CEO Rick Mills Discusses Q2 2020 Results of Creative Realities Inc
Table of Contents:
- Introduction
- Impact of COVID-19 on Creative Reality Inc.
- Challenges faced by the Digital Signage industry during the pandemic
- Key verticals affected by the pandemic
4.1 Retail sector
4.1.1 Banking
4.1.2 Automotive
4.2 Entertainment industry
4.2.1 Movie theaters
4.2.2 Stadiums and arenas
4.3 Food service industry
4.3.1 Quick-service restaurants
4.3.2 Corporate or campus dining venues
- Response to customer base challenges
- Introduction of the Thermal Mirror
- Key features and differentiators of the Thermal Mirror
7.1 Availability of competitor's products
7.2 Facial recognition software
7.3 Integration with mobile Q&A technologies
- Launch and trial program of the Thermal Mirror
- Momentum and distribution partnerships
- Future trends and opportunities in the digital signage industry
- Financial results for the Second quarter of 2020
11.1 Revenue comparison
11.2 Gross margin on hardware revenue
11.3 Gross margin on services and other revenue
11.4 Operating loss and net loss
11.5 EBITDA and adjusted EBITDA
- Analysis of operating expenses and debt
12.1 Reduction in employee-related expenses
12.2 Increase in reserve for bad debt
12.3 Debt classification and negotiations
12.4 Paycheck Protection Program loan
- Conclusion and outlook for the future
Article: The Impact of COVID-19 on Creative Reality Inc. and the Future of the Digital Signage Industry
Introduction
The COVID-19 pandemic has had a significant impact on businesses worldwide, and Creative Reality Inc. (CRI) is no exception. As a leading provider in the digital signage industry, CRI faced numerous challenges during the second quarter of 2020. This article explores the effects of the pandemic on CRI and the industry as a whole, as well as the company's response and future prospects.
Impact of COVID-19 on Creative Reality Inc.
The Core function of CRI and the digital signage industry is to communicate and motivate consumers as they navigate their daily lives. However, with society experiencing reduced activity and uncertainty surrounding the reopening of various sectors, CRI's customer base was significantly affected. Key verticals such as retail, entertainment, and food service experienced suspension of projects, delays, and cancellations, leading to disruptions in revenue generation and cash collections.
Challenges faced by the Digital Signage industry during the pandemic
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Retail sector:
1.1 Banking: The banking industry, a crucial part of the retail sector, witnessed a decline in consumer activity, impacting the demand for digital signage solutions.
1.2 Automotive: With dealerships facing closures and reduced foot traffic, the automotive sector also experienced a downturn in demand for digital signage.
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Entertainment industry:
2.1 Movie theaters: The temporary closure of movie theaters resulted in the loss of revenue for CRI and its customers in the entertainment vertical.
2.2 Stadiums and arenas: Large venues like stadiums and arenas faced similar closures, affecting the demand for digital signage solutions.
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Food service industry:
3.1 Quick-service restaurants: With restrictions and decreased consumer spending, quick-service restaurants had to scale back operations, impacting the need for digital signage.
3.2 Corporate or campus dining venues: Many corporate and campus dining venues remained closed or operated at limited capacity, affecting the demand for digital signage in these locations.
Response to customer base challenges
Despite the challenges faced in the second quarter, CRI took proactive measures to strengthen relationships with its customers. The company offered short-term deferrals or reductions in subscription services, solidifying its position as a market-leading provider. By reinvesting in these relationships, CRI aimed to navigate the impact of the pandemic while maintaining its industry position.
Introduction of the Thermal Mirror
To adapt to the evolving needs of businesses during the pandemic, CRI launched a product called the Thermal Mirror. This innovative solution received exceptional market reception when it was introduced at the end of April. Throughout May and June, CRI collaborated with its partner, Reality, to enhance the features and functionality of the product. Additionally, the company focused on ensuring the availability of the product by optimizing its supply chain.
Key features and differentiators of the Thermal Mirror
The Thermal Mirror offers several key differentiators in the market. Firstly, it addressed the lack of availability of competitors' products, as CRI secured its supply chain in advance. Secondly, the Thermal Mirror incorporates facial recognition software from a US-Based provider, distinguishing it from competitors using blacklisted Chinese companies. Lastly, the solution integrates with mobile Q&A technologies, enabling companies to combine screening and temperature-taking processes into one streamlined solution.
Launch and trial program of the Thermal Mirror
During the second quarter, CRI launched a substantial trial program targeted at corporate enterprise customers across the United States and Canada. These trials have expanded in scope over time, incorporating new capabilities such as printer integration and digital signage integration. By actively engaging with customers and continually enhancing the product, CRI established itself as a market leader in the safe space solutions space amid the pandemic.
Momentum and distribution partnerships
CRI's efforts to adapt to the challenges of the pandemic and meet the demand for the Thermal Mirror have paid off. All three major distributors of technology products, namely Ingram, Tech Data, and Cenex, have picked up the Thermal Mirror and are offering it to their customers. Furthermore, these distributors have decided to distribute CRI's thermometer SAS offering throughout the third quarter. The company expects this momentum to Continue as businesses reopen and the market stabilizes.
Future trends and opportunities in the digital signage industry
CRI believes that the COVID-19 pandemic will accelerate digital change, a trend that was already underway. As the economy reopens and gains momentum, the pace of digital transformation is expected to increase. The company remains committed to its long-term vision of being the go-to enterprise provider in the digital signage industry. CRI anticipates industry consolidation, particularly among smaller competitors facing challenges during this period.
Financial results for the second quarter of 2020
In terms of financial performance, CRI experienced a decrease in revenue of 61% compared to the same period in 2019. However, the company implemented cost-cutting measures that significantly reduced operating expenses, leading to an improved adjusted EBITDA compared to the first quarter. While challenges persist, CRI remains optimistic about the long-term opportunity for both the digital signage industry and the company itself.
Analysis of operating expenses and debt
CRI has diligently managed its operating expenses during the pandemic. The reduction in sales and marketing expenses, research and development expenses, and employee-related expenses demonstrate the company's commitment to cost-cutting. However, the reserve for bad debt increased due to a customer bankruptcy, offsetting some of these reductions. Additionally, the company is actively working to refinance its debt and is optimistic about the forgiveness of the Paycheck Protection Program loan.
Conclusion and outlook for the future
Despite the challenges posed by the COVID-19 pandemic, CRI remains committed to serving its customers and capitalizing on emerging opportunities. The launch and success of the Thermal Mirror solution, coupled with strategic partnerships and financial management, position CRI as a market leader in the safe space solutions segment. As businesses reopen and the digital signage industry evolves, CRI aims to continue its role as a trusted provider and drive digital change in the market.
Highlights:
- The COVID-19 pandemic significantly impacted the digital signage industry and Creativity Reality Inc. (CRI).
- Key verticals like retail, entertainment, and food service faced challenges due to closures and reduced consumer activity.
- CRI responded by offering deferrals and reductions in subscription services to support its customer base.
- The launch of the Thermal Mirror, a solution that combines screening and temperature-taking, received positive market reception.
- CRI secured partnerships with major distributors and saw increasing demand for the Thermal Mirror.
- Financial results showed a decrease in revenue but a focus on cost-cutting measures and debt management.
- CRI believes that the pandemic will accelerate digital change, leading to future opportunities in the industry.
FAQ:
Q: What challenges did the retail sector face during the pandemic?
A: The retail sector, including banking and automotive, experienced closures, reduced foot traffic, and decreased demand for digital signage solutions.
Q: What differentiates the Thermal Mirror from competitors' products?
A: The Thermal Mirror stands out due to its secure supply chain, use of US-based facial recognition software, and integration with mobile Q&A technologies.
Q: How did CRI respond to the challenges faced by its customer base?
A: CRI offered short-term deferrals and reductions in subscription services to support its customers during the pandemic.
Q: What financial impact did the pandemic have on CRI?
A: CRI experienced a decrease in revenue but implemented cost-cutting measures to mitigate the impact on its financial performance.
Q: What future opportunities does CRI anticipate in the digital signage industry?
A: CRI believes that the pandemic will accelerate digital change, leading to increased demand for digital signage solutions and potential industry consolidation.