Good morning and welcome to the Creative Realities Second Quarter 2020 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. Joining us on the call we have 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. The words anticipates, beliefs, expects, intends, plans, estimates, projects, should, may, propose and similar expressions or the negative versions of such words or expression as it relate to us or our management are intended to identify 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 our quarterly financial statements on Form 10-Q and in our Annual Report on Form 10-K 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 filings. It is now my pleasure to introduce Rick Mills, CEO of Creative Realities, Inc.

Thank you, Will, good morning, everybody. Thanks for joining the call. As I discussed on our first quarter earnings call in May, we anticipated that the impact of COVID-19 pandemic on CRI and the digital signage industry as a whole would be significant. As the fundamental core of what our industry and CRI does is communicate and motivate consumers as they move throughout their day in an active society. Throughout the second quarter and still today, in many parts of the country, society is not nearly as active. There continues to be uncertainty about the reopening of many segments of our society, including education, government, sports, dining, retail, all has been impacted. Several of our key verticals have been impacted by the pandemic. These include our retail sector that includes both banking and automotive. Entertainment including large venues, stadiums, arenas and movie theaters. And finally Food Service includes not only the quick-serve restaurant, but also corporate or campus dining venues. During the quarter, we saw continuation of the trends that developed within our customer base in March. Suspension of current projects, delays in orders and finally, some cancellations of commitments to spend capital. Our entertainment vertical was particularly hit hard, while we have nearly $2 million in quarterly contractual services revenues, many of those customers were close throughout the second quarter, and specifically the movie theater industry remains closed today. Although, there have been short-term impacts to both our revenue generation and cash collections from segments of our customer base, we reinvested and double down on these relationships during the pandemic. We are offering certain short-term deferrals or reductions in our subscription services, a move which we believe has helped to further solidify our position as a market-leading provider. Despite the challenges faced in the second quarter, we generated revenue…

Thank you, Rick. I'll now summarize our financial results for the three months ended June 30, 2020 compared to 2019. Regarding our second quarter 2020 results, we note that the MD&A section of our quarterly report on Form 10-Q provides unaudited 2020 and 2019 quarterly financial information derived from the company's annual and quarterly financial statements. We've also provided a reconciliation of GAAP net income to non-GAAP quarterly EBITDA and adjusted EBITDA for the current and previous four quarters there in. Revenues were $3.7 million for the quarter ended June 30 2020, a decrease of $5.7 million or 61% as compared to the same period in 2019 and consistent with the first quarter of 2020. Hardware revenues were $1.6 million for the quarter ended June 30, 2020, a decrease of $0.1 million or 3% as compared to the same quarter in the prior year. Gross margin and hardware revenue was 19.1% as compared to 20.7% in the prior year. Services and other revenues were $2.1 million for the quarter ended June 30, 2020, a decrease of $5.6 million or 73% in the quarter ended June 30, 2020, as compared to 2019. Gross margin on services and other revenue was 73.6% in the quarter compared to 50.7% in the prior year. Managed services revenue, which includes both SaaS and help desk technical subscription services were effectively flat year-over-year at $1.6 million. Gross profit was $1.8 million for the second quarter of 2020, a decrease of $2.4 million or 57%, compared to the same period in 2019. Consolidated gross margin increased to 49.7% for the quarter from 45.4% in the same quarter in the prior year. This was driven primarily by a higher ratio of our managed services revenue to total revenue in the period as part of a reduction in installation…

Thanks, Will, great overview. I want to discuss our view of the future and the trends we are anticipating and others that we're beginning to see. We believe that we have clearly weathered the worst of the COVID-19 pandemic with respect to its impact on our business. And we're optimistic about CRI's opportunities with respect to our traditional digital marketing technologies, and the immediate opportunity with respect to the Thermal Mirror solution. CRI has remained an open, flexible and transparent business partner, to our vendors and customers and we believe our flexibility and responsiveness during this crisis will contribute to our success as businesses reopen and markets stabilized. We believe the long-term opportunity for both the digital signage industry and CRI remain bright. And we look forward to supporting our customers in their pursuit to reopen as we move forward together. We stated on our first quarter call and we continue to believe that this pandemic will be an accelerator for digital change that was already underway. As we reopen our economy and the economy picks up the pace, it will move faster. We are firmly committed to our long-term vision of being the go to enterprise provider of these digital solutions in the U.S. and believe we have a number of opportunities to participate in these changes in society. We continue to expect industry consolidation in the digital signage to space, particularly if stay-at-home orders or business closures continue into the fourth quarter. We have seen and heard from several of our peer companies and understand the challenges that many of our smaller competitors have and are facing in these difficult times. Finally, I do want to compliment the team that I work with every day at CRI. The last few months have been some of the most challenging of my career, but they've also been some of the most rewarding as I have witnessed the effort the entire CRI team has put in to pivot our business in order to alter our market offerings, to stay relevant to new and existing customers. CRI is grateful for your efforts and your commitment. Thanks.

Great. Before we open the phone lines, we do have a few questions that have come into the IR at CRI inbox. So we will clear those and then open the phones.

Great. The first question is how many sales personnel do we currently have in the organization? What does that structure look like today?

Today, we have approximately 12 people involved in sales. We have four vertical, what we call subject matter experts that lead four pillars or vertical industries, one is in retail, one is in automotive, one is in QSR movie theater, and finally our fourth subject matter experts is in stadium and large venue. Then we have an inside sales team that consists of about six, seven people that work with many of our customer base on an ongoing basis and deal with a day-to-day orders as they come in.

Right. Thanks, Rick. Right. So a few questions here on Thermal Mirror. The first one is with respect to any updates on the FDA approval process, and what does that look like for Thermal Mirror?

The FDA approval process is a very complex one as many folks can imagine, and we are continuing that process of applying for 510(k) clearance for our Thermal Mirror. Today, though, the FDA has released a waiver on it. So, we are fully within compliance of the FDA requirements today.

Great. Could you provide any updates on the current status of the Samsung relationship and digital signage tie-ins to the Thermal Mirror?

Sure. Samsung is of course, one of our largest, most-valued partners, and they're the largest supplier of displays in North America today. And we partnered with Samsung, they adopted our product. They have taken it to many of their large commercial customers. We have a dedicated team that supports Samsung's initiative in this area. And so we have a number of customers who were adopting the Thermal Mirror because of the Samsung relationship. Finally, Samsung is actually our current customer of the Thermal Mirror and we announced in a press release earlier this year that, Samsung adopted it, and today has installed many units, 50 plus units across many of Samsung's corporate facilities across America today.

And then next question is, how many devices have we sold of the Thermal Mirror thus far?

Well, we've shipped over 1,200 units, a thousand here in the U.S. We finally shipped 200 into Canada that got landed within the last week. Some of those reps distributors who are then selling them and shipping them every day

Okay, I believe that's the last of the calls that have come in via email. We will open the phone lines here. [Operator Instructions]

It appears that there are no individuals on the line. So I haven't responded to all inquiries received via email. We will now open -- excuse me. We will now close the call. Let me conclude by thanking all of our shareholders, clients, partners and employees for the continued efforts commitment and support during these unprecedented times. This now concludes the CRI second quarter 2020 earnings call.