Creative Realities, Inc. (CREX) - Q1 2026 10-Q Summary
Business Context and Reporting Period
Creative Realities, Inc. provides digital marketing technology, including digital signage hardware, software platforms (SaaS), and managed services. The company operates in the United States and Canada. This report covers the quarterly period ended March 31, 2026. The company is classified as a non-accelerated filer and a smaller reporting company. As of May 13, 2026, there were 10,567,268 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Total Sales | $16,348 | $9,734 |
| Gross Profit | $5,596 | $4,453 |
| Gross Margin | 34.2% | 45.7% |
| Operating Loss | $(6,206) | $(722) |
| Net Loss | $(7,461) | $3,368 (Income) |
| Net Loss Attributable to Common | $(7,852) | $3,368 |
| Diluted EPS | $(0.74) | $0.32 |
| Cash and Equivalents (End of Period) | $1,829 | $1,149 |
| Net Cash Used in Operating Activities | $(1,723) | $(2,449) |
| Total Debt (Net) | $47,466 | $43,953 |
| Working Capital | $(9,528) | $(5,728) |
Note: All figures in thousands except per share data.
Material Changes vs. Prior Period
- Revenue Growth: Total sales increased 68% to $16.3 million, driven primarily by the November 2025 acquisition of DDC Group International (CDM). Hardware sales rose 34%, while Services and other revenue surged 86%.
- Margin Compression: Gross margin declined from 46% to 34%. Hardware margins dropped 18 points due to a mix of lower-margin QSR deployments and transition costs. Services margins fell 11 points due to contract expirations in the prior year.
- Expense Expansion: Operating expenses increased 128% to $11.8 million. Sales and marketing expenses rose 132%, and G&A expenses rose 127%, largely due to the inclusion of CDM operations and integration costs.
- Profitability Shift: The company swung from a net income of $3.4 million in Q1 2025 to a net loss of $7.5 million in Q1 2026. This was driven by higher operating costs, increased interest expense (up 356% due to new term debt), and the absence of a $4.8 million gain on settlement of contingent consideration recorded in the prior year.
- Debt and Liquidity: Total debt increased to $47.5 million following a refinancing in November 2025. The company reported negative working capital of $9.5 million and an accumulated deficit of $72.6 million.
Outlook, Risks, and Management Commentary
- Going Concern Warning: Management has disclosed that conditions raise substantial doubt about the company's ability to continue as a going concern for at least twelve months following the issuance date. This is due to the accumulated deficit, negative working capital, and reliance on successful integration of the CDM acquisition to generate positive cash flows.
- Acquisition Integration: The company is in the measurement period for the CDM acquisition. A $661,000 adjustment was made in Q1 2026 to reduce goodwill and deferred tax liabilities. Management believes the acquisition will improve scale and liquidity, but success is not assured.
- Debt Obligations: The company operates under an Amended and Restated Credit Agreement with a $36 million Term Loan and a $22.5 million Revolving Credit Facility, maturing in November 2028. Interest rates are variable based on the Senior Funded Debt to EBITDA ratio. There is also a Promissory Note with a 14% interest rate.
- Preferred Stock: The company has Series A Redeemable Convertible Preferred Stock with a liquidation preference of $30.6 million. Cumulative dividends of $391,000 were accrued in Q1 2026.
- Market Risks: The company faces foreign currency risk due to Canadian operations and has no hedging instruments in place. It also faces risks related to customer concentration (one customer accounted for 11% of revenue).
Key Facts for Investor Verification
- Going Concern Status: Verify the company's ability to meet debt obligations and fund operations given the explicit "substantial doubt" disclosure and negative working capital.
- Integration Synergies: Assess whether the CDM acquisition is delivering the projected revenue and margin improvements to offset the increased debt service and operating costs.
- Debt Covenants: Review the Senior Funded Debt to EBITDA ratio to ensure compliance with the credit agreement and to understand potential interest rate fluctuations.
- Preferred Stock Dilution: Monitor the $30.6 million liquidation preference of Series A Preferred Stock and its impact on common equity value and potential conversion scenarios.
- Cash Burn Rate: Analyze the trend in operating cash flow usage ($1.7 million in Q1) against available cash ($1.8 million) and revolver availability ($13.0 million).