitability, trends affecting our financial condition and results of operations, operating efficiencies, revenue opportunities, potential new markets, and the ability of the Company to effectively compete in a highly competitive market. Nevertheless, and despite the fact that management's expectations and estimates are based on assumptions management believes to be reasonable and data management believes to be reliable, the Company's actual results, performance, or achievements are subject to future risks and uncertainties, any of which could materially affect the Company's actual performance.  Risks and uncertainties that could affect such performance include, but are not limited to:  the adequacy of funds for future operations; future expenses, revenue and profitability; trends affecting financial condition and results of operations; ability to convert proposals into customer orders; the ability of customers to pay for products and services; the impact of changing customer requirements upon revenue recognition; customer cancellations; the availability and terms of additional capital; ability to develop new products; dependence on key suppliers, manufacturers and strategic partners; industry trends and the competitive environment; the impact of the Company's financial condition upon customer and prospective customer relationships; and the impact of losing one or more senior executives or failing to attract additional key personnel.  These and other risk factors are discussed in Company reports filed with the Securities and Exchange Commission.

Given these uncertainties, and the fact that forward-looking statements represent management's estimates and assumption as of the date of this press release, you should not attribute undue certainty to these forward-looking statements.  We assume no obligation to update any forward-looking statements publicly, or to update the reasons why actual results could differ materially from those anticipated in any forward-looking statements contained in this press release, even if new information becomes available in the future.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/creative-realities-reports-2014-third-quarter-and-nine-month-results-300002267.html

SOURCE Creative Realities