Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains various forward-looking statements within the meaning of Section 21E of the Exchange Act. Although we believe that, in making any such statement, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. When used in the following discussion, the words "anticipates," "believes," "expects," "intends," "plans," "estimates," "projects," "should," "may," "proposes," and similar expressions (or the negative versions of such words or expressions), as they relate to us or our management, are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated, and many of which are beyond our control. Factors that could cause actual results to differ materially from those anticipated are set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on April 15, 2026.

Our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking statements. Accordingly, we cannot be certain that any of the events anticipated by forward-looking statements will occur or, if any of them do occur, what impact they will have on us. We caution you to keep in mind the cautions and risks described in this document and to refrain from attributing undue certainty to any forward-looking statements, which speak only as of the date of the document in which they appear. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

Overview

The Company transforms environments through digital solutions by providing innovative digital signage solutions for key market segments and use cases, including:

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Retail

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Entertainment and Sports Venues

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Restaurants, including Quick Service Restaurants ("QSR")

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Convenience Stores

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Financial Services

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Automotive

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Lottery

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Mixed Use Developments

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DOOH Advertising Networks

We serve market-leading companies, so there is a good chance that if you leave your home today to shop, work, eat or play, you will encounter one or more of our digital signage experiences. Our solutions are increasingly visible because we help our enterprise customers achieve a range of business objectives including:

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Increased brand awareness;

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Improved customer support;

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Enhanced employee productivity and satisfaction;

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Increased revenue and profitability;

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Improved guest experience;

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Increased customer/guest engagement; and

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Traffic content and advertising

Through a combination of organically grown platforms and a series of strategic acquisitions, the Company assists customers to design, deploy, manage, and monetize their digital signage and in-store retail media networks. The Company sources leads and opportunities for its solutions through its digital and content marketing initiatives, close relationships with key industry partners, including equipment manufacturers and a media sales agent, and the direct efforts of its in-house industry sales experts. Customer engagements focus on consultative conversations that ensure the Company's solutions are positioned to help customers achieve their business objectives in the most cost-effective manner possible.

When comparing us to other digital signage providers, our customers value the following competitive advantages:

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Breadth of solutions - Creative Realities offers a wide breadth of solutions to our customers. Creative Realities is one of only a few companies in the industry capable of providing the full portfolio of products and services required to implement and run an effective digital signage and in-store retail media networks. We leverage a 'single vendor' approach, providing customers with a one-stop-shop for sourcing digital signage and media solutions from design through day two services.

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Managed labor pool - Unlike most companies in our industry, we have a curated labor pool of qualified and vetted field technicians available to service customers quickly nationwide. We can meet tight schedules even in exceptionally large deployments and still ensure quality and consistency.

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In-house creative resources - We assist customers in creating new content or repurposing existing content for digital signage experiences, an activity for which the Company has won several design awards in recent years. In each instance, our services can be essential in helping customers develop an effective content program.

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Network scalability and reliability - Our SaaS content management platforms power some of the largest and most complex digital signage networks in North America, evidencing our ability to manage enterprise scale projects. This also provides us purchasing power to source products and services for our customers, enabling us to deliver cost effective, reliable and powerful solutions to small and medium size business customers.

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AdTech platforms - The Company has developed and deployed the AdLogic and CPM+ platforms, which, working in conjunction with our CMS platforms, present completely integrated digital advertising solutions for existing and prospective customers seeking to monetize their in-store retail media networks. These platforms anchor the Company's vertical expansion into AdTech bringing new, and expanding existing, addressable markets.

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Market sector expertise - Creative Realities has in-house experts in key market segments such as retail, QSRs, convenience stores, and DOOH advertising. Our expertise in these business segments enable our teams to provide meaningful business conversations and offer tailored solutions with prospects and customers to their unique business objectives. These experts build industry relationship and create thought leadership that drives lead flow and new opportunities for our business.

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Logistics - Implementing a large digital signage project can be a logistical nightmare that can stall an initiative, even before deployment. Our expertise in logistics improves deployment efficiency, reduces delays and problems, and saves customers time and money.

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Technical support - Digital signage networks present unique challenges for corporate IT departments. We simplify and improve end user support by leveraging our own network operations center ("NOC") in Louisville, Kentucky. The NOC resolves many issues remotely and when field support is required, it can be dispatched quickly from the NOC, leveraging our managed labor pool to resolve customer issues quickly and effectively.

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Integrations and Application Development - The future of digital signage is not still images and videos on a screen. We believe that interactive applications and integrations with other data sources will dominate the future. From social media feeds, mobile integrations, corporate data stores, or POS systems, our proven ability to build scalable applications and integrations is a key advantage that customers can leverage to deliver more compelling and engaging experiences for their customers.

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Hardware support - A number of digital signage providers sell a proprietary media player or align themselves with just one operating system. We utilize a range of media players including Windows, Android and BrightSign to provide customers the flexibility they need to select the appropriate hardware for any application knowing the entire network can still be served by a single digital signage platform, reducing complexity and improving the productivity of our customers.

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Retail Media Network - The Company owns and operates the largest mall shopping network in Canada.

Our Sources of Revenue

The four primary sources of revenue for the Company are:

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Hardware sales from reselling digital signage hardware from original equipment manufacturers such as Samsung and BrightSign.

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Services revenue from helping customers design, deploy and manage their digital signage and in-store retail media networks, including:

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Hardware system design/engineering

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Hardware installation

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Content development

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Content scheduling

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Post-deployment network and field support

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AdTech to traffic advertising and content directly and through programmatic channels

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Recurring subscription licensing and support revenue from our digital signage software platforms, which are generally sold via a SaaS model. Our platforms:

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ReflectView, the Company's core digital signage platform for most applications, scalable and cost effective from 10 to 100,000+ devices;

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Reflect Xperience, a web-based interface that allows customers to give content scheduling access to local users via the web or mobile devices, while still maintaining centralized programming control;

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AdLogic, the Company's ad management platform for digital signage networks, which presently delivers approximately 50 million ads daily;

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Clarity, the Company's digital signage platform for menu board solutions, which has become a market leader for a range of restaurants, including QSRs and convenience store applications; and

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iShowroomProX, an omni-channel digital sales support platform targeted at original equipment manufacturers in the transportation sector, which integrates with dozens of key data services including dealer inventory at the VIN level.

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Selling digital out-of-home (DOOH) advertising on infrastructure it owns or operates at retail malls, shopping centers, office buildings, and other commercial properties.

While hardware sales and support services revenues can fluctuate more significantly year over year based on new, large-scale network deployments, the Company is focusing on maintaining and increasing recurring SaaS revenue as digital signage adoption/utilization expands across the vertical markets we serve.

Our Operating Expenses

Our operating expenses are comprised of sales and marketing, and general and administrative expenses. Sales and marketing expenses include salaries and benefits for our sales, business development solution management and marketing personnel, and commissions paid on sales. This category also includes amounts spent on marketing networking events, promotional materials, hardware and software to prospective new customers, including those expenses incurred in trade shows and product demonstrations, and other related expenses. Our general and administrative expenses consist of corporate overhead, including administrative salaries, real property lease payments, salaries, and benefits for our corporate officers and other expenses such as legal and accounting fees.

Results of Operations

Note: All dollar amounts reported in Results of Operations are in thousands, except per-share information.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

The tables presented below compare our results of operations from one period to another and present the results for each period and the change in those results from one period to another in both dollars and percentage change.

		For The Three Months Ended
		June 30,
		2026				2025				Change $				Change %
Sales:
Hardware		$	7,475			$	7,073			$	402				6	%
Services and other			14,030				5,957				8,073				136	%
Total sales			21,505				13,030				8,475				65	%
Cost of sales:
Hardware			6,197				5,298				899				17	%
Services and other			7,011				2,715				4,296				158	%
Total cost of sales			13,208				8,013				5,195				65	%
Gross profit			8,297				5,017				3,280				65	%
Operating expenses:
Sales and marketing expenses			2,024				1,156				868				75	%
General and administrative expenses			9,018				5,192				3,826				74	%
Total operating expenses			11,042				6,348				4,694				74	%
Operating loss			(2,745	)			(1,331	)			(1,414	)			106	%
Other expenses (income):
Interest expense, including amortization of debt discount			1,426				513				913				178	%
Other expense (income), net			40				(1	)			41				(4100	%)
Total other (income) expenses, net			1,466				512				954				186	%
Loss before income taxes			(4,211	)			(1,843	)			(2,368	)			128	%
Income tax benefit (expense)			315				26				289				1112	%
Net loss		$	(3,896	)		$	(1,817	)		$	(2,079	)			114	%

Sales

Sales increased by $8,475 or 65%, to $21,505 for the three months ended June 30, 2026 compared to the same period in 2025. Hardware revenues during the second quarter of 2026 were $7,475, an increase of $402 as compared to the same period in 2025. The increase was due to the inclusion of CDM, which contributed $380 during the period. Services and other revenues were $14,030, an increase of $8,073 for the three months ended June 30, 2026, as compared to the same period in 2025, due to the acquisition of CDM. Managed services revenue, which includes the Company's SaaS subscription services, was $4,991, an increase of $507, or 11%, as compared to the same period in 2025, largely driven by the inclusion of CDM in 2026, which represented approximately $1,813. This increase was offset by the expiration of certain customer contracts within the legacy operations of CRI. Other services revenue also increased as a result of the acquisition of CDM, up $1,326 for the three months ended June 30, 2026 as compared to the same period in 2025.

Gross Profit

Gross profit margin was 39% and 39% for the three months ended June 30, 2026 and 2025, respectively. Hardware gross margin decreased 8 points, due to an unusually higher mix of lower margin QSR deployments during the 2026 period. Services and other gross margin decreased 4 points in the quarter compared to the prior year period.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing expenses. Costs increased by $868, or 75% for the three months ended June 30, 2026 as compared to the same period in 2025 primarily due to the inclusion of CDM.

General and Administrative Expenses

General and administrative expenses increased by $3,826 or 74%, for the three months ended June 30, 2026 as compared to the same period in 2025. The increase was primarily driven by the inclusion of CDM, which represented $4,241 of expense offset by lower stock compensation expense for the period.

Interest Expense

Interest expense increased by $913 or 178%, during the three months ended June 30, 2026 as compared to June 30, 2025 primarily as a result of the new Term Loan entered into during November 2025. See Note 9, Debt, to the condensed consolidated financial statements for a discussion of the Company's debt and related interest expense obligations.

Other Expense (Income)

The Company recognized $40 in other expenses for the three months ended June 30, 2026 as compared to $(1) for the three months ended June 30, 2025. The increase is a result of the inclusion of CDM in 2026.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

The tables presented below compare our results of operations from one period to another and present the results for each period and the change in those results from one period to another in both dollars and percentage change.

		For The Six Months Ended June 30,
		2026				2025				Change $				Change %
Sales:
Hardware		$	12,032			$	10,467			$	1,565				15	%
Services and other			25,821				12,297				13,524				110	%
Total sales			37,853				22,764				15,089				66	%
Cost of sales:
Hardware			10,116				7,602				2,514				33	%
Services and other			13,844				5,692				8,152				143	%
Total cost of sales			23,960				13,294				10,666				80	%
Gross profit			13,893				9,470				4,423				47	%
Operating expenses:
Sales and marketing expenses			4,921				2,403				2,518				105	%
General and administrative expenses			17,923				9,120				8,803				97	%
Total operating expenses			22,844				11,523				11,321				98	%
Operating loss			(8,951	)			(2,053	)			(6,898	)			336	%
Other expenses (income):
Interest expense, including amortization of debt discount			2,891				834				2,057				247	%
Gain on settlement of contingent consideration			-				(4,775	)			4,775				(100	%)
Other expense, net			360				264				96				36	%
Total other (income) expenses, net			3,251				(3,677	)			6,928				(188	%)
(Loss) income before income taxes			(12,202	)			1,624				(13,826	)			(851	%)
Income tax benefit (expense)			845				(73	)			918				(1,258	%)
Net (loss) income		$	(11,357	)		$	1,551			$	(12,908	)			(832	%)

Sales

Sales increased by $15,089 or 66%, to $37,853 for the six months ended June 30, 2026 compared to the same period in 2025. Hardware revenues during the first half of 2026 were $12,032, an increase of $1,565 as compared to the same period in 2025. Approximately 68% of the increase was due to the inclusion of CDM, with the remaining 32% driven by new customer deployments during the first half of 2026. The number of new deployments was lower than expected due to adverse weather conditions that delayed planned installations in multiple regions. Services and other revenues were $25,821, an increase of $13,524 for the six months ended June 30, 2026, as compared to the same period in 2025, due to the acquisition of CDM. Installation services revenue was $7,742, an increase of $4,908 for the six months ended June 30, 2026, as compared to the same period in 2025, driven by the inclusion of CDM in 2026 along with the continued roll-outs of QSR and lottery customers. Digital marketing advertising and other services revenues also increased as a result of the acquisition of CDM, up $8,979 for the six months ended June 30, 2026 as compared to the same period in 2025. Managed services revenue, which includes the Company's SaaS subscription services, was $8,368, a decrease of $363, or 4%, as compared to the same period in 2025, due to the expiration of certain customer contracts in 2025.

Gross Profit

Gross profit margin was 37% and 42% for the six months ended June 30, 2026 and 2025, respectively. Hardware gross margin decreased 11 points, due to an unusually higher mix of lower margin QSR deployments during the 2026 period and $486 in costs associated with transitioning away from an outsourced installer of a large CDM customer. Services and other gross margin decreased 7 points in the period compared to the prior year period driven by the expiration of certain customer contracts in 2025.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing expenses. Costs increased by $2,518, or 105% for the six months ended June 30, 2026 as compared to the same period in 2025, driven primarily by the inclusion of CDM which contributed $1,874 of expenses for the period.

General and Administrative Expenses

General and administrative expenses increased by $8,803 or 97%, for the six months ended June 30, 2026 as compared to the same period in 2025. The increase was primarily driven by the inclusion of CDM, which represented $8,020 of expense, and additional accounting, compliance, legal and other one-time fees and severance costs in connection with the integration of CDM.

Interest Expense

Interest expense increased by $2,057 or 247%, during the six months ended June 30, 2026 as compared to June 30, 2025 primarily as a result of the Amended Credit Agreement entered into during November 2025. See Note 9, Debt, to the condensed consolidated financial statements for a discussion of the Company's debt and related interest expense obligations.

Other Expense (Income)

The Company recognized $360 in other expenses for the six months ended June 30, 2026 as compared to $264 for the six months ended June 30, 2025. The increase is a result of the inclusion of CDM in 2026.

Summary Unaudited Quarterly Financial Information (Non-GAAP)

A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position, or cash flows, but excludes or includes amounts that would not be so excluded or included in the most comparable U.S. generally accepted accounting principles ("GAAP") measure. Earnings before interest, taxes, depreciation, and amortization ("EBITDA") and adjusted EBITDA ("Adjusted EBITDA") are non-GAAP financial performance measures we believe offer a useful view of the overall operations of our business. These non-GAAP financial performance measures, which may not be comparable to, and may be defined differently than, similarly titled measures used or reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and should be read together with financial information presented on a GAAP basis.

EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP. We use non-GAAP financial performance measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. We believe these non-GAAP financial performance measures are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of core expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. Our management believes that these non-GAAP financial measures provide additional information useful for investors, shareholders and other stakeholders of our Company in gauging our results of operations on an ongoing basis.

EBITDA and Adjusted EBITDA have limitations as analytical tools. They should not be viewed in isolation or as a substitute for net income (loss) or any other measure of performance derived in accordance with GAAP. EBITDA and Adjusted EBITDA exclude certain expenses that we believe may not be indicative of our business operating results. EBITDA should not be considered as an alternative to net (loss) income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity. EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. In addition, Adjusted EBITDA excludes stock-based compensation, fair value adjustments and both cash and non-cash non-recurring gains and charges. We strongly urge you to review the following reconciliation of net (loss) income to EBITDA and Adjusted EBITDA, along with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We also strongly urge you not to rely on any single financial performance measure to evaluate our business.

The table below shows the reconciliation of the Company's net loss to EBITDA and Adjusted EBITDA:

										Quarters Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
		2026				2026				2025				2025				2025
GAAP net loss		$	(3,896	)		$	(7,461	)		$	(1,965	)		$	(7,862	)		$	(1,817	)
Interest expense:
Amortization of deferred financing costs			80				83				60				26				25
Interest expense, net			1,385				1,382				1,055				504				488
Depreciation/amortization:
Amortization of intangible assets			1,456				1,441				1,350				1,171				1,165
Depreciation of property and equipment			2,429				2,452				1,512				54				52
Income tax expense (benefit)			(315	)			(530	)			1,175				(82	)			(26	)
EBITDA		$	1,139			$	(2,633	)		$	3,187			$	(6,189	)		$	(113	)
Adjustments
Stock-based compensation			430				324				724				308				1,249
Deal & transaction expenses			105				43				1,188				766				-
CDM related integration and transition costs			240				1,452				-				-				-
Loss on impairment of software asset			-				-				-				5,712				-
Loss on modification of revolver			-				-				24				-				-
Other expense (income)			40				320				108				144				(1	)
Adjusted EBITDA		$	1,954			$	(494	)		$	5,231			$	741			$	1,135

Liquidity and Capital Resources

Overview

See Note 1, Nature of Organization and Operations, to the accompanying condensed consolidated financial statements for a detailed discussion of liquidity and financial resources.

Operating Activities

Net cash provided by operating activities was $1,003 for the six months ended June 30, 2026 compared to net cash provided by operating activities of $773 for the six months ended June 30, 2025. Cash provided in 2026 was primarily attributable to a net loss of $11,357, offset by net non-cash charges of $8,461 and a $3,899 net source of cash from changes in operating assets and liabilities. Cash provided in 2025 was primarily attributable to net income of $1,551 reduced by net non-cash gain of $(591) (including a $4,775 gain on settlement of contingent consideration), in addition to a decrease in operating assets and liabilities of $187.

Investing Activities

Net cash used in investing activities was $3,220 for the six months ended June 30, 2026 compared to $1,264 for the six months ended June 30, 2025. Capitalization of internally developed software costs was $768 for the six months ended June 30, 2026 compared to $1,155 for the six months ended June 30, 2025. Purchases of property and equipment were $2,452 for the six months ended June 30, 2026 compared to $109 for the six months ended June 30, 2025. The Company did not have any material commitments for capital expenditures as of June 30, 2026.

Financing Activities

Net cash provided by financing activities was $11,325 for the six months ended June 30, 2026 compared to $23 for the six months ended June 30, 2025. Cash provided in 2026 was primarily attributable to $10,784 of net proceeds from the 2026 public offering of common stock and pre-funded warrants and net borrowings of $4,804 under the Revolving Credit Facility ($18,222 in proceeds and $13,418 in repayments), partially offset by $2,201 of scheduled principal payments on the Term Loan and the Promissory Note, $1,862 in repayments of finance lease obligations (which increased relative to the prior-year period as a result of finance leases assumed in the CDM Acquisition), and $200 used to repurchase Common Stock warrants pursuant to the Warrant Repurchase Agreement entered into on February 16, 2026. Remaining available amounts under the Revolving Credit Facility were $12,756 as of June 30, 2026. Cash provided in 2025 was primarily attributable to net borrowings of $3,049 under the Revolving Credit Facility under the Prior Credit Agreement ($18,334 in proceeds and $15,285 in repayments), partially offset by a $3,000 cash payment in connection with the partial settlement of the contingent consideration liability and $26 in repayments of finance lease obligations. See Note 9, Debt, and Note 12, Common Stock, to the condensed consolidated financial statements for further discussion.

Contractual Obligations and Commitments

As of June 30, 2026, we had operating and finance lease obligations of approximately $21,033 payable over the next five years. These obligations relate primarily to corporate office space, warehousing and light-assembly facilities used to stage and deploy digital signage hardware and leased equipment supporting our operations.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and the related disclosures. We base our estimates on historical experience and on assumptions that we believe are reasonable under the circumstances; actual results may differ from these estimates.

Our critical accounting estimates are described in Part II, Item 7, Critical Accounting Estimates in our Annual Report on Form 10-K for the year ended December 31, 2025, and our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, in our financial statements included elsewhere in this quarterly report. There have been no material changes to our critical accounting estimates or significant accounting policies since the filing of our Annual Report on Form 10-K for the year ended December 31, 2025.

Off-Balance Sheet Arrangements

During the six months ended June 30, 2026, we had no off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.