Good morning and welcome to the Creative Realities 2019 Financial Results and Earnings Call. All lines have been placed on mute to prevent any background noise. After the company’s remarks, there will be a question-and-answer session. [Operator Instructions] Alternatively, questions can be submitted during the call via e-mail to ir@cri.com. This call will be recorded and a copy will be available on our website at cri.com following completion of the call. Participating on this call are Rick Mills, Chief Executive Officer and myself, Will Logan, Chief Financial Officer. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in the Risk Factors section of our Annual Report on Form 10-K as filed 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 may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our public filing as well as in our press release. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities, Inc.

Thank you, Will. Good morning, everyone and again thank you for joining the call. As always, I want to start the call with a thank you to all the CRI employees across the country. Your hard work and dedication to outstanding customer service continues to make this company a success and a leader in the industry. So again, thank you for your efforts. 2019 was another record year for the company in terms of both revenue and profitability. We focused our efforts and achieved three primary goals during the year: number one, continuing the rapid acceleration of our top line revenue growth that continues to be important to us; furthering the integration of our acquisition of Allure Global Solutions which we closed on in November 20, 2018; and then finally driving improvements in our operating model to achieve profitability. Our revenue grew approximately 41% in 2019. This included approximately 20% organic growth in addition to the contribution of Allure and continues to significantly outpace our competitors and the industry as a whole, all this while maintaining stable margins. Our 2019 results include the incremental operations of Allure for a full year. Despite the completion of the acquisition in late 2018, our total operating expenses were effectively flat. This evidences our previous statements and continues to show our ability to manage the expenses and also demonstrate the operating leverage of our business and the ability of our management team to successfully integrate the operations of multiple businesses in a manner that maximizes the synergies between those businesses, while producing only limited disruption to our ongoing operations. There are two other key developments that occurred in 2019 and early 2020 that I wanted to reiterate as we summarized the year. We made two changes to our Board of Directors during 2019. It was mid to late 2019 that we have the addition of Dennis McGill to our board brings significant operating and financial experience to our team. Dennis is our Chairman of the Board. The addition of Steve Nesbit, Steve certainly brings 20 plus years of industry experience and an impressive background in the digital signage industry, not only here in the U.S., but globally. In January 2020, right at start of the year after an extensive search, we added Mike Mckim is our Vice President of Operations. Mike joined CRI from United Tote, that’s a Churchill Downs company, technology focused. Mike has extensive experience running operating functions across multiple geographic areas with significant overlap and comparability to our installation in day two services. Effective immediately upon hire, Mike has taken over the day-to-day operations and is responsible for delivery of our exceptional client experiences. We want to take this moment and welcome Mike to the team. I will now turn this back to Will to discuss the numbers in detail. Will?

Thanks, Rick. I will now summarize our financial results for the year ended December 31, 2019 compared to 2018. With respect to the 2019 results, we note that the MD&A section of our Annual Report on Form 10-K provides those audited figures and a reconciliation of GAAP net income to the non-GAAP EBITDA and adjusted EBITDA figures. Revenues were $31.6 million for the year ended December 31, 2019 representing an increase of $9.1 million or 41% compared to the same period in 2018. As Rick mentioned, this was about 20% related to organic growth and 20% achieved from the incremental revenues provided by Allure during 2019. Hardware revenue increased approximately $1.2 million or 18% in 2019 as compared to the prior year. Gross margin on hardware revenue was 24% in 2019 as compared to 32% in 2018. Current year margin on hardware is more in line with our expectation for the business moving forward than the margin from 2018 which was buoyed by material one-time transaction. Services and other revenue grew approximately $7.9 million or 51% in 2019 as compared to the same period 2018. Gross margin on services and other revenue was relatively consistent year-over-year at 50% in 2019 compared to 52% in 2018. Managed services revenue, which includes both our SaaS and our help desk technical subscription services, represented approximately $6.6 million revenue in 2019, an increase of $3.6 million or 122% as compared to the same period in the prior year. Gross profit was $13.8 million for the year ended December 31, 2019, an increase of $3.5 million or 34% compared to the same period in 2018. Gross margin decreased to 43% in 2019 from 45% in 2018 driven primarily by the mix of hardware and services and other revenue. Total operating expenses decreased $0.9 million or…

Thanks Will. Great update and overview. We continue to believe that our acquisition of Allure supports three key factors about the digital signage industry and just the general state of the industry in general. The industry is right for consolidation among smaller and midsized competitors into an enterprise provider, number one. Number two, this industry offers significant synergies through consolidation and ultimately we believe that we will be one of a handful of enterprise level companies, which own a dominant portion of the market share within this industry. We believe that our ability to both outgrow our competitor and successfully integrate acquisition – acquisitions plural position CRI to be amongst the few enterprise-level providers in this industry. Our end-to-end services offerings position as well within the industry to compete for new and growing opportunities with partners and enterprise customers in a variety of key verticals. Our view of 2020 is cautiously optimistic as more customers are evaluating what we call digital signage 2.0. And that – what is digital signage 2.0 translate into or what does that really mean? A number of customers have tried digital signage over the last 6, 7, 8, 9 years. They now are incorporating it into their enterprise level operations across all of their locations. And so that many of them are taking the opportunity to step back, review the landscape, understand how they implemented their first digital signage solution and are now looking to improve, revamp, upgrade that deployment, so that it is enterprise across all of their locations. As we look at the 2020 organic growth, it is important to understand that the enterprise customer sales cycle is a multiyear process often involves a pilot process before a final decision is made. We are down the path with a number of these opportunities.…

Great. Thanks, Rick. We will now open the phone lines in order to respond to any questions that we may have. If you would like to ask a question, reminder, please use the raise hand function within the webcast. It looks like we have a question from Jacob Silverman. Jacob, are you with us?

Yes. Hi, Rick. Hi, Will. Thanks for taking my questions. I was wondering if you could give any color on your current pipeline and how it changed over last month, I know you commented on a little bit, but maybe you could give us little more detail? And also can you quantify the pipeline of projects, the LCD and other non-China sourced panels?

Great questions. Jacob, first off, the current pipeline, we haven’t seen a dramatic change in the pipeline. So all the projects that were currently in the pipeline, currently still there, has it slowed the process through the pipeline, potentially some. Many of customers as if Q1 timing of this virus global pandemic is people are taking a wait-and-see. They – many of our customers are simply just trying to figure it out as is we are today. So but we don’t – we have not seen any projects simply go away. And so right now, things remain status quo. However, that could change over the next 60 to 90 days. We just simply don’t have enough data. Number two, LED stuff versus LCD, in 2019, LED jumped up and was making a major progress. It jumped up – it was 15% of our business, approximately of our installs involved LED versus LCD or large format display. We see no issues with large format display, LCD panel displays out of Korea, just not an issue, but large LED projects simply will be the lead delayed for a quarter maybe two, we expect that situation to resolve itself by mid summer at the latest, but it’s created a temporary slowdown of those projects. We have a large LED wall going into the dream mall up in New Jersey. And so that project is not due to an LED supply, that’s due to construction issues at the dream mall in New Jersey. So it’s several of them. We have a large LED project going on, on the West Coast. It’s about a 1.5 million refurbish of a large venue arena. And it’s a $0.5 million LED wall, it was close to install in Q1 and that currently is slipped into Q2. So that’s the kind of stuff we see. We don’t see anybody, well, let’s not buy LED, that’s not the conversation, it’s let’s mitigate your delivery plans and grand opening and refurbishment plans around the supply chain. Hope that answers your question, Jacob?

Yes, definitely. And then just one more question, how are you adjusting your sales strategy, are you able to sell any of your products through something like videoconferencing given the recent traveler restrictions?

I got to tell you, I mean, we do a whole lot through conference calls in videoconferencing with our customers, because many of our customers, it’s not like typically it does not involve a single point of contact when we are dealing with a luxury retailer, their team is often spread not only throughout the United States, but sometimes globally. So that work tends to happen via conference calls. So we don’t see the travel band is impacting us dramatically per se from a sales pipeline point of view. I will point out in the last 72 hours, two very large shows in our industry segment one is called Digital Signage Expo or DSE. And also Cinemacon which is the annual large cinema show for the theater folks. Both of those shows which we expected to attend were cancelled.

But Jacob with our traditional sales cycle being longer in this industry, those tend to be biz development activities not in the travel ban the same way, it’s not as if we show up at a site for the new customer, we provide there and we closed a deal that starts installing the next day. So as Rick pointed out, it tends to be a longer conversation and typically the flying and the traveling is something that happens towards the end of those deals not the beginning.

Great. Thanks guys. Congratulations on the solid year.

Thanks.

Thank you. Alright, let me see if there are any other calls that have come in. It appears there are no other calls at this time. So, let me conclude by thanking all of our shareholders, clients, partners and employees for their continuing efforts, commitment and support as we work together to transform CRI into the leading brand in digital marketing solutions. This concludes the CRI 2019 earnings call.