Tucked away in Louisville, Kentucky, Creative Realities (CREX) operates in a realm far removed from the glitz and glamour of Silicon Valley. Yet, beneath the surface of this seemingly modest tech company lies a potentially explosive narrative. The recent Q1 2024 earnings call transcript whispers a tale of silent but significant expansion, one that might have slipped under the radar of even the most seasoned Wall Street analysts.

CREX's core business revolves around digital out-of-home (DOOH) solutions, primarily digital signage and media platforms. Their offerings are diverse, ranging from interactive kiosks to sophisticated drive-thru systems for quick-serve restaurants. While these avenues are promising in their own right, a deeper dive into the transcript reveals a strategic play that could redefine CREX's growth trajectory: the aggressive pursuit of retail media networks.

The Q1 call highlighted several key wins in this domain, including a financial institution signing on for an initial deployment of 650 sites, with the potential to scale up to a staggering 40,000 locations across the US. This, coupled with ongoing expansions with Starlite Media and the tantalizing prospect of the IceBox Network deploying 5,000+ locations, paints a picture of immense opportunity.

But here's the twist. These wins, significant as they are, are not reflected in the company's backlog, which has remained relatively flat. This suggests that CREX is not simply winning contracts; they are converting them into installations and recurring revenue at an unprecedented pace.

Consider this: CREX exited Q4 2023 with an Annual Recurring Revenue (ARR) run rate of $16.3 million. By mid-March, just a few months later, this figure has surged to $17.7 million, exceeding the initial guidance for the entire fiscal year 2024. The company has even raised its ARR guidance to $20 million, indicating unwavering confidence in their growth trajectory.

This silent but aggressive conversion of contracts into installations and recurring revenue is a phenomenon that has likely escaped widespread attention. While analysts may be fixated on the flat backlog, CREX is quietly laying the foundation for a DOOH revolution, transforming the retail landscape one screen at a time.

Delving into the Numbers

Let's delve into the numbers. Assuming an average sale price of $12,000 per location (inclusive of installation) for retail media networks, a deployment of even 5,000 IceBox locations translates to a potential revenue injection of $60 million. Should the financial institution fully exercise its 40,000 location potential, the revenue implications are truly mind-boggling, reaching into the hundreds of millions.

This is not mere speculation. The transcript reveals a deliberate strategy to focus on high-margin recurring revenue streams. CREX is strategically leveraging their installations to drive SaaS adoption, ensuring that deployed hardware translates into long-term, high-margin revenue.

This silent strategy is bolstered by several key factors: a new $20 million revolving credit facility (with an additional $5 million accordion feature) that unlocks significant lending capacity and financial flexibility; a 70% win rate on proposals, highlighting CREX's competitive edge; and a rapidly expanding channel program targeting smaller businesses, further diversifying their revenue base.

ARR Growth: A Silent Revolution

The chart below depicts the growth of CREX's Annual Recurring Revenue (ARR). The significant jump from Q4 2023 to Q1 2024, exceeding the initial 2024 guidance, highlights the company's aggressive conversion of installations into recurring revenue.

Hypothesis: Undervalued and Poised for Growth

CREX's unreported backlog growth in retail media networks, coupled with their accelerated conversion of installations into recurring revenue, suggests a significant undervaluation by the market. The company's aggressive expansion in this high-margin segment, bolstered by increased financial flexibility and a proven competitive edge, positions them for explosive growth, potentially exceeding current analyst expectations.

While CREX may not be a household name just yet, their quiet but determined pursuit of the retail media network landscape is a story worth watching. The company, armed with a robust platform, a proven track record, and a keen eye for lucrative opportunities, is poised to explode onto the DOOH scene, potentially disrupting the retail advertising paradigm as we know it.

"Fun Fact: CREX is involved in several high-profile projects, including digital signage solutions for professional sports teams and entertainment venues. Their technology enhances the fan experience, bringing dynamic content and interactive experiences to stadiums and arenas across the country."