Creative Realities anticipates 15% adjusted EBITDA margin by year-end while advancing QSR and retail media initiatives

Earnings Call Insights: Creative Realities, Inc. (CREX) Q2 2025

MANAGEMENT VIEW

* CEO Richard C. Mills reported that revenue reached $13 million in Q2, representing a 34% increase over Q1 and was described as flat year-over-year. Gross profit for the quarter was $5 million. Mills attributed a decrease in gross margin, now at 39% versus the prior year’s 52%, to a higher mix of hardware sales, noting, “lower profitability [was] largely due to changes in revenue mix of more hardware versus services…driven by a few customers who chose to purchase hardware in advance due to the uncertainty of tariffs.” Mills stated, “We expect margins to rise in the third and fourth quarters as we are installing those products previously purchased in bulk.”
* Mills highlighted an annual recurring revenue run rate of $18.1 million as of June 30, 2025, up from $17.3 million at the end of Q1. Adjusted EBITDA increased to $1.2 million, and the company reduced debt by $3.1 million during the quarter.
* Strategic wins included a significant engagement with a quick service restaurant (QSR) chain for a digital menu board transformation, with a pilot underway and national rollout expected after completion. Mills said, “We are delivering a 100% turnkey solution, all powered by our proprietary CMS platform, Clarity.”
* Mills emphasized new offerings such as an updated drive-thru hardware and software solution at a $14,999 price point, designed to undercut competitors by 20% and target mid-market QSRs. He also referenced a proof-of-concept deployment for Circle K Mexico and growing traction for the company’s AdLogic CPM+ platform.
* Interim CFO David Ryan Mudd stated, “At the end of Q2, we had $600,000 in cash on hand with additional availability of $6 million. We do not keep excess cash on hand and the cash we have on hand at any point is not a proxy for our true working capital capacity.”
* Chief Strategy Officer George Sautter added, “We pursued a very disciplined strategy and financial management over the past couple of years to decrease our leverage, and that works hand in glove with pursuing those strategic opportunities.”

OUTLOOK

* Management reiterated expectations for accelerated revenue and improved margins in the second half of 2025. Mills projected, “We expect adjusted EBITDA as a percent of revenue rising back to 15% by year-end.”
* The company plans to continue focusing on debt reduction with cash generated by operations and confirmed ongoing evaluation of acquisitions if the right fit arises.
* No specific updated numerical guidance or forecasts for revenue or recurring revenue were issued, but Mills said, “We remain on track for another year of solid performance…revenue to accelerate in the second half, backlog to grow and margins to improve.”

FINANCIAL RESULTS

* Revenue for Q2 was $13 million, up from $9.7 million in Q1. Gross profit was $5 million, and adjusted EBITDA reached $1.2 million, up from $0.5 million in Q1. Gross margin decreased to 39% due to a shift in revenue mix.
* Debt at quarter-end was $20.1 million gross and $19.5 million net, both down from earlier in the year due to operating cash flow, following a prior increase related to settlement of a contingent liability in Q1. Leverage ratios were reported as 4.53 gross and 4.4 net at the end of Q2.
* Cash on hand at quarter-end was $600,000, with $6 million in additional availability from the credit facility.

Q&A

* Jason Michael Kreyer, Craig-Hallum: Asked about the progression of pipeline deals and visibility into revenue acceleration. Mills responded, “Everything continues to move forward…we do expect to make some announcements in this calendar year.”
* Kreyer, Craig-Hallum: Inquired about drivers of second-half acceleration. Mills explained that previously announced QSR wins are now being deployed, with installation delays due to construction but significant deployments expected shortly.
* Kreyer, Craig-Hallum: Asked about verticals seeing the most modernization pressure. Mills indicated, “Clearly, that would be QSR drive-thru…Number two, I would tell you, retail media networks, everybody is circling it.”
* Brian David Kinstlinger, Alliance Global Partners: Sought clarification on QSR installs and opt-ins, to which Mills replied, “We are deploying 50 POC locations, but we already have a queue of locations behind that…they're going full steam ahead.”
* Jon Robert Hickman, Ladenburg Thalmann: Asked about pre-buys of hardware and impact on future quarters, with Mills confirming some impact on hardware revenue timing but not on overall guidance. Hickman also asked about 7-Eleven deployments, which Mills described as “measured over the next five years.”
* Howard Allen Halpern, Taglich Brothers: Queried leverage expectations from retail media network deployments. Mills responded, “Significant…there would be tremendous flow-through to the bottom line just because of pure volume.”
* Unidentified Analyst: Asked about acquisition activity, and Mills confirmed interest but stated, “I have nothing that we could discuss. Nothing to discuss at this time.”

SENTIMENT ANALYSIS

* Analysts generally expressed a neutral to slightly positive tone, with questions focused on deal progression, revenue visibility, and vertical expansion. There was some skepticism regarding timing and execution but overall receptiveness to management’s responses.
* Management maintained a confident tone, emphasizing operational progress, pipeline strength, and cost control. Phrases such as “we expect,” “we remain on track,” and “we are confident” were frequent. During Q&A, responses were measured, occasionally deflecting exact forecasts but reaffirming positive expectations. Compared to the previous quarter, management’s tone remained optimistic, with a slight increase in detail on execution challenges.

QUARTER-OVER-QUARTER COMPARISON

* Q2 revenue increased significantly from Q1, with adjusted EBITDA more than doubling quarter-over-quarter. Gross margin declined due to a change in revenue mix, while annual recurring revenue grew modestly.
* Management’s tone remained consistent, with continued emphasis on pipeline quality and a focus on execution. In both quarters, management highlighted backlog growth and margin improvements expected in the second half of the year.
* Analysts continued to probe for timing and specifics around large contract deployments and recurring revenue growth, similar to the prior quarter.
* Strategic focus on QSR and retail media networks was unchanged, but Q2 included more detail on international opportunities and live venue wins.

RISKS AND CONCERNS

* Mills cited longer sales cycles and the complexity of digital transformation projects, warning that “this leads to increasingly long sales cycles and requires patience and persistence.”
* Tariff uncertainty remains a concern, with Mills noting bulk hardware purchases by some customers and the possibility of future impacts from finalized tariffs.
* The delayed deployment of the Digi Point Media Network was acknowledged, now expected to start in Q4.
* Analyst questions highlighted risks of installation delays, the impact of hardware pre-buys on revenue timing, and the challenge of scaling recurring revenue.

FINAL TAKEAWAY

Creative Realities finished Q2 2025 with strong sequential revenue and EBITDA growth, a robust pipeline, and expanding verticals, notably in QSR and retail media networks. Management reaffirmed its goal of achieving a 15% adjusted EBITDA margin by year-end and highlighted ongoing debt reduction efforts. While gross margin temporarily declined due to a hardware-heavy revenue mix, leadership expects improvement in the second half as services and installations ramp. The company remains focused on executing significant customer rollouts, advancing international and live venue opportunities, and maintaining a disciplined capital structure to support both organic and potential acquisitive growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/crex/earnings/transcripts]

MORE ON CREATIVE REALITIES

* Creative Realities, Inc. (CREX) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813286-creative-realities-inc-crex-q2-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on Creative Realities [https://seekingalpha.com/symbol/CREX/ratings/quant-ratings]
* Historical earnings data for Creative Realities [https://seekingalpha.com/symbol/CREX/earnings]
* Financial information for Creative Realities [https://seekingalpha.com/symbol/CREX/income-statement]