Creative Realities, Inc. Stock

Good morning. At this time, I would like to welcome everyone to Creative Realities' 2026 Second Quarter Earnings Conference Call. This call will be recorded, and a copy will be available on the company's website at cri.com following its completion. Creative Realities has prepared remarks summarizing the interim reports for the quarter, along with additional industry and company updates.

Joining the call today is Rick Mills, Chief Executive Officer; Tamra Koshewa, Chief Financial Officer; and George Sautter, Chief Strategy Officer and Head of Corporate Development. Ms. Koshewa, you may begin.

Thank you, and good morning, everyone. Welcome to our earnings call for the second quarter ended June 30, 2026.

I would like to take this opportunity to remind you that remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose and similar expressions or the negative versions of such words or expressions as they relate to us, our management, our operations are intended to identify forward-looking statements. Actual results may differ materially from those contemplated by such statements. Factors that could cause these results to differ materially are set forth in our Form 10-K and other filings with the SEC. Any forward-looking statements that we make on this call are based on assumptions and information as of today, and we undertake no obligation to update these statements after today.

During this call, we will present both GAAP and non-GAAP financial measures. We believe the use of certain non-GAAP measures such as adjusted EBITDA, ARR and several other important key performance indicators represent meaningful ways to track our performance. A reconciliation of GAAP to certain non-GAAP measures is included in our public filings and in our earnings release that was issued this morning.

It is now my pleasure to introduce Rick Mills, CEO of Creative Realities. Rick?

Thanks, Tamra. Good morning, everybody. We appreciate you joining today's call. I'll start by giving some highlights of our quarterly financials and other recent developments.

We posted revenue of $21.5 million in Q2 versus $13 million in the prior year period, including roughly $7.4 million from CDM. This is our best ever Q2 quarter revenue number and the second largest revenue quarter ever in the history of CRI. We are pleased with the strong top line growth and improved gross margins, which we expect this top line growth and margin enhancement to continue for the balance of the year. Our second quarter gross profit was $8.3 million as compared to $5.0 million in fiscal 2025 quarter, and our consolidated gross margin was 38.6% versus 38.5% in the prior year period. All trends are pointing in the right direction, and we believe we have tremendous upward momentum into the second half of the year.

As of June 30, we had an annual recurring run rate or ARR of $20.5 million, up from $20.1 million last quarter. And as we previously discussed, we have about 4 -- somewhere between $4 million and $5 million in backlog that will -- in backlog of ARR that will show up as we turn the clock and start 2027. So on January 1, that number automatically goes up significantly.

Net loss attributable to common shareholders was $4.6 million for the 3 months ended June 30, 2026, compared to a net loss of $1.8 million in the prior year period. Adjusted EBITDA rose to $2 million for the second quarter of 2026 versus $1.1 million last year. Our financial results are improving, and our team is putting in the hard work to increase operating efficiencies and leverage opportunities across our much larger technologically advanced customer-centric organization. We have now completed the majority of the integration with CDM.

We announced earlier this year, we expect to realize synergies of at least $10 million on an annualized basis. Currently, our run rate is approximately 75% of the total synergy number or approximately $7.5 million has been realized. This will help us to drive adjusted EBITDA margins in the quarters to come as we scale revenue. As we grow our adjusted EBITDA, we expect to use the free cash flow to further delever the balance sheet, as many of you know, exactly as we have done in the past.

The bottom line is we remain on track for the best year ever as we anticipate Q3 will be the largest quarter of revenue in the company's history. We expect Q3 this quarter to significantly exceed Q4 2025 when we achieved $23.9 million in revenue. And one other comment to note, we are also confident that Q4 will significantly exceed Q3 2026. So next 2 quarters, upward trajectory, tremendous growth.

One other thing, we recently completed a follow-on offering, raising approximately $12 million in net proceeds to help strengthen the balance sheet and provide capital for future growth. One additional note about the capital raise. I personally as the CEO, purchased 5% of the shares in the offering and several other members of the leadership team participated in the offering. Clearly, we believe in and are committed to growing this business. CRI is on track to be well positioned for the next 2 quarters and 2027.

I'll come back in a minute to talk about some customer updates, but we'll now turn it over to Tamra to share some additional comments on our second quarter financials. Tamra?

Thanks, Rick. An overview of our financial results for the second quarter of 2026 was provided in our earnings release filed this morning, which include the condensed consolidated balance sheet as of June 30, 2026, the statement of operations and cash flows for the 3 and 6 months ended June 30, 2026, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended June 30, 2026, as well as the preceding 4 quarters. We anticipate filing the Form 10-Q for the second quarter tomorrow. While Rick provided our operating results briefly, let me provide more context related to our performance and outlook.

Looking at the income statement, as Rick mentioned, second quarter sales rose to $21.5 million. This is an increase of $5.1 million compared to the first quarter and 65% higher than the same quarter in 2025. CDM contributed $7.4 million during the quarter or 35% of the total. Sales from our legacy CRI business increased approximately 8% year-over-year, driven by new installs across multiple new customers, including catching up on some of the installs that were delayed from Q1. Hardware sales rose to $7.5 million versus $7.1 million in the prior year period, reflecting both new deployments and the inclusion of CDM. Service revenue more than doubled to $14 million from $6 million in fiscal 2025, reflecting $7 million of CDM service sales and positive growth in the legacy CRI business from new installs.

Consolidated gross profit was $8.3 million in the second quarter of '26 versus $5 million in the prior year period, and consolidated gross margin was 38.6% versus 38.5% in the second quarter of '25. Gross margin on hardware revenue was 17.2% during the quarter as compared to 25.1% in the prior year period, while gross margin on services amounted to 50.1% versus 54.4% in the second quarter of '25. Hardware gross margins decreased year-over-year, primarily due to mix, while service gross margin declined due to the expiration of higher-margin customer contracts in '25. We anticipate gross margin to increase quarter-over-quarter as we realize sales growth from new business.

Sales and marketing expenses in the second quarter rose to $2 million versus $1.2 million in the prior year period, with CDM contributing approximately $500,000. General and administrative expenses were $9 million in the second quarter compared to $5.2 million in fiscal 2025, the increase driven by $3.8 million in CDM expenses during the quarter. Legacy CRI G&A expenses were down approximately $400,000 year-over-year. We remain on track to achieve the $10 million of synergies that Rick mentioned and cost reductions -- other cost reductions that have previously been announced for fiscal 2026, while also investing in the business to accelerate growth going forward.

We posted an operating loss of approximately $2.7 million in the second quarter of fiscal 2026 compared to an operating loss of $1.3 million in fiscal 2024 (sic) [ 2025 ], reflecting the items I just discussed. CRI reported a net loss of $4.2 million and a net loss attributable to common shareholders of $4.6 million or $0.43 per diluted share in the quarter ended June 30, 2026, versus a net loss of $1.8 million or $0.17 per diluted share in the prior year period. Adjusted EBITDA rose to $2 million in the second quarter of '26 as compared to $1.1 million in the prior year period and a loss of $494,000 in the first quarter. While adjusted EBITDA greatly improved over Q1 results, we continue to anticipate that it and associated cash flows will further improve during the second half of fiscal 2026, given the forecasted business growth and cost initiatives previously discussed.

In terms of the balance sheet, as of June 30, 2026, the company had cash on hand of approximately $10.7 million versus $1.6 million at the start of 2026. As Rick mentioned, we completed an equity offering that raised net proceeds of approximately $12 million to provide capital for growth and strengthen the balance sheet. Our debt stood at $46.6 million at the end of the second quarter as compared to $44 million at the beginning of the fiscal year. We had approximately $12.8 million of available liquidity under our revolving credit facility as of June 30, 2026.

We intend to use positive operating cash generation and the equity proceeds to support our growth projections, fund capital expenditures and lower our debt when possible. We remain dedicated to maintaining an optimized capital structure in support of financial flexibility. We believe given our recent capital raise and general positive outlook for the business, we are in a strong position to continue supporting this growth while strengthening the balance sheet.

One other item to mention. We provided a comprehensive financial model and corresponding documentation to our auditors in support of alleviating the going concern that has been on our financial statements for multiple periods. The auditors have reviewed our analysis and have concluded that the going concern is no longer needed. When our 10-Q is released tomorrow morning, the going concern language will not be there. We are confident in the plan we have laid out for the second half of 2026 and 2027 that models our ability to generate profitable growth and adequate cash flow and liquidity to sustain the business.

I will now turn it back to Rick for additional comments around customer activities.

Thanks, Tamra. Great news about the removal of the going concern. Thanks for all the hard work.

Okay. Now some customer updates. I previously announced that we were selected as the official digital signage provider for the Tennessee Titans and the new Nissan Stadium under construction in Nashville, Tennessee. As a reminder, this is about an $8.5 million deal that includes the installation of thousands of displays in a full IPTV solution throughout the venue. We are on track for most of this revenue to be realized in 2026.

Additional perspective on the retail media network grocery client. I can now say that this new customer is Albertsons, an incredible brand, well-known company with thousands of locations across the U.S. To our knowledge, it is the largest retail media network being deployed in the United States this year. This is being measured by screen count. So why is Albertsons investing in this in-store media network? Why does in-store media networks work, right? Well, all the reasons we've discussed on prior calls, but in Albertsons, think along these lines, 2,200 stores, 20 well-known store banners in 35 states. Think of the names Albertsons, Safeway, Vons, Jewel-Osco, premium brands with locations all across the country. They get 36 million customers per week, which equates to 543 million annual customer trips. A tremendous network. We're thrilled to be part of it and excited. They use -- are using our entire AdTech stack, our CMS, all the things we talked about previously.

Another customer, AMC. As a reminder, on April 13, we announced a project to expand and modernize AMC Theatres' in-lobby media footprint across about 285 locations nationwide. This is a partnership between CRI and National CineMedia. They are the leading cinema advertising platform in the U.S. This media network utilizes our CMS platforms, again, including ReflectView and then our AdLogic, AdTech solution to provide ad serving for all the screens. We have completed the test locations and are moving to full deployment this month.

As we mentioned in the earnings press release, we are in the contract stage with two additional customers. One is a national cellular organization, which operates more than 900 retail locations across 45 states. The other is a fast-growing QSR, which today operates more than 1,000 restaurants across 22 states. Both customers are converting existing screens with plans for significant growth over the next few years. These conversions -- actually, one conversion will be completed by the end of September. The other conversion will be completed by the end of the year. They will help us grow our SaaS revenue in 2027.

One additional customer to talk about, we are in the process of migrating all of the Lexus, Toyota dealerships in Canada to our CMS platform. This engagement includes significant creative work to be delivered by our team. It includes approximately 300 locations, and it will generate a couple of hundred thousand a year in SaaS and creative services.

In closing, I want to take a moment and point out to everyone, our plans to go big, scale up and focus on the enterprise customer is working. We believe we have reached the stage where our profitability will grow quickly as we layer on additional business. Our sales pipeline is strong and most importantly, continues to grow significantly. The combined teams in the U.S. and Canada are working well together and frankly, delivering exceptional customer value. The reception from the customer to the new C -- combined CRI has been significant.

I want to do a quick shout-out to the new members of our C-suite who joined CRI in the last 7 months. Dan McAllister, Jackie Walker and Tamra on this call, they're all having a significant impact in the business. And as they take over the daily operations, and they truly are starting to run the business, I'm turning my focus on strategic growth areas in the marketplace where CRI will have an advantage over our much smaller competitors. Expect more to come in the future as I talk about that in future quarters.

With that, we'll now move to the Q&A portion of the call. Please go ahead, operator.

[Operator Instructions] Our first question will be coming from the line of Jason Kreyer of Craig-Hallum.

Rick, great to hear all the deal flow that's happening. Particularly on the Albertsons front, good to hear things are moving in the right direction there. Can you maybe talk about what work, if any, has been done thus far? And then when you look at getting a big deal like that in the retail media sector, what does that do for prospects in the pipeline? Do you think that opens up more retail media opportunities? Or does that accelerate conversations you're already having?

It certainly does. I'll come back to that, but I'll answer the first part of your question first. As of today, we have converted about 3,000 screens, and we're currently running 3,000 screens across 220 to 250 locations. We take over the deployment of those screens and the deployment of players and all the technology here over the next 30 days that will transition to us from -- they've had a plethora of suppliers doing it. It will all consolidate and we'll finish out the rest of Phase 1. So currently, today, they're running about 1 million ads a day, Jason. So it's very successful for them. They're excited. They're using our CMS, our AdTech, et cetera.

In terms of what it does for the pipeline, well, I got to tell you, it strengthens our position as we like to claim that we're one of the top 3 providers of retail media networks in the U.S. or North America today, the U.S. and Canada. And certainly, having a customer like Albertsons backs it up. We, again, have 3 or 4 customers today that have chosen our ad tech. You've got Albertsons, of course, 7-Eleven using our AdTech at now over 2,000 stores. Macy's, Best Buy has adopted our AdTech. So with growing references of that type of blue-chip brands, we expect that to accelerate our retail media network pipeline.

That's great. We've also heard a lot about the challenges facing one of your competitors. It seems like that would create a great opportunity for CRI. Can you just talk about the early discussions that you're having with customers in the pipeline and what the prospects look like there?

As I stated on the call earlier, Jason, I mean, again, here we have 2 customers who are in contracting stages right now, both have to be converted. One actually came from that competitor. The other was not. The other was a new -- came from a different platform. So we are gaining customers. We do expect the pipeline to -- was enhanced as that customer ran into some trouble or that other supplier, a competitor of ours, ran into trouble. So it certainly has helped our pipeline. But we do expect to be closing multiple "logos" on a quarterly basis, on a go-forward basis. So we're excited about it.

Terrific. Last question for me. Just -- so given the deals that you've already won, the deployment pipeline you have today, if we combine that with the things that you have in your pipeline that you just alluded to, wondering if you can talk about how that changes your visibility as we look towards 2027 and gives you maybe a little bit better predictability around the financials.

Certainly gives us better predictability because when you have 7, 8, 9 additional customers come on that are doing deployments or SaaS, if you will, on a consistent monthly basis. We think we have entered the new stage where our revenue as we enter 2027 will be much more predictable than it has in the past. We've been working on this for many years for this to catch up. And I would tell you that it's finally here. It's finally caught up or catching up, and we are incredibly bullish about 2027.

And I would also point out the comments I made earlier. We expect our Q3 to be the largest quarter in the company's history. Oh, by the way, we expect Q4 to be significantly larger than Q3. Well, that tells you there is pending revenue coming our way.

And our next question will come from the line of Brian Kinstlinger of Alliance Global Partners.

Hey, Brian.

Brian, your line is open.

Brian is never this quiet.

Can you hear me?

There you go.

Hello?

We hear you now, Brian.

Interesting. I never hit mute, and I was on mute. Sorry about that. I was saying hi to you, Rick.

So on the strong awards and second half ramp in revenue, I'm curious with what's known, how you see the split between services and hardware.

We see the SaaS continuing to grow from a services perspective, Brian. There is some hardware in the second half growth, but most of it is all services related which leads to, in theory, you should see the margin -- composite margin of the company increase in Q3, but even particularly Q4.

Yes. Now that margin is improving on mix. Maybe you could touch on, there were a few comments on each of the pieces, the services and the hardware. Obviously, there's inflation, supply chain issues. How are you adjusting prices? Will we see margin recover at all in hardware specifically? And then on the service side, maybe speak to pricing trends.

Pricing trends on the services, there's been some downward pressure, Brian, just due to when you have competitors suffering in the marketplace as they lose market share or their business falters, that tends to put pressure on price. We've been able to withstand that to a great extent, but it's always a challenge. In terms of hardware, we expect hardware margins to continue to be under pressure through the balance of this year, but we do expect in 2027 to get some additional relief in hardware margins. We believe we will expand them again in 2027.

Got it. And just one more question, just to make sure I heard it right. One of your two pending negotiations or wins, it's August, and you expect to deliver by the end of September. Is it because you have the screens in inventory? I'm just trying to reconcile expecting to complete the installation that quickly.

That one, is -- there is no installs, it's conversion of every one of their stores over to our platform. So they already have hardware in place. They already have players in place. We've developed scripts to go take over every one of their 1,000 locations "remotely," and it will deploy our CMS and all new content, and that literally will be done by the end of September. Now out of that customer in November, December, I then expect to pick up new builds and new construction, new store openings all throughout 2027, but there is no large hardware chunk that goes with the initial conversion. Makes sense, Brian?

Totally. Great work on all the awards.

Yes.

Brian, let me just clarify a couple of things that Rick was talking about with respect to your question on services versus hardware in the second half. We do expect that the third quarter is going to have a higher percentage of hardware revenues given the installs that we're planning for the third quarter, in particular, the Tennessee Titans. But then in the fourth quarter, we expect it to get back to the level that it was in Q2. And also because in the fourth quarter, remember, we have a large media revenue base that will come online that we will experience similar to what we did last year with the CDM media business.

And our next question will be coming from the line of Jon Hickman of Ladenburg.

On the margin side of things, is there some longer-term target gross margin that you are after that you could share with us?

Jon, I think ideally, we'd like to, as we enter 2027, get back in -- out of the 30s back into the 40s. Tamra, I'll let you add comments, but just generally, we've had margin [ compression ] of 5% or 6%, and we're trying to get back as we enter 2027 through enhanced product mix, et cetera. Tamra, anything to add?

Yes, I think that's correct. I mean we have seen both the inflation as well as the mix of our revenues bring the margins down compared to last year. But as we build that SaaS base, then we can start to get back closer to that 40% plus target. But we're still going to be short of that this year. Certainly, in the second half, we'll see some improvements, but really not until 2027 when we get more of that SaaS revenue flowing through the P&L that we will start to get a lift on the margin rate.

Yes. I would -- Jon, let me just add one more. I mean the point is, if you think to my earlier comments, we've got about $4 million -- certainly $3.5 million to $4 million of seeded SaaS already that is -- will "magically" turn on, on January 1. So that in itself brings incredibly high margin to the mix [indiscernible]. So that alone could push us up. We haven't done the math, pushes up the [indiscernible] up 2 points at the moment that turns on January 1. Go ahead and ask your question, sorry.

Okay. So if you have the kind of margins you would like in the, say, low 40% range, so you would need -- if you had that now, you would need another $6 million or so in revenues to breakeven on an operation basis. Do I have that -- does that math work out?

Yes, I think that's reasonable to assume.

Okay. Then any comments on Culver's and on the lottery stuff that's going on?

Culver's continues to go well. We continue to deploy every month. We are installing new drive-thrus. There is, I think, a 3-year target to complete all of their restaurants. That's their target, not ours. And we are certainly well on track.

In terms of the lottery, we're seeing a lot of traction. We're in significant discussions with 7, 8 additional lotteries right now. North Carolina Lottery has talked about some significant expansion in 2027. I don't have orders today as we speak, but they continue to be extremely pleased and are looking to and continue to grow their lottery network in 2027. And we would expect to have some announcements as we get closer to year-end about a lottery expansion in 2027.

And our next question will be coming from the line of Kevin Sheldon, a private investor.

Hello?

Hey, Kevin.

How are you, sir?

Doing great. Yourself?

All things considered, not bad.

Go ahead.

So just quick, when -- I guess it's a 2-part question or multiple, but regarding the SG&A being at $9 million, where do you need to be revenue-wise to be able to cover that? Or are there plans to improve efficiencies so that, that number isn't as large?

It's really a combination of both. We expect the next 2 quarters to add significant ongoing revenue to the business that we will certainly be north of $25 million, closer to $30 million, if not exceed $30 million on a quarterly basis. We believe that's in the imminent future, Kevin.

Number two, there are -- we've taken out $7.5 million. It has not all showed up, but it's already been done. And so it will show up as we enter 2027. And we've got a couple of million of additional costs that we want to take out throughout 2027 as we migrate. We have customers on other networks, they're not running our software today. They're our customer, but they're running on third-party platforms that do cost us money. And the goal is to migrate them over to our platforms in 2027. So it's a combination of taking some SG&A out, leaving our expenses flat as the top line grows fairly significantly here over the next 3, 4 quarters.

And just one other thing I'd like to mention with respect to the G&A. What rolls in there is a fairly large amortization accounting expense for leases that we have in our mall network. And that amortization changes as we go throughout the year, and it's a noncash amortization that is just required for the way that we book that. So that certainly increases in certain periods of the year and then decreases back down. So it's not related to actual hard G&A costs that we can take out.

Yes. Well said, Tamra.

And I would now like to turn the call back to Rick for closing remarks.

Okay. I just do want to do a quick shout out. I want to give special thanks. There's about -- at CRI, we have about 230 employees now. I want to thank all of them for their incredible effort this year. I use the term what a great, sometimes crazy journey, this acquisition of CDM and putting the companies together and emerging as one of the top 3 competitors in North America. It's been pretty special. It's been fun, but we couldn't have done without the hard work of all the CRI employees. So a special shout-out to them.

So let me conclude the call by thanking all our shareholders, clients and partners for your continuing efforts, commitment and support as we work together to transform CRI into the leading brand in digital signage solutions. We look forward to speaking with you again next quarter. Thanks.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, at this time, I would like to welcome everyone to Creative Reality's 2026 First Quarter Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at cri.com following its completion.

Creative Realities has prepared remarks summarizing the interim results for the quarter along with additional industry and company updates. Joining the call today is Rick Mills, Chief Executive Officer; Tamra Koshewa, Chief Financial Officer; and George Sautter, Chief Strategy Officer and Head of Corporate Development. Ms. Koshewa , you may proceed.

Thank you, and good morning, everyone. Welcome to our earnings call for the first quarter ended March 31, 2026. I would like to take this opportunity to remind you that remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose and similar expressions or the negative versions of such words or expressions as they relate to us, our management or operations are intended to identify forward-looking statements.

Actual results may differ materially from those contemplated by such statements. Factors that could cause these results to differ materially are set forth in our Form 10-K and other filings with the SEC. 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. We believe the use of certain non-GAAP measures such as adjusted EBITDA and several other important key performance indicators represent meaningful ways to track our performance. A reconciliation of GAAP to non-GAAP measures is included in our public filings and in our earnings release that was issued this morning.

It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Thanks, Tamra. Good morning, everybody. We appreciate you joining today's call. I'll start by giving some highlights of our quarterly financials and some other recent developments. Tamra will go over the results in greater detail, but we posted revenue of $16.3 million in Q1 versus $9.7 million in the prior year period, including $7.9 million from our CDM acquisition. Our revenue in Q1 was negatively affected by approximately $4 million in revenue. This was due to the extreme cold weather across the Southeast U.S. which -- well typically, it slows down all new construction and more specifically in North Carolina in February due to a major snowstorm that paralyzed most of the state. Our first quarter gross profit was $5.6 million as compared to $4.5 million in fiscal 2025. And our consolidated gross margin was 34.2% versus 45.7% in the prior year period.

The gross profit and gross margin were affected by a onetime event as we terminated a CDM legacy subcontractor, which reduced gross margin by approximately $0.5 million. The approximate $4 million of revenue, if not lost, it's just delayed. February and March, new location openings were pushed out until April and May plus we had 500 locations we were installing for a lottery customer that were going to be installed in Q1 and this revenue shifted from Q1 into Q2 and then some of the locations will shift from Q2 to Q3. As a result, we expect our second quarter results to improve compared to the first quarter with the remainder of 2026 showing growth acceleration and margin expansion.

As of March 31, we had an annual recurring revenue run rate or ARR, as we call it, of $20.1 million with an additional $4 million of ARR contracted and in place already that ARR will start at year-end. Net loss attributed to common shareholders was $7.9 million for the 3 months ended March 31 compared to net income of $3.4 million for the 3 months ended March 31, 2026. Adjusted EBITDA was negative $0.5 million for the first quarter of 2026 versus a positive $0.5 million last year. While the first quarter had some weather challenges as we discussed, we also completed the consolidation and reorganization of the entire CRI and CDM combined workforce, including all sales, operational and support functions.

To all the folks at newly combined CRI, I just want to say job well done. Wow, it was a lot of tough work. The final integration challenge in the migration of the legacy is the migration of the legacy CDM financial accounting systems onto our NetSuite ERP platform. That will be completed at the end of Q2. We I suspect my CFO, Tamra is losing a little bit of sleep and there will be some late nights ahead. However, I've seen her in action. I've seen the plan. We have done this multiple times before and I have absolute confidence this will happen on time, and the results will be first rate.

Let me again state with a very bullish attitude. We remain on track for our best year ever with company revenue exceeding $100 million and adjusted EBITDA margins reaching the high teens in the coming quarters. We remain on track to realize the premerger combination cost savings of at least $10 million on an annualized basis by the end of 2026. Now not all of that will show up this year as we are still in process of executing on those cost synergies. In March, we had achieved over 60% of the goal and each month, we achieve one more step in that journey.

As a reminder, once all synergies are realized, adjusted EBITDA margins are expected to be above 20% and free cash flow generation will allow us to pay down debt and delever the balance sheet as we have done every time we completed an acquisition. I'll come back in a minute or so when Tamra is done to talk about some customer updates and a significant new retail media network.

But I'll turn it over to Tamra to share some additional comments on our financials.

Thanks, Rick. An overview of our financial results for the first quarter of 2026 was provided in our earnings release and our Form 10-Q which included the condensed consolidated balance sheet as of March 31, 2026, the statement of operations and cash flows for the 3 months ended March 31 and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended March 31 as well as the preceding 4 quarters.

While Rick reviewed our operating results briefly, let me provide more context related to our performance and our outlook. In terms of the income statement, first quarter revenue rose to $16.3 million versus $9.7 million in the same period in 2025, with approximately $7.9 million or 48% coming from CDM. Revenue from our legacy CRI business decreased approximately 15% year-over-year. While there were new installs in the quarter, there was a decrease in our SaaS from expiration of certain customer contracts in 2025. As Rick mentioned, several large planned installations were delayed in the quarter due to snowstorms and other poor weather conditions across much of North America. We expect to catch up on these installs in the second and third quarters, driving a healthy uptick in business, both sequentially and year-over-year.

Hardware revenue in the first quarter rose to $4.6 million versus $3.4 million in the prior year period, reflecting both new deployments and the inclusion of CDM. Service revenues increased 86% to $11.8 million from $6.3 million in fiscal 2025, reflecting the CDM acquisition, offset partially by expired customer contracts. Consolidated gross profit was $5.6 million for the fiscal 2026 first quarter versus $4.5 million in the prior year period. Consolidated gross margin was 34.2% versus 45.7% in the fiscal '25 first quarter. Gross margin on hardware revenue was 14% in Q1 of fiscal 2026 as compared to 32.1% in the prior year period due to an unusually higher mix of QSR deployments, and certain onetime costs of approximately $0.5 million associated with transitioning away from an outsourced CDM installer. Gross margin on service amounted to 42% versus 53% in the fiscal '25 first quarter, driven by the expiration of certain customer contracts in 2025.

We anticipate an increase in margins going forward due to revenue growth, synergy realization and improved operating cost leverage across the company. Sales and marketing expenses in the first quarter rose to $2.9 million versus $1.2 million in the prior year period, while general and administrative expenses increased to $8.9 million versus $3.9 million in fiscal 2025, primarily reflecting the acquisition of CDM, which contributed approximately $3.8 million of G&A expense.

However, as Rick indicated, we remain on track to achieving the $10 million of synergies previously announced for fiscal 2026. We also continue to invest in our media business and other technology initiatives meant to drive increased growth across the company.

We posted an operating loss of approximately $6.2 million in the first quarter of 2026 compared to an operating loss of $700,000 in fiscal 2025, reflecting the items I just discussed. CRI reported a net loss of $7.5 million and a net loss attributable to common shareholders of $7.9 million or $0.74 per diluted common share in the quarter ended March 31 versus net income of $3.4 million or $0.32 per diluted common share in the prior year period. As a reminder, the fiscal 2025 first quarter included a $4.8 million gain on the settlement of our prior contingent liability with the former stockholders of Reflect Systems.

Adjusted EBITDA was negative $500,000 in the first quarter of 2026 as compared to $500,000 income in the prior year period. We anticipate EBITDA and cash flow to improve for the remainder of fiscal 2026 given the forecasted business growth and cost initiatives previously discussed. When appropriate, we intend to use the cash generation to delever our balance sheet and strengthen our financial flexibility as we've done in the past. This remains a key long-term priority for the company.

In terms of the balance sheet, as of March 31, 2026, the company had cash on hand of approximately $2.3 million versus $1.6 million at the start of 2026. Our debt stood at $47.5 million at the end of the first quarter as compared to $44 million at the beginning of the fiscal year. we had approximately $13 million remaining in available liquidity under our revolving credit facility as of March 31, 2026.

Going forward, as I just mentioned, we remain dedicated to using cash generation, when possible, to lower our debt and migrate to an optimized capital structure in support of financial flexibility. However, we will also continue to invest in the business to drive growth and improve technology applications across the organization.

I will turn it back to Rick for additional comments around customer-specific activities.

Thanks, Tamra. Let's talk about some customer updates. First, I'd like to announce that we are the official digital signage provider for the Tennessee Titans and the new Nissan Stadium, which is under construction in Nashville, Tennessee. We talked about this previously, but this is an $8.5 million deal. It includes thousands of displays and a full IPTV solution throughout the entire venue. Most of this revenue will be recognized in 2026 I think the official stadium opening is in February. So we expect a little bit to trail into January, February punch list as the stadium gets open.

Second, we'd like to announce Dairy Queen in North America, not only the U.S. but also Canada. This is the QSR that we did not have the contract signed when we reported our Q4 results. We acquired this business as a result of a very exhausting tough RFP process, which ultimately accumulated in us being awarded the business. We were actually awarded and given the verbal award the same month as our closing of the CDM acquisition.

Here is what makes this unique. The prior provider of Dairy Queen was Cineplex Digital Media or CDM. So we expect to expand the annual revenue probably going to grow between $1 million and $2 million a year on an annual basis, mostly primarily driven by our Drive-Thru product. As of today, there's 4,700, approximately, locations across the U.S. and Canada. And as we've evaluated only 2 have digital drive-throughs, so the demand for that product is pretty significant inside this account.

Another customer, I guess, third, if you will, April 13, we announced a project to expand and modernize the AMC theaters in lobby media footprint across 285 locations nationwide. Well, I want to give a little additional color on that event or that announcement. This is a partnership between CRI and National CineMedia. National CineMedia is the leading cinema advertising platform in the U.S. This new initiative will turn the lobby at the participating theaters into a network of digital displays that will deliver the high-impact video brand storytelling and interactive experiences. These upgrades create a premium video platform that expands opportunities for advertisers to reach audiences both in auditorium and throughout the entire theater location.

We will install this network. It's approximately 1,200 screens and large-format LEDs throughout the rest of 2026. This media network utilizes our CMS platform, including our Reflect CMS and our AdLogic AdTech solution. Expected revenue of this is $6 million to $7 million, and we expect to realize most, if not all, this year. However, think of the growth of this network to other cinema theater chains or locations such as Cinemark and some of the other competitors and is what we expect will ultimately happen.

Okay. Next customer, I want to talk about 7 Brew. This account continues to grow. My last conversation with our account team indicated that in discussion with the customer, 7 Brew, they are on track to open 750 new locations this year. Well, each location is about $8,000 to us when it gets first opened. However, it is the ongoing SaaS that keeps growing with each new location.

And then finally, I want to talk about our retail media network. We are in the final contracting stages of a significant retail media network deployment. I can't yet discuss specifics. What I can tell you is this would result in a substantial sales of additional hardware SaaS and AdTech revenue. As we understand it today, this would be the largest retail media networks deployed in 2026 and measured by the number of screens across the U.S. Think of it in this year alone, it would be about 10,000 screens plus an additional 20,000 data gathering devices. So by year-end, we would be monitoring about 30,000 devices. By mid-2027, it would be in excess or approximately 60,000 devices.

This solidifies CRI as the leading retail media network provider in North America and there's certainly more to come about this announcement as we finalize the contracts over the next 3, 4 weeks. I hope everyone can grasp the significant change in CRI as an operating entity. So let's review them.

Number one, our position in the marketplace. I think it's very clear we are now clearly one of the leaders, if not the leader in the U.S. Number two, the revenue growth. Rapid expansion of revenue, we expect it to rapidly expand throughout the balance of this year. Number three, the management team. And I want to repeat that, the management team. I talked a lot about it on our last call, but this is a first-class management team in place running the business. Number four, operational excellence. We continue to excel in deployment. Wet weather doesn't get in our way. So -- and then last but not least, the financial discipline and commitment to delever the balance sheet. We are very focused on that. Our pipeline remains robust, and we expect to continue to land many new opportunities.

We're in excellent position to post higher growth and improved operating results going forward. And again, we remain on track for our best year ever. With that, we'll now move to the Q&A portion of the call. Operator, I'll turn it back to you.

[Operator Instructions]

Our first question comes from Jason Kreyer with Craig-Hallum.

Lots of good content in there. Rick, maybe we'll start on stadiums. You talked about the win with the Tennessee Titans, so congratulations on that. We've seen you have success in multiple needs, right? You've already had success in basketball and hockey and others. And it seems like when you've landed one, you do a really good job of finding 2 or 3 or 5 other teams in that league that need help, need a refresh. So maybe talk about the opportunity in football and your ability to expand beyond now kind of landing a deal with the Titans.

Sure. Thanks, Jason. We were really pleased to land this stadium. It's the second stadium where our software solutions that we deploy are controlling all of the screens. Of course, our first one in the NFL was Dallas Capital, where we continue to manage 3,300 screens throughout the building. So we're excited to have the Titans. Cracking the NFL is a big deal. And we do expect -- we are in pursuit of multiple other NFL teams for either a upgrades of the entire stadium refresh or where we're seeing quicker penetration is taking over the menu board operations within those stadiums. So it continues to grow.

I think we talked on the last conference call that, that business unit, our IPTV group, would probably double this year, and that currently appears to be on track.

Great. all shift to the RMN opportunity that you highlighted at the end there. So maybe just a couple of a couple of quick questions, and if you can expand on that. Is this a customer that you're already familiar with, that you've worked with in the past? Is the process still competitive at this point? And then if you get that win, when would you expect that to start to kick off?

Okay. Number one, the process is no longer competitive. We have received a verbal award. We are committed. We probably have certainly north of 10 people almost full time working on preparing for this project. We anticipate deploying in June or potentially shipping product in June and deploying in July. So this is coming fast and furious. They -- we actually did a total store takeover because this project started with somebody else in the industry as a competitor who fell down, they came to us and so we actually did a complete total store takeover. I believe it was Wednesday of this week, and that was a success, and we expect to take over the remaining test stores in the month of June and begin to full rollout in July.

I mean this seems like this could be a kind of a transformational deal for CRI. Could you talk about maybe first additional costs that you may have to take on to onboard a deal like that? And then with that, what does this mean in terms of onboarding or in terms of reference ability, putting CRI on the map and really scaling up your retail media business?

We think it's huge. I mean, the referenceability of this is second to none. It would be considered again, let's be clear, Jason. We got to go execute, right? I got to go get it done. But let's assume we're successful, and I think we will be. And we go get it done. This will be considered the top shelf first-class retail media network with full closed-loop attribution at the cash register for this retailer. And nobody else has done that in the U.S. And here we are at the forefront of getting that done.

Our next question comes from Brian Kinstlinger with Alliance Global Partners.

Congrats on all the great business development. In terms of the Retail Media Network follow-up, maybe you can size what a TCV looks like for 50,000 devices, of which it sounds like 10,000 are screens. And what maybe a ballpark what a recurring revenue opportunity looks like for something that large?

Yes. Great question. In terms of it, put it in size, this year, we think it's 10,000 screens and about 20,000 data gathering analytic devices will be deployed, right, to map out the shopper journey as they manage through a retail environment. All total by mid-2027, the customer expects it to be about 60,000 devices, which is roughly 25,000 screens and then 35,000 data gathering devices. In terms of range of magnitude of ongoing SaaS, we would expect that to be in the $6 million to $8 million range. still being a little bit adjusted and negotiated as we finalize the contract, but we expect that it will add $6 million to $8 million, we believe, when it is fully deployed.

It sounds great. Mean in terms of Gary Green, what was the current revenue contribution as it related to CDM? And maybe that will help us size the actual contract value on top of that.

So I'm converting from Canadian, Brian. So forgive me if I'm a little bit off. But before it was about $2 million to $2.5 million a year. That was a combination of SaaS and then indoor deployments because CDM was doing the indoor menu boards. As it now has expanded and includes the Drive-Thru we expect that CAD 2 million to CAD 2.5 million. Tamra, I believe that number was about right. Correct.

That's in U.S. though.

Yes, in the U.S., right. So. But it was historically $2 million to $2.5 million. We now expect it to be somewhere in the $4 to $5 million. And that growth rate, Brian, is driven predominantly -- well, some additional SaaS, but mostly just the actual pure hardware of Drive-Thru going in. And obviously, the benefit every time a Drive-Thru goes in, it's somewhere between 3 and 7 screens get added to the SaaS pool for every Drive-Thru. The difference of 3% to 7%, it just depends, is it a single Drive-Thru or a double.

Great. And then last question for me on the drive-through business. When you think about North America, what percentage of QSR has drive through digital now. Are we halfway through that?

That's a great question. Again, this is maybe a little bit dated material because I haven't looked at it in the last 6 months or so. But there's approximately 220,000, 210,000 QSRs that with drive through in the U.S., we believe the penetration today is less than 40%. And we believe they're 60% of the market. And when you look at it, the 2 people that are the most dominant is McDonald's and Taco Bell, who fully rolled out digital. So they actually make up the largest component of the installed base of the 40% that's out there installed.

I'm showing no further phone questions at this time. Do we have any questions over the web.

Yes. Thank you. Rick, we have a question from [ Kevin Sheldon ] via e-mail as to whether our customers with the franchisee system or a coalition approach to retail media networks Creative Realities or the customer continues to follow up with those franchisees or other prospects that did not opt in for a program when initially presented with an opportunity to do so.

Yes. Great question, George, and Kevin, so thank you for that. The answer is yes, we typically -- when we first engage with the customer -- of course, there's pent-up demand and there's a strong upfront rollout process as we fulfill the demand. Once that demand kind of calms down a little bit, yes, we meet with the franchisor. We go over the list of who are the franchisees that have multiple locations that did not opt in or has not installed digital. And then typically, it's joint work between us and the franchisor to have discussions, meet with that franchisee and ultimately get them to up into the program.

Because installing digital in the drive through specifically or indoor -- it improves throughput, it improves profitability and improve profitability at the franchisee benefits not only the franchisee, but the franchisor. So it's really a joint effort. But yes, we do do that.

Great. Thanks, Rick. There are no other questions via e-mail.

Okay. Well, first, finally, I want to conclude the call. I want to thank all our shareholders, clients, partners and employees. And again, this was a real interesting quarter for our company as we combined 250 people into 1 organization and did the reorganization. And so again, I just want to say a shout out to all the CRI employees for all the hard work this has fundamentally changed our company, and we expect to do nothing but continue to grow from here forward.

Thanks for joining the call. We look forward to speaking to you again next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning. At this time, I would like to welcome everyone to Creative Realities' 2025 Fourth Quarter Earnings Conference Call. This call will be recorded, and a copy will be available on the company's website at cri.com following its completion. Creative Realities has prepared remarks summarizing the interim results for the quarter along with additional industry and company updates.

Joining the call today is Rick Mills, Chief Executive Officer; Tamra Koshewa, Chief Financial Officer; and George Sautter, Chief Strategy Officer and Head of Corporate Development.

Mrs. Koshewa, you may proceed.

Thank you, and good morning, everyone. Welcome to our earnings call for the fourth quarter ended December 31, 2025.

I would like to take this opportunity to remind you that remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose and similar expressions or 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 such statements. Factors that could cause these results to differ materially are set forth in our Form 10-K and other filings with the SEC. 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. We believe the use of certain non-GAAP measures such as adjusted EBITDA and several important KPIs represent meaningful ways to track our performance. A reconciliation of GAAP to non-GAAP measures is included in our public filings and in our earnings release that was issued this morning.

It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Thanks, Tamra. Good morning, everybody. We appreciate everyone joining today's call. I'd like to start by giving some highlights of our Q4 financials and other recent developments, including our integration of the CDM business, which we acquired in November. Given the sizable nature of this transaction and the transformable impact it brings to CRI, it should come as no surprise that it took longer than normal to close our books for the fourth quarter.

But first, I'd like to take a moment to introduce our new CFO, Tamra Koshewa. Tamra joined our team on December 1. I know the date because it happens to be my birthday. So Tamra, welcome aboard. She brings tremendous experience to the organization, 30 years of executing financial strategies across diverse industries, including manufacturing, technology and services. Her expertise and leadership credentials include a strong dedication to achieving a high level of performance and orchestrating operational turnarounds.

We believe Tamra is uniquely qualified to take on the challenges of integrating CDM into CRI, finding synergies across the enterprise, ensuring margin expansion and ultimately, delevering the balance sheet, while this should improve returns for our shareholders. She brings tremendous energy. She is driving organizational change. She is implementing value-enhancing process improvements and is working to increase our cash flow. She's off to a great start, and Tamra, we're excited to have you on board.

More recently, we've also added a couple of other key executives. So on March 30, we added Jackie Walker as our Chief Experience Officer. Jackie is a veteran digital transformation leader, with more than 15 years experience, designing, operating and scaling enterprise digital platforms, really at the intersection of customer experience, product vision and commercial outcomes.

She brings a combination of technical execution and business acumen, having authored the digital menu board and drive-thru strategies for 7 of the top 10 restaurant brands and 2 of the largest in-store retail media networks in the U.S. Her appointment marks an important shift for CRI as the company continues its transition into a software-first platform, powered by data analytics and artificial intelligence.

Jackie will be instrumental for our next era of growth. She possesses a unique ability to bridge the gap between complex engineering and the strategic needs of the world's largest brands, and we're very pleased to have her here as well.

You add Jackie's addition with the prior addition of Dan McAllister, as our CRO, this rounds out our management team with industry-leading veterans who have track records of accomplishment at a pivotal time in our history, as we relaunch ourselves as a much bigger, more technology-focused service-oriented leader in the digital signage space. We believe we now have the talent at the top to accelerate growth, enhance our margin and deliver improved bottom line results going forward.

A couple of other facts of the business. This past February, we completed the repurchase of all of Slipstream's 1.7 million outstanding warrants for $200,000. This -- the repurchase of these warrants provides greater visibility for the future and our total shares outstanding, which we believe benefits the company as well as our shareholders, alleviating potential overhang on the stock. We want to thank Slipstream for their support in finalizing this transaction.

Now let's review a few details of our current results. Tamra will go over the financials in greater detail, but some of the highlights. We posted revenue of $23.9 million in Q4 versus $11 million in the prior year period, including $13.6 million of that revenue from CDM. Our fourth quarter gross profit was $11.5 million as compared to $4.9 million in fiscal 2024, and our consolidated gross margin was 47.9% versus 44.2% in the prior year period. This reflects both improved mix and the positive impact from CDM joining the company.

In addition, as of December 31, 2025, we had an annual recurring revenue run rate, or ARR, of $20.1 million versus $12.3 million at the end of the third quarter. In addition, we have $4.1 million of SaaS under contract that will come online through the balance of this year and be added to the January 2027 SaaS total.

Adjusted EBITDA was $5.2 million for the fourth quarter of 2025 versus $0.5 million last year and $0.8 million in the third quarter. And just as a reminder to everybody, we closed the transaction on November 7. So our Q4 includes 2 months of the CDM performance, not the full quarter. We anticipate both adjusted EBITDA and our ARR will increase going forward due to the synergies and additional opportunities in our pipeline.

We have substantially integrated CDM operations into CRI, and we are making significant progress towards our integration goals this year. As you may recall, acquiring CDM more than doubled the size of our company and significantly increased our market penetration in Canada. CDM serves thousands of quick-serve restaurants, financial institutions and retail establishments across North America, and the acquisition strengthened our ability to address the growth in retail media networks literally coast-to-coast all throughout North America.

In addition, we now own Canada's largest mall retail media network. This digital out-of-home, or DOOH, if you will, media network has over 750 screens with exclusive representation and revenue sharing across 95 shopping destinations. Such these locations include 76 of the 100 most productive Canadian shopping centers and 9 of the 10 busiest malls in Canada, serving approximately 750 million shopper visits annually.

As previously announced, we expect synergies of at least USD 10 million across North America on an annualized basis by the end of this year, reflecting the operating efficiencies, margin enhancement opportunities and the cross-pollination of our CMS and ad tech platforms. At present, we are currently north of 60% of the goal, and we continue to anticipate total company revenue to exceed $100 million in 2026, with adjusted EBITDA margin percentage in the mid-teens.

Once all synergies are realized, adjusted EBITDA margins are expected to be above 20% and free cash flow generation should be significant, allowing us to pay down debt and delever the balance sheet once again as we have done in the past after acquisitions.

With all our advancements, unique applications, strong customer relationships and proprietary technology, we've built a strong foundation for a bright future at CRI. We expect revenue to accelerate, our backlog to grow and margins to improve as the year plays out, putting us on track for a record performance in fiscal 2026.

I'll come back in a minute to talk about specific product and customer trends, but we'll now turn it over to Tamra to share some additional comments on our financials.

Thanks, Rick. I'm really excited to be part of the team during such an exciting time in our company's growth trajectory. An overview of our financial results for the fourth quarter of 2025 was provided in our earnings release and will be provided in our Form 10-K, which includes the condensed consolidated balance sheet as of December 31, 2025, the statement of operations and cash flows for the 3 and 12 months ended December 31, 2025, and a detailed reconciliation of net income to EBITDA and adjusted EBITDA for the quarter ended December 31, 2025, as well as the preceding 4 quarters.

While Rick reviewed our operating results briefly, let me provide more context related to our performance and outlook.

In terms of the income statement, fourth quarter revenue more than doubled year-over-year to $23.9 million as compared to $11 million in the same period in fiscal 2024, with approximately $13.6 million from CDM. Revenue from our legacy CRI business decreased approximately 6% year-over-year, primarily as a result of project timing and decreased SaaS. Hardware revenue rose to $6.6 million versus $3.9 million in the prior year period, while service revenue increased to $17.3 million from $7.2 million in fiscal 2024, largely reflecting the CDM acquisition as well as deployment timing.

Consolidated gross profit was $11.5 million for the fiscal 2025 fourth quarter versus $4.9 million in the prior year period, and consolidated gross margin was 47.9% versus 44.2% in the fiscal '24 fourth quarter. Gross margin on hardware revenue was 28% in Q4 of fiscal 2025 as compared to 26.3% in the prior year period, while gross margin on service amounted to 55.7% versus 53.9% in the fiscal 2024 fourth quarter, primarily due to improved mix of services profit as a result of the CDM acquisition.

Sales and marketing expenses in the fourth quarter rose to $2 million versus $1.4 million in the prior year period, while general and administrative expenses increased to $8.9 million versus $4.2 million in fiscal 2024, again, reflecting the acquisition of CDM, which contributed approximately $3.2 million in expense. Approximately $1.2 million of G&A costs were onetime in nature, including legal, accounting and consulting fees as well as closing costs related to the transaction.

As Rick indicated, we are well on our way to achieving the $10 million of synergies previously announced for fiscal 2026, although we are also investing in the Canadian media business and other technology initiatives meant to drive increased growth across the enterprise.

The company posted operating income of approximately $0.5 million in the fourth quarter of fiscal 2025 compared to an operating loss of approximately $700,000 in fiscal 2024. CRI reported a net loss of $1.9 million or $0.19 per diluted share in the quarter ended December 31, 2025, versus a net loss of $2.8 million or $0.27 per diluted share in the prior year period.

Adjusted EBITDA was $5.2 million in the fourth quarter of 2025 as compared to $0.5 million in the prior year period. We anticipate adjusted EBITDA and cash flow to improve going forward as synergies are realized and at the appropriate time, intend to reduce debt to decrease interest expense and strengthen our financial flexibility as the company has done in the past.

In terms of the balance sheet, as of December 31, 2025, the company had cash on hand of approximately $1.6 million versus $1 million at the start of 2025. As mentioned on prior earnings calls, we keep a minimum amount of cash in the bank as the company has set up a sweep instrument to apply funds against our revolving debt facility to better manage interest expense.

Our gross and net debt stood at approximately $43.3 million and $41.7 million, respectively, at the end of the fourth quarter, as compared to $13 million and $12 million, respectively, at the start of 2025. The increase of our indebtedness is largely a result of financing the acquisition of CDM as previously discussed. As a reminder, we financed the transaction through a combination of debt and preferred equity, including a 3-year $36 million senior syndicated term loan and $30 million of convertible preferred equity with a $3 conversion price provided by affiliates of Northland Capital.

Going forward, as I just mentioned, we remain dedicated to using cash generation when possible to lower our debt and migrate to an optimized capital structure in support of financial flexibility. However, in the near term, we are investing in the business to drive growth and improve technology applications across the organization.

I will now turn it back to Rick for additional comments on the senior executive additions to the management team, reorganization of our sales team, some customer activities and the CDM integration.

Thanks, Tamra. I've already discussed Tamra's background and unique fit for our business earlier on the call, but I do want to spend a few more moments to introduce Dan McAllister, is our CRO; and Jackie Walker, is our Chief Experience Officer.

Dan has been a Chief Revenue Officer at a SaaS company before. He has a history of accelerating go-to-market strategy and reengineering the revenue systems for sustainable growth. His proven track record in aligning sales, marketing and customer service teams, along with enforcing team structure and process discipline, all lead to revenue growth.

His sales organization here has been structured into vertical teams, each led by a senior executive and focused on a vertical market. By the way, this is a team of 42 folks. That's really a sales team that has effectively tripled in size. These vertical teams fall into the following markets: sports and entertainment, also known as IPTV; QSR and fast casual restaurants; retail and financial; retail media networks, including ad tech; lottery; and finally, malls and real estate, known internally as MRE. We are now better focused and prepared to go after new customers across the board.

More recently, Jackie Walker has joined as our new Chief Experience Officer. She will serve as the internal and external authority on how digital and physical environments converge. She brings and will leverage an outsider's perspective to really disrupt the legacy thinking, overseeing the strategic what and why of our software evolution while scaling our consulting practice into a high-growth, high-margin engine of the business. Jackie, welcome aboard.

Now there's a lot of activity and news to discuss across our various business vertical markets. So let's start with the IPTV division. We have been awarded a new stadium project, which will be completed in the second half of this year. This is a new stadium build from the ground up. This is an $8 million project involving thousands of displays and IPTV throughout the entire venue.

In addition, we are in the process of refreshing the entire IPTV system for a Major League Baseball team and several other stadium projects. This division, which is headed by Lee Summers, is expected to double revenue this year to over $17 million.

Our QSR and Fast Casual restaurant division is managed by Natalee Minds, a 15-year veteran of CRI. Our next-gen modular drive-thru digital menu board system, which we introduced in January of this year, is continuing to increase revenue in this division. This drive-thru, as we call it, Version 2.0, is engineered to help operators streamline installation, simplify maintenance and scale the drive-thru environment over time.

This new system allows brands to expand from single digital screen setups to multiscreen configurations without replacing the entire structure. We are currently deploying this product for multiple customers and typically are installing 10 new locations on a weekly basis, or over 500 a year.

The Retail, Financial, Retail Media Network and AdTech team, headed up by Jessica Creces, has been extremely busy since the acquisition. We had a nice jump start on the year by renewing the SaaS contracts of 2 of the top 10 largest financial institutions in North America. Congrats to the team for getting that done.

Our AdTech solutions are now in test by a number of large customers who are evaluating the monetization capabilities of their installed signage network. We would expect to see 3 or 4 deployments in the second half of this year.

Today, we're also announcing a $6 million media network project that CRI is deploying across the lobbies of AMC theaters in the U.S. Our partner, National CineMedia, or NCM, is the leading cinema platform in the U.S. and the media representative for this new innovative network. We will install this network of 1,200-plus screens and large-format LEDs through the rest of 2026. By the way, this media network utilizes the Reflex CMS and our AdLogic AdTech software solutions.

One other customer-specific update I'd like to mention, North Carolina Lottery, the previously announced 10-year $54 million contract, is in the process of deployment and has been migrated to the ReflectView CMS platform. The deployment of all 1,550-plus locations is expected to be completed in Q2, with a few remaining locations in Q3.

And then finally, let's talk about the start of 2026. We had a significant revenue impact in Q1 from the disruptive weather across the Midwest and Southeast. As many of you know, a major cold wave gripped much of North America from mid-January through mid-February, bringing incredibly low temperatures, snow, sleet, freezing rain to the eastern 2/3 of the country.

In addition, a very rare storm brought historic snowfalls to the Carolinas, specifically North Carolina. This caused $4 million or more of revenue to push to Q2. I want to remind everybody, this is not lost revenue, however, just delayed. Construction on many of our customers' new QSR facilities was frankly suspended for 30 to 45 days as the weather passed through. As a result, the February and March new location openings for these QSR customers were delayed until April, May, some in June, including the installation of 500 locations for our lottery customer. This will shift revenue from Q1 into Q2 and maybe even some into Q3.

With that said, I want to be very clear. We continue to be bullish on our revenue and stand behind our earlier statements that our revenue in 2026 will exceed $100 million and our adjusted EBITDA will reach a run rate of 20% by year-end. Our pipeline remains robust. We expect to continue to land many new opportunities. We're in an excellent position to post higher growth and improved operating results going forward, and we remain on track for our best year ever.

With that, we'll now move to the Q&A portion of the call.

Operator, please go ahead.

[Operator Instructions] Our first question comes from the line of Jason Kreyer with Craig-Hallum.

Rick, can you just talk maybe about like scale gains, how that's changed the go-to-market over the last several months since the acquisition, or just maybe the tone of customer conversations and how that's changed?

Great question, Jason. The tone of conversations is totally different. Number one, most customers would recognize, particularly in some of our verticals, QSR specifically, we're absolutely at the top of the food chain. And so we are now in conversations that we would have never been in before. That's number one. Number two, those conversations are very serious because they understand we are now a true leader in the QSR and drive-thru space and approach us with a very different message than we've experienced in the past.

Great. Good to hear. Rick, we've talked for the last few quarters about deals that are kind of sitting at the 1-yard line or I think you've even talked about the 1-inch line. Just any updates on that? I'm also curious how you see the pipeline building with your AdTech capabilities. I know the last several wins that we've discussed have been more slanted to the QSR side. So I'm curious how deal flow or how that pipeline looks on deals that have advertising embedded in them?

Deal flow continues to be strong. Let's go back to the 1-inch line comment. First thing I'd tell you is, obviously, we pulled one across the 1-inch line with an $8 million stadium project, finally got that done. Number two, we announced on a prior call, a large QSR had gone through an entire RFP over 4,000 locations in North America, and they had selected us. And we've been negotiating the contract, and we finally expect to actually sign that contract here in the next couple of weeks. So it's been a long time coming, but the contract is getting ready to get executed. So that will result in additional drive-thrus, et cetera, moving along.

Retail Media Networks, primarily, we've had a couple of C-store customers, one specific large C-store customer that has been in test for probably been 5, 6 months at least now and is now moving to deployment, number one. Number two, we are in conversations with 3 or 4 other customers who are interested in Retail Media Network. One is a large grocer, one of the largest grocery chains in the U.S. So we're in significant conversations. Another, significant C-store chain. So again, seeing -- and I would say 2 or 3, what you would call traditional retailers, tend to be more in the luxury beauty area, but we are having substantive conversations with a number of them.

And last but not least, I'd also add, our sales force has literally tripled in size. We have 40-plus folks who are on the sales team, who are out talking to customers every day. The number of folks we are actively engaged with has certainly increased significantly. Part of that's due to our new position and stature in the industry, is one of the big guys. Number two, it's just also the fact that I've now got 40-plus experienced folks out beating the streets, contacting customers every day across North America.

So a combination of all those things is really coming into play, and we feel very bullish about the next 12 to 18 months.

That was a solid recap there, Rick. Last one for me. Just want to touch on the lottery sector. I think the last time we talked, you've got the big deployment happening right now in North Carolina, but I thought there was some potential momentum with other RFPs that were coming to market. So if you could just give us a recap of what you think that RFP landscape looks like today?

That's a solid question, Jason. Unfortunately, I don't have a solid answer other than we expect in 2026, 7 to 8 large RFPs coming out. We have yet to see that happen. We have one that we are actively participating in. We have a couple large West Coast opportunities that we were in discussion, but I would not call them active RFPs. But again, well positioned, and we are certainly talking to everybody -- every lottery that's interested.

The one thing I would tell you about the lottery market and what we've done with our current lottery customer is we are showing significant lift. And so we have results of that to show other lottery customers, potential customers, that we can achieve substantial lift, which results in significantly increased lottery ticket sales.

Okay. I lied about the last question. Just curious on that point your ability to take that lottery, go into C-stores and almost create kind of a cross-sell opportunity where I'm just curious if the rollout of lottery kind of helps build out a greater rollout of C-store, you kind of see a network effect there?

Still unproven yet. Today, when we've rolled out lottery, it's been dedicated to lottery. So we have not done a mix of in-store promotion type stuff and then layered in lottery, like a 50-50 mix. Have not done that. It has today been 100% lottery. We are talking to some of our C-store customers who have networks already deployed about improving their schedule and adding lottery on those screens to just increase lift, but no results yet to even talk about.

Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners.

Solid fourth quarter results. Prior to the announced partnership, had AMC been a customer of Creative or even CDM? And if so, how much revenue did AMC generate last year? And then the second part of that question is, I'm not sure I heard, what was the installation revenue on this contract versus the potential recurring revenue based on your AdTech and Media solution?

Great question, Brian. A couple of things. Yes, AMC has been a long-time customer, okay, of CDM's. And today, I would tell you it's a 7-figure customer in terms of deploying our software, managing all of the screens throughout every AMC theater in the U.S. today, number one. Number two, they are actually not a hardware customer. They have always procured hardware internally. So they are a software and content customer. So when the opportunity came to build out a network, it seemed to make sense that CRI was already deployed throughout their locations. We were doing a great job. So it was a natural fit for us.

In terms of the hardware and installation revenue on this particular network, I'm assuming it's going to be in the typical 70-30 range of hardware and installation. However, that's out of the $6 million bucket. Then there's ongoing. It is our software AdTech that will be running it, our CMS, our AdTech, and there is a revenue share for the next 5 years on that screen.

Great. That's helpful and a great deal. This week, I think it was, and I could be wrong, 7-Eleven announced a store restructuring where it's going to close something like 600 stores, don't quote me, I'm sure you know better, and open something like almost 300 stores over the course of maybe 2 years. Again, I'm not sure I got the time frame right. Is there any impact on your business from the store closings? And then I know you've been a preferred vendor there. Is there going to be a new RFP? Or is that under your existing contract? Just maybe talk about 7-Eleven and what's going on there.

No. We -- great question. Number one, if there is an effect on CRI, it would be de minimis or minimal. The closing of the 600 stores, they may have us -- if those stores had digital, which we don't know, they may have us uninstall digital and reinstall it in some other stores. In the 300 new locations, those typically are going to be full-sized 7-Elevens that are typically going to include at least 1, if not 2 food concepts. And yes, we would do a number of screens through that.

Number three, our contract with 7-Eleven is in the process of renewal. It has not been signed, but we're at the endgame for another 3-year renewal with 7-Eleven. We do not anticipate any change in that customer if they just continue to grow.

Great. You mentioned and it was helpful that the first quarter was impacted by weather. Clearly, that's going to be the worst quarter of the 4. Is there any other thoughts on which are the strongest, maybe the second or the third quarter, based on known installs at places like AMC and North Carolina?

I would tell you, Q3 is setting up to be a significant quarter because, with stadium install, a bunch of hardware will ship in Q3. A bunch of drive-thrus will all go in, in Q3 because you got -- that's kind of the end of the construction time frame across the eastern half of the U.S., so they want to get those restaurants open September, October time frame, right, before it gets into bad weather. So generally speaking, that's going -- what we expect to be significant. Then we have this QSR customer that has not rolled out drive-thru. We're going to sign the new contract. We do expect drive-thru expansion out of their 4,000 locations across North America.

The other thing that I will add is that Q4 has the largest percentage of our media revenue with the CDM acquisition, so that automatically will increase the value in Q4. So we do expect Q4 to be the largest quarter of revenue.

Great call out. I forgot that little portion about a bunch of media revenue in Q4. Thank you, Tamra.

Already adding value. And then last question for me. Remind us the expectations for interest expense and how much is the cash obligation this year?

That's a great question. George or Tamra, any input on what that would look like?

I mean I think, again, it's going to depend on, obviously, the debt levels of the revolver. But generally, you're going to have the term loan that's going to drive the lion's share of the interest expense that we would expect to see. And so that generally is somewhere between $0.5 million and $0.75 million a quarter.

And Brian, happy to go through that. I know I think we have a little one-on-one time scheduled. So happy to articulate that in detail on that call.

Our next question comes from the line of Jon Hickman with Ladenburg.

Can you hear me okay?

Yes, I can hear you just fine, Jon.

Okay. So all -- most of my questions have been asked and answered. I wanted to like drill down a little bit on this restaurant chain that you landed last year, and then there were some issues with installation because of the size of the screens and stuff. So where are you with those guys? I mean did you do business with them in the fourth quarter even though you've -- what's going on? Can you elaborate?

No. I mean the answer is there was some SaaS revenue because we had some of their locations on our SaaS platforms, okay? However, they have halted all hardware procurement and installs until the new contract was executed. So the new contract, we all had -- including the customer and ourselves, we had internal dates. We were going to get it done by March 15. Well, here we are at April 14, and we still don't have it signed. We do expect this signed in the next couple of weeks. What we...

Why does there have to be a new contract? I thought this was a brand-new win last year.

Yes. So they did an RFP. It was a brand-new win. So it's a contract that we had to write -- create from the ground up.

Okay. You won the RFP, okay. And there's a lot of franchisees in this particular customer. Has that been an issue?

Again, since we -- it has not been an issue as we've started to deploy the SaaS across the franchisees. Now the franchisees are responsible for hardware updates and should they desire to put in, to upgrade to a digital drive-thru, they would be responsible for that.

Now Jon, I can tell you, we attended the franchisee show in January. The verbal indication we received from the folks who came by our booth, I was there. And so talk to our people, indicated significant interest. I've talked to 2 or 3 franchisees that owned 30 to 50 locations each that indicated they wanted to pull the trigger and put digital drive-thrus in all locations.

Now Jon, as you know, we have to take that with a little bit of a grain of salt because now when it's time to start to write the check, who knows? But we do expect to see some growth in Q3 because even if they turned it on today, we wouldn't be installing drive-thrus in the next 60 days. It would be Q3 or Q4 revenue that would get an impact once we sign this contract. Right, Tamra? I mean, that's realistically the impact.

Okay. And maybe this is too hard of a like the math and stuff. But out of the kind of the total addressable market here, not including the AdTech side, but what do you think -- do you have any estimate at all of your market share right now?

Really hard number to pin down. I would tell you, in North America today, we are not 2%. If we were 1%, I would be surprised at $100 million. George, any input? I've got George sitting here who is certainly the math guy on all those things. George, any comment?

And Jon, are we -- just to clarify, are we talking about market share or market penetration?

I'd say, market -- well, maybe when we talk later today, we can talk about both of those. But just let me ask a different question. Now that you were combined with CDM and you say that you can get into different -- just a different level of contracts and opportunities, so have you changed your competitor outlook? Or the individuals or the entities you're competing with, are they different now?

No. We have always competed against the same 3 or 4 or 5 competitors. Only some were larger than us. Today, they're not larger than us. We occupy a different unique position. And some of them, I am significantly larger than they are. So I represent a real strategic advantage for the end user customer to align with CRI as a supplier.

Our next question comes from the line of Kevin Sheldon, private investor. Kevin,

please check your mute button.

All right. And I'm currently showing no further questions from the phone lines. Mr. Sautter, are there any e-mail questions?

No, there are not. Thank you.

All righty. I would like to turn the call back over to Rick Mills for any closing remarks.

Okay. Let me conclude the call, number one, by thanking all our shareholders, clients, partners and specifically the CRI and CDM employees for their continuing efforts, commitment and support. We continue to work to transform CRI into the leading brand in digital signage solution. And for many of you who've been on these calls for the last couple of years, you've seen us really execute in the market and continue to grow.

So thanks for joining the call. We look forward to speaking with you again next quarter.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good morning. At this time, I would like to welcome everyone to Creative Realities’ 2025 Third Quarter Earnings Conference Call. This call will be recorded and a copy will be available on the company's website at cri.com, following its completion. Creative Realities has prepared remarks summarizing the interim results for the quarter along with additional industry and company updates.

Joining the call today is Rick Mills, Chief Executive Officer; and George Sautter, Chief Strategy Officer and Head of Corporate Development. Mr. Sautter, you may proceed.

Thank you, and good morning, everyone. Welcome to our earnings call for the third quarter ended September 30, 2025. I would like to take this opportunity to remind you that remarks today will include forward-looking statements. The words anticipated, will, believes, expects, intends, plans, estimates, projects, should, may, propose, and similar expressions or 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 such statements. Factors that could cause these results to differ materially are set forth in our Form 10-K and other filings with the SEC. 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 issued this morning. We believe the use of certain non-GAAP measures such as adjusted EBITDA and several other important KPIs represent meaningful ways to track our performance.

It is now my pleasure to introduce Rick Mills, CEO of Creative Realities.

Thanks, George. Good morning, everybody. We appreciate everybody joining today's call. We also want to take this moment to welcome all the team members from Cineplex Digital Media, who are joining the call for the first time.

As many of you are aware, we completed the purchase of Cineplex Digital Media or CDM, just last week on November 7. This was a tremendous effort by everyone here involving a great deal of due diligence, strategic analysis and of course, the arrangement of appropriate financing to get the transaction across the finish line.

I'll speak about this more in a moment, but in a nutshell, we just couldn't be happier with this acquisition. This is the one that we believe allows us to leapfrog the competition in North America, doubling the size of the company, puts us on an accelerated growth trajectory to significantly improve bottom line results. As many of you know, we've talked about this transformational acquisition for the past 1.5 years, and it has finally come to fruition.

First, let me give you an overview of the quarter. We posted revenue of $10.5 million in Q3 versus $14.4 million in the prior year period, while gross profit was $4.8 million as compared to $6.6 million in 2024. A $2 million order slipped from the third quarter into the fourth quarter, negatively impacting our results. However, 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, 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 million versus $18.1 million 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 CAD 70 million, approximately USD 50 million after many months of due diligence and negotiation. The business is a great addition to realities, and as I first discussed on a call following our announcement, the company is a leader in providing data experience-based digital marketing solutions across North America. Over 60% of the revenue is recurring and approximately 84% of sales are based in Canada.

CDM posted revenue of just under CAD 56 million 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 U.S. 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 CAD 32 million or USD 25 million 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 100 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 U.S., opened new avenues for accelerating growth going forward.

CDM serves thousands of QSR restaurants, financial institutions and retail establishments across Canada. Combine that with our U.S. coverage, 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 license certain software applications from third-party providers, the combination with CRI, including our ReflelectView and Clariti CMS platforms as well as our AdLogiq Ad server and AdLogiqCPM+, our CMS and ad tech platforms will provide significant synergies to accelerate growth across the business. Overall, we believe CDM will rapidly 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 3x and 4x the adjusted EBITDA of CDM.

On a forward-looking basis, we anticipate total company revenue to exceed $100 million in 2026 with 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 4 to 7 individuals, appointing 3 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 North Run 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 detail 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 2 service, all powered by our proprietary CMS platform, Clarity.

Our AdLogicq ad server and CPM+ programmatic applications also continue to see increasing traction 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 and 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. An overview of our financial results for the third quarter of 2025 was provided in our earnings release and Form 10-Q, which included the condensed consolidated balance sheet as of September 30, 2025, the statement of operations and statement of cash flows for the 3 and 9 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 4 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.

Debt. 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 7.56x and 7.646x, respectively, versus 4.53x and 4.40x at the end of the second quarter of 2025. Please be reminded that the Q2 and Q3 2025 debt balances reported herein contain the settlement of 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 3-year $36 million senior term loan with First Merchants Bank and $30 million of convertible preferred equity with a $3 conversion price provided by affiliates of North Run 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.

Thanks, George. Just a few updates, and then we'll go to Q&A. 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 U.S. alone. Our drive-thru pricing was one of the key deciding factors as they have not rolled out digital drive-thru 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. They're running our CMS. Now, they're running AdLogq. Assuming the test is successful, the 8,000 in-store screens, it's 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 Instructions]. Our first question comes from the line of Jason Kreyer of Craig-Hallum.

Rick, I was just wondering if you can provide some feedback on what you've been hearing from customers and partners and stuff, since you announced the CDM acquisition a few weeks ago and any enthusiasm that's built up in the channel?

Yes. Jason, great question. All the customers have been very positive and certainly appreciate how it gives us tremendous scale. As you may or may not know, I flew 10,000 miles in 1 week to literally visit virtually every customer of CDMs in the week prior to the closing. The CDM customers understand the acquisition, no issue.

I will tell you the one area you mentioned, you used 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. A lot of acknowledgment around that. As you know or folks on this call know, we have always stated, this is all about get scale, go big, go home. Well, guess what? We've got scale and we went big, and we're glad to be here.

Appreciate that. You've had a lot of success in QSR. Maybe you can just talk about how you go-to-market in Canada following the acquisition. I'm curious when you think about that, 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 footprint in Canada?

Little bit of both. There are certainly some CRI customers that 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 for our -- 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 take 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. Certainly, 3 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 1,500 locations. So that's really a strategy that we are embarking upon virtually immediately.

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?

Yes. The answer clearly is just yes. But let me tell you why. We now -- 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. 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 CAD 32 million 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 U.S. customers and gain traction quicker.

Our next question comes from the line of Brian Kinstlinger of Alliance Global Partners.

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 completed? Maybe if you could size that opportunity collectively?

Sure. Great question, Brian. Number one, as we talked about North Carolina Lottery, that alone was $54 million, approximately $8 million to $10 million of hardware and then the rest is SaaS over a 10-year period.

Number two, the opportunity, what we had heard early is there were about 10 or so states in the U.S. that we're planning RFPs. We since currently have received our first RFP from down here in the U.S. and expect to participate in more. We believe the opportunity in lottery is robust.

Then can you talk about your go-to-market strategy in U.S. malls as you leverage CDM's positioning in Canada?

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 2 quarters to engage with a number of the mall ownership properties here in the U.S., 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.

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 U.S. We expect to be able to bring some of that knowledge and potentially participate in that in the U.S. over the next year or 2.

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?

Our stadium business continues to grow. This is year 3. 2026 is year 3 that we've been in that vertical market really going hard. We have a couple of signature wins that are waiting for signatures as we speak. We expect 2026 to be our best year. 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.

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 had a 4,000 store location. I heard an 8,000 stores. It sounds like 3 separate ones. I can only assume that 8,000 is 7-Eleven you talked about specifically last quarter. Am I right, there were 3 separate opportunities and what of those have been signed versus not signed? I was confused.

Then lastly, on customer-specific IceBox, is that moving forward this quarter? Those are 4 different customers, I think.

Yes. The IceBox network was, as we talked about, was the $2 million that got pushed from Q3 to Q4 because of a funding snafu. 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, yes. We have dramatically worked with them to move approximately 8,000 screens into a true retail media network test. 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 ad tech and our ad serving tech, 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, etc. 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 their 4,000 locations have already gone digital. They will be migrating all of that to our platform. Most importantly, out of all their locations, they have less than a handful of digital drive-throughs, and that's the #1 area of growth for them in 2026. 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. A number of things going on there.

Our next question comes from the line of Jon Hickman of Ladenburg Thalmann.

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. Can you elaborate on what you think this guy can do to push customers like over the goal line to actually sign with you?

First and foremost, Jon, 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. I need help, and so I really -- this is an individual I've spent 8, 9 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 is 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. We expect a lot of potential inbound customer opportunities, the ability to convert some of these customers, who have been lingering, just haven't got them across the finish line. I'm very intrigued to have help. I hope that answers your question, Jon.

With him, how many sales guys will you actually have beside yourself?

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

All my other questions got answered by the previous question.

Our next question comes from the line of Howard Halpern of Taglich Brothers.

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

Howard, I would say we've always had content creation. We had a relatively smaller team as part of CRI and our predominant content creation and content management was focused on QSR and C-store. With the Cineplex 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 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, I think we've budgeted somewhere between USD 5.5 million or USD 6 million 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.

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

Yes. As a matter of fact, our wonderful partners at North Run, 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. That was a key tenet of them even making the investment. 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?

That's correct, Rick.

Yes. Lots of headroom to run the business on a go-forward basis. Thanks, George.

Just one final one, more of a numbers question. Entering 2026, the end of this year, what do you anticipate the combined company's ARR to be?

We expect, as we enter the year, the combined ARR, it's a combination of ARR, plus our ad revenue, which we indicate is ARR like. Those 2 will exceed USD 40 million combined.

That's good higher-margin revenue going into 2026. That sounds great.

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

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

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 CRI platform. The next 4 months, we have a lot of integration to do, a lot of hard work, but it will be fun work. We look forward to speaking with you again next quarter.

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

Good day, and thank you for standing by. Welcome to the investor update meeting. [Operator Instructions] Please advise that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Rick Mills, CEO. Please go ahead.

Good morning, everybody. It's been a fast and furious couple of days. Sorry to be a couple of minutes late starting the call. But I look forward to just talking about CRI and the CDM combination. So first and foremost, thank you for the call. Forward-looking statements. I think everybody is familiar with that.

Let's get to the conference call agenda. So the same that I will cover today is background and acquisition rationale, an overview of the Cineplex assets being acquired, transaction details and then really talk about what does this mean for CRI. How it doubles our scale, expand total addressable market, increase the ARR, meaningful cost synergies and ultimately, the outlook for calendar year 2026.

So first, a little background on the acquisition. We -- back in right post-COVID, CDM, or Cineplex put the CDM business unit up for sale. And they ultimately -- we participated in that process, they ultimately decided to withdraw it from the market. But it really started the conversation. And for those of you on the call, George Sautter, our Chief Strategy Officer. George worked for Cineplex for -- I think it was 13 plus years. But so we -- George had joined CRI as a consultant to help in the first bid for CDM and then ultimately, George came on board as an employee of the company. But we kept the conversation going.

George and I would come up to Toronto a couple of times a year and sit down with the leadership of CDM and Cineplex and talk about the business unit. 2023, we actually got in the same room and talked about why don't we put the 2 companies together, and they would be better together. 2024, we finally got into valuation discussions. Well, what would it look like? What would it take? What's the dollar value? And then ultimately, January of this year 2025, we executed NDA -- updated NDA and reviewed all the information and then ultimately, in May of this year, we gave them an indication of interest and then obviously, here we are today.

Rationale for the acquisition, number one, scale. And as everybody on this call knows, we've talked about scale for a long time. This is a big -- go big or go home business, and this doubles the size of our company from $50 million to $100 million in revenue, creates one of the largest North American digital media companies focused on the segments we are focused, which is QSR, retail along with retail media networks, convenience stores and stadium segments. Another interesting characteristics, both companies focus on large enterprise accounts. We are not built for mom-and-pop signage users. We are built for enterprise accounts. The scope it expands our total addressable market with the addition and focus on the lottery vertical, but it also takes us into the media revenue generation business with media sales. It also adds strength in content and strategy.

And then last but not least, cost synergies, we identified a number of cost synergies. We believe there's about $10 million that comes from a number of areas. Yes, personnel is one of them; number two is support and their entire support structure; number three, the other area for synergies is really the fact that we would migrate a number of their users to our platform because today, they're paying third-party suppliers for use of other platforms. And with us, that goes away.

Okay. Let's talk about the revenue of the assets being acquired. They have a number of different buckets of revenue across the 5 verticals, I mean, the 4, 5 areas of the business. And so you can see the each area of the business. The area that really is growing rapidly is the media. You see in 2024, that's the medical -- vertical right in the middle. They did about 20.7%. This year, they're tracking for a 25% growth. But in media, it's actually larger than that. And we expect this year in media, they will exceed $30 million in revenue. So we are definitely excited about that.

Now you look at the 4 verticals, the malls and real estate. Of course, they have all of the large malls in Canada. And the next slide, I'll talk about the mall network, but they have established about 750 screens across 95 malls in Canada, 9 out of the top 10 malls in Canada. And they have existing accounts, but they generate revenue out of that retail media network.

The next section is the retail vertical, right? And so you see Save-On-Foods, which is a very large food supplier, grocery supplier throughout Canada; Suncor, which is a series of 1,500 C-store gas stations; and then North Carolina Lottery. So in the retail, they have a number of accounts in the retail vertical. Financial, 2 of the biggest banks in Canada, Scotiabank and RBC, each both very large networks. So in Canada, you very much have the big 4 banks. So they have 50% of the big 4 financials. And then the last vertical is QSR and just Tim Hortons and A&W are significant QSR customers, Tim Hortons specifically, they do all of the content here in Canada. It's a tremendous content account. So those are the verticals that they play in, and of course, they line up with ours very well.

Now let's talk about the mall network. Ivanhoe Cambridge, Cadillac Fairview, Oxford, 3 of the largest mall operators throughout Canada. It's 76 of the most productive malls in Canada, 95 locations, 9 of the top 10. And so -- again, this is the network. It is jointly owned. In some cases, the equipment is owned by CDM, in other cases, the equipment is owned by the mall owner. However, CDM as the contract to sell the media in these malls. And we have an agreement and the sales for the media in those malls is generated at Cineplex corporate. Cineplex corporate, of course, they have a whole sales team that sells the movie screen at theater before the start of every movie. So they have 180 movie theaters, 70% of the Canadian movie theater market. So the Cineplex sales team has been the strongest sales team in Canada selling this type of retail media network. We signed a 5-year exclusive representation for them to continue to sell the mall media for us. And we just -- we expect that area to grow.

A little bit about the transaction detail. Purchase price is USD 50 million, give or take, depends upon the exchange rate on the day we closed, okay? But it was financed with $48.5 million of straight bank debt and $30 million of convertible preferred equity at a fixed $3 conversion price. So the $48.5 million senior debt comes from our current banking partner, First Merchants Bank, $12.5 million of the revolving credit facility and 36% of a secured term. $30 million convertible comes from North Run Capital. It is nontoxic. It's very, very traditional convertible preferred. We're glad that Tom Ellis and Mike Bosco of North Run has teamed up with us to allow us to take this next step and grow. After 3 years, we do have a mandatory conversion is possible. We have to hit certain EBITDA and debt ratios, but we can force conversion after a 3-year time period. And there is a small coupon, it's a pick in that $30 million convertible preferred.

So what does this mean for CRI? Well, number one, it strengthens leadership. It expands the enterprise presence in digital signage, digital out-of-home and ad tech, okay? We pick up some key leadership in verticals particularly retail media networks, lottery with stadium, et cetera. It adds recurring revenue, $8 million of additional day 1 SaaS revenue and $20 million of attractive media revenue. It expands our content capability, they -- CDM acts more as a true agency. They have tremendous creative capabilities that we do a certain number of "menu boards". They do agency creative like top-tier agencies. And they elbowed their way into some of their customers and our agency of record like capabilities, okay? And we expect to do a lot of that with retail media network development as it grows. It broadens our vertical, lottery. They won -- it was recently announced in the North Carolina Lottery contract, and it was $54 million over a 10-year period. So that's tremendous, that is just in the beginning deployment stages.

We're initially deploying 1,500 locations as of today, as of yet, only 200 locations have been deployed. And they did announce an additional 500 locations will be added to that because they signed and announced they have reached an agreement with food line, all throughout the state of North Carolina, so they expect to add another 500 locations to the lottery network. In addition, retail media network, we now own the largest mall digital out-of-home network in Canada, period. So we're excited about that and increasing profitability, redundant platform eliminations. It reduces SG&A support debt costs and increased scale brings to significant operating leverage, leading to gross margin increase.

A couple of the synergy examples, number one, technology, CDM, they license third-party tech. They certainly pay well in excess of $1 million a year for third-party tech. Over time, we will convert some, if not all of that, to our own CMS and ad tech platforms, eliminates redundant platforms. Additional media revenue is retained at reduced costs. So that's one type of synergy. Number two, deployment. They tend -- they outsourced all deployments. And we're a CRI, we routinely deploy infrastructure at scale, pretty simple. So at the end of the day, reduce costs for ongoing and future rollouts for CDM customers. Most specifically, North Carolina Lottery and a couple of others that we're going to take over virtually right away.

Third, a leg of this synergy stool, day 2 support. They outsourced it to an offshore support center. We have a NOC located at our headquarters in Louisville, Kentucky. And over about a 120-day period, we will migrate. We expect that to be completed by February or March, and that ends in reduced support cost. Hence, adds significant recurring revenue. So here we were, CRI is $16 million approximately. We're adding [ 8.2 ] of their ARR plus you add $21 million of the media revenue, which is the portion we retain after commissions are paid to Cineplex. And at the end of the day, we're at $45 million -- or about $46 million in recurring type revenue by the end of 2025. So this is a huge leap for us. And again, it continues to be all about scale.

Outlook for 2026. Yes. There's -- accounting for the synergies, revenue will exceed $100 million, okay? And adjusted EBITDA margins in the high teens. But once all synergies are realized, it will take 12 months. It could go to 14 months. But by the end of 2026, we see adjusted EBITDA margins that will exceed 20% and significant free cash flow generation. So that is the quick investor update. At this point in time, I'd like to open it up for questions.

[Operator Instructions] Our first question comes from the line of Jason Kreyer of Craig-Hallum Capital Group.

Congratulations, this seems like a fantastic deal. I want to start out talking about scale. So when you go into competitive processes that you're going into today? How much more important or how much does that conversation change going forward now that you've got significantly more reach and significantly more capabilities? What is the likelihood of your ability to operate on bigger deals or to win more deals?

Well, that's a great question, Jason. Number one, it adds a lot of expertise in retail media networks because when we can look at customer in the eye and say, yes, we own and run the largest retail media network in the malls in Canada. The credibility that gives you is tremendous. As you talk today to customers about retail media network, number one. Number two, for customers that have joint operations across Canada and the U.S., now it's a big deal because we can cover both territories with kind of one interface to the customer. So we see it as a big game changer for us.

I also want to talk about where that retail media opportunity meets the media capabilities inside of CDM right now. So what capabilities do you have to be able to go back to all your existing footprint with greater capabilities to now deploy more retail media opportunities and get them kind of that targeted capability on an in-store basis?

Well, number one, the challenge that as we look to U.S.-based customers, right? The U.S.-based customers, we don't have a sales organization in the U.S. yet, but look for us to try and go find the right sales organizations that we can add in the U.S. to address U.S. customers. In Canada, it's pretty simple. We have the resources. So we can approach Canadian customers now with our lower cost structure and potentially win more retail media networks in Canada because we simply have a lower cost structure, and we have all the ad tech up and running, and we have sales capability in Canada. So we think it's going to be a game changer.

That's great. We haven't talked a lot about some of the other segments that they have capabilities like financial and real estate. Can you maybe just talk a little bit more about what you see the cross-sell opportunity in those new verticals?

Well, in financial, we think it gives us a strong credible sales base to go grow U.S.-based financial verticals because we have a couple of large financials now. We had Charles Schwab, we had Western Union. But now when you add Scotiabank, you have the large -- and RBC. You're really operating at a different level for credibility to attack the financial verticals. So there's that. The addition of lottery, we expect to launch a lottery vertical what I have been told from the CDM folks who have been chasing lottery now for about a year.

In the next 12 months, can lotteries in the U.S. are putting out RFPs to do effectively what North Carolina has done. So we see that as a tremendous opportunity to grow lottery. We have North Carolina Lottery. By the way, the North Carolina Lottery is the fourth largest lottery in the United States. I had no idea. But North Carolina Lottery is considered a leader in the industry. And so a lot of lotteries look to North Carolina Lottery to see what they're doing. So we think that gives us a tremendous leg up in the lottery market, okay?

Now one other vertical. As you know, we've had a lot of success in the U.S. in our QSR and drive-thru product. We see a tremendous opportunity to bring the drive-thru product up here to Canada and introduce that to Canadian QSRs. We think that will also be a game changer and really excite kind of our Canadian-based sales team to go chase a bunch of QSRs here in Canada because they haven't had that range of products and depth of products that we now supply them with. So yet all those opportunities up, Jason, there's a lot to go after.

There is a lot to go after. I appreciate all the color. And again, congratulations. It seems like a great deal. I appreciate the time, Rick.

[Operator Instructions] And our next question comes from the line of Brian Kinstlinger of Alliance Global Partners.

Congratulations, Rick on which sounds like a long process here. I wanted to start with lottery. If we could -- you could kind of break down in these contracts, how much is hardware versus ad tech of these types of contracts? When do you expect the bulk of this remaining 1,300 to 1,800 locations will be installed. And then what's the competitive landscape since you just talked about a lot of new RFPs?

So great questions. Number one, we expect the North Carolina Lottery to be fully installed and up and running by the end of Q1 2026. If I could figure out how to get it in by Christmas time, they would love it. It is not practical. So -- and then Q2, we think we'll go chase -- or go install the 500 additional food line locations that they have contracted for. Now we have yet to give them a price and got to go through those processes. But our contract with them is exclusive, and we don't see an issue. So we'll roll that out.

So then it's a 10-year operating agreement might still be 9.5 years left. It generates several million in additional SaaS per year once they are up and operating these locations, okay? Number two, the competitive landscape, there is a company called -- that is based out of Canada that is a competitor in the lottery market. It is owned by StrataCash. And we believe they -- shall I say, they've had the market somewhat to themselves, and we believe there's a great opportunity for us as a young and hungry competitor to go win that business. And with a North Carolina Lottery as a referral, we think it gives us a tremendous leg up.

And are you the one generating the revenue on the screens for North Carolina, so you all install 1,500 screens, plus or minus? And what's the ARPU on that if you could share that at all?

No, we are not responsible for any of -- generating any revenue from those screens. It is a strictly SaaS arrangements where we are operating the screens and managing them for the North Carolina Lottery. What North Carolina Lottery will be promoting on those screens is lottery sales. And I believe the retailers that they've given it to because of the North Carolina Lottery is paying for the equipment that goes in these convenience stores. And it's all about lift in lottery tickets. And I believe they've given the local retailer, 30% of the loop or some amount of the loop but most of it is promoting the sale of lottery tickets.

Now is there a screen or hardware component to their business? And if there is not, is that a synergistic opportunity for when they win new business for you to now provide screens as well?

For who, Brian?

For example, if you want a lottery or media or contract with a mall who was providing new screens on those contracts and it wasn't CDM, would that be now fall to something that your services would help cross-sell for them? Does that make sense?

Yes. Well, so there's 2 pieces there. Number one is the hardware piece. So up here in the Canadian mall network, CDM has made some investments in some of that hardware and in the other side of the equation, it's the mall owner who's made investments. And if the mall owner makes the hardware investment, the mall owner takes a bigger percentage of the revenue share, right? If CDM made the hardware investments, CDM takes more of the revenue share.

Got it. And is there a similar seasonality to their business than CRI?

Certainly, in the retail mall network, Q4 is always their biggest quarter. Yes. Because everybody wants to be in those malls beginning in the second half of October through November and December. Everybody wants to advertise in the malls.

Great. Okay. And then you -- 2 other questions, sorry. You raised, I think when I did the math, $79 million-ish, your purchase price is $50 million. Can you speak to the excess uses of cash?

Yes, $79 million. So there was -- we have an existing credit facility of $21 million that had to be paid back. So the $46 million is starting from 0. We're paying off our existing credit line, have a new credit facility, $46 million plus $30 million of the injection.

Got it. You paid down the CRI debt?

Yes. Yes, that got "paid down to 0". And then a new line come up -- I say paid down to 0. We still have a remaining note due to the settlement of the contingent liability, Brian, but other than that, no. And there was a very strong focus on having working capital in the business. So the business had headroom, and that was a real strong focus out of the North Run folks in the bank to make sure that the business has sufficient liquidity to operate and run and grow.

Sounds like a good plan to me. Last question I have is, you call out in the discussion of outlook in your press release, the end of the Stellantis contract what was the annual revenue run rate of that contract? Was it all recurring and spread evenly across quarters?

Yes. It was $2.4 million a year, ballpark. And Stellantis has been -- in the U.S. has been noted in the press is in real disarray. It's had a lot of challenges. Now we're still providing the service in Canada, okay, for the dealerships, but the U.S. simply had no budget. They had their hands were tied. The department that was providing the services, their budget was reduced by 70%.

Our next question comes from the line of Jon Hickman of Ladenburg Thalmann.

Could you -- the growth -- gross margin for cinema is -- was that about the same as yours or all their outsourcing, was it lower?

No, it's about the same -- it was the same, maybe a -- just a hair lower, but directly in the same. And that's where we believe there are some synergy and cost pickups. Right, cost reduction. So we would expect to see potentially margins trend up here as we go forward.

And then you said in your press release, you're going to give us more information about Q4 when you report Q3?

Yes. Yes. The challenge is it's hard to talk about Q4 because the reason we have not closed this transaction, this transaction is currently under review, Jon, by the Competition Bureau in Canada, which think of them as the DOJ in the U.S., right? And so if the Competition Bureau gives us the ability to close October 31, we're going to close October 31. If it goes to Thanksgiving, we got to go until Thanksgiving. Well, I just -- I lost that revenue because I didn't close until Thanksgiving. So we don't have a sense for what the combined Q4 revenue is until we understand the close date.

Is there a possibility they don't agree?

Well, first off, I can't say never, but every set of attorney we've all looked at it, there is virtually no competitive overlap. We don't run any digital signs in Canada. They do run -- CDM ran some in the U.S., but it's minimal. So there's minimal overlap. We believe this is a check-the-box exercise. But because of the -- the only reason we had to do it is because of the size of the asset base, okay? If an accounting technique, you have to put the right-of-use assets, these mall networks have to get capitalized as an asset on the balance sheet for an accounting treatment, which put us over the threshold that the Canadian bureau had to look into it. And we've already been -- we've been talk to them 3 or 4 times. We believe this is going to be a big nonissue or nothing burger as we say, but we have to go through the process, Jon.

Okay. And then -- so you didn't really run into these guys as a competitor on your day-to-day stuff in the -- before this merger?

No, not really. No. Particularly in QSR and C-store where we're having a lot of strength in the U.S., they just -- they were not focused on QSR and C-store in the US.

Okay. And then the account that got pushed out into Q4. Is that the most recent win of yours?

No, there's actually 2. One was a large network that has now subsequently been funded and we will start deploying. It just took them an extra 90 days to get their funding. So they have funding. The second piece, it was the start-up of installing a bunch of QSR drive-throughs. The anticipation was we'd install a bunch of those in Q3, and it just took everybody longer on the customer side to get started up. And now we're currently installing multiples per week. So it's now on track, but it just -- we missed a couple of months. So it's a couple of things, Jon.

[Operator Instructions] Our next question comes from the line of Howard Halpern of Taglich Brothers.

Congratulations, guys. Do you have a sense up in Canada with the QSRs, what the potential for drive-through that you have over the next number of years?

We've looked at the current customers and tried to decide that who has not gone digital in their drive-through here in Canada. And it currently is a pretty significant group have not gone digital. Tim Hortons has still not gone digital, right? And there, of course, they have a bunch of locations up here. A&W has not gone digital. A&W's a little premier brand of 1,000 locations up here. Gary Queen has franchisees throughout Canada, they have not gone digital. And we actually, in the last quarter, installed our first 2 Freddie, first to Freddie, I believe, went came up to Canada because they expanded into Canada, and we've now installed the first to Freddie. So we believe there's a tremendous opportunity here in Canada.

Okay. And could you talk about maybe their pipeline of business? I know your pipeline has been very strong. What is their pipeline like?

Their pipeline is, I would call it, it is not quite as strong as ours, okay? However, they are being invited to more RFP opportunities up here than we have did. So we're excited about the potential, and we look to strengthen the pipeline.

And how does this combination help jump-start your initial pipeline of media ad tech that hasn't really yet gone live in the U.S.

Well, we bring tremendous knowledge and credibility. Again, as I said earlier on the call, when we're talking to a customer, and we talk about the fact that we own and run the largest retail media network in malls in Canada. All of a sudden, they sit up and listen, and we've been running it now for 7, 8 years that this small network has been up and running. So it gives you tremendous credibility for our customers, whether that customer is in Canon or that customer is in the U.S. they understand that we have real expertise running retail media networks. So we think that's going to be a strong help in the sales pipeline.

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

Well, first and foremost, we appreciate folks taking time logging into the call. We appreciate your support. I do want to just take a moment and thank the sponsors that helped us get this done North Run Capital and First Merchant Bank. We appreciate all your support, and we look forward to growing this business over the next year. Thanks, everybody. Have a great day.

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