CREX — Q2 2026 Financial Report Analysis

Creative Realities (CREX), a Louisville, Kentucky company that installs and runs digital signage networks (menu boards, in-store screens, mall advertising displays) and sells the software and ad-serving tools behind them, reported second-quarter 2026 revenue of $21.5 million, up 65% from $13.0 million a year earlier. Almost all of that jump came from Cineplex Digital Media (CDM), the Canadian signage and mall-advertising business it bought in November 2025, which contributed about $7.4 million. The quarter still ended in a GAAP net loss of $3.9 million ($4.3 million, or $0.41 per share, after preferred-stock dividends), wider than last year's $1.8 million loss, because the deal added depreciation, overhead and interest. The bigger news sits on the balance sheet: a $3.50-a-share stock offering on June 30 let the company drop the "going concern" warning it had carried since its 2025 annual report.

At a glance

• About $7.4 million of $21.5 million revenue came from CDM. Without it, sales were roughly $14.1 million against $13.0 million a year ago, around 8% growth, so most of the 65% headline is the acquisition.
• Adjusted EBITDA of $2.0 million, up from a $0.5 million loss in Q1. The business swung back to a positive operating cash profit as delayed first-quarter installations landed and CDM integration costs fell from $1.45 million to $0.24 million.
• The going-concern doubt is gone, but at the cost of about 37% more shares. The offering and the underwriter's follow-on purchase raised about $12.2 million net by issuing roughly 3.86 million new shares (including pre-funded warrants) on top of 10.5 million at the start of the year.

The quarter in numbers

Percentage changes are not meaningful (n/m) when both periods are losses, so the table shows the dollar change instead. Operating margin is the share of revenue left after running the business, before interest and tax; here it is negative, meaning operating costs exceeded gross profit. Adjusted EBITDA is the company's own profit measure that adds back interest, taxes, depreciation, amortization, stock pay and items it calls one-time. ARR is the yearly run-rate of its subscription software, support and content-management contracts.

Takeaway: The offering fixed the near-term solvency question, not the earnings question. The legacy recurring software business shrank this quarter (managed services excluding CDM fell about 29%), and $2.0 million of adjusted EBITDA only modestly covers $1.4 million of quarterly interest before the company spends anything on equipment. Whether CREX becomes self-funding now depends on the new large rollouts management describes converting into recurring revenue.

What drove revenue

• Services and other ($14.0M, up $8.1M): the 10-Q attributes the increase to the CDM acquisition. CDM brings mall advertising sales in Canada (it runs what the company calls the largest mall shopping network in Canada) plus installation and support work.
• Hardware ($7.5M, up $0.4M): reselling screens and media players. CDM contributed $380 thousand, so legacy hardware was essentially flat at about $7.1 million.
• Managed services, the recurring software and support line ($5.0M, up 11%): CDM added about $1.8 million. Stripping that out, the legacy line was about $3.2 million against $4.5 million a year earlier, a decline of roughly 29% that the filing attributes to "the expiration of certain customer contracts within the legacy operations." This is the part of the business investors usually value most, because it repeats every month.
• Sequentially, revenue rose 31.5% from $16.3 million in Q1. Management said some sales planned for Q1 slipped into Q2 because adverse weather delayed installations.

Margins and costs

Overall gross margin (revenue left after the direct cost of hardware and services) held at 38.6%, but both halves got worse and the total held up only because higher-margin services became a bigger share of sales:

• Hardware gross margin fell to 17.1% from 25.1%, which the filing blames on "an unusually higher mix of lower margin QSR deployments" (quick-service restaurant menu-board rollouts).
• Services gross margin fell to 50.0% from 54.4%, which the company ties to contracts that expired in 2025.

Below gross profit, general and administrative costs rose to $9.0 million from $5.2 million; CDM accounted for $4.2 million of its own G&A, partly offset by lower stock compensation. Sales and marketing rose to $2.0 million from $1.2 million, also mainly CDM. Interest expense nearly tripled to $1.4 million from $0.5 million because of the $36 million term loan taken on to fund the CDM purchase.

What the headline numbers hide

• Adjusted EBITDA versus the GAAP loss. The $5.9 million gap between a $3.9 million net loss and $2.0 million of adjusted EBITDA is mostly real costs, not one-offs: $2.4 million of depreciation (largely the leased mall screens and equipment that came with CDM), $1.5 million of amortization of acquired intangible assets, and $1.5 million of interest. The items the company labels non-recurring this quarter were small ($105 thousand of deal costs, $240 thousand of CDM integration costs, $430 thousand of stock pay). Depreciation on the screen network is a cost the company will keep paying to replace that equipment, so adjusted EBITDA flatters the economics of the CDM business more than usual.
• Cash flow came from shrinking working capital, not from profits. Operating cash flow for the first half was a positive $1.0 million against a $11.4 million net loss. That relied on $3.9 million released from working capital: customers paid down $3.3 million of receivables and prepaid expenses fell $2.6 million. Working against it, deferred revenue (cash collected in advance from customers) fell $3.1 million, to $4.9 million from $8.1 million at year-end. After $2.5 million of equipment purchases and $0.8 million of capitalized software, the half-year was cash-negative before financing.
• The $10.7 million of cash at June 30 did not stay on the balance sheet. It was mostly the offering money received that day. On July 1 the company used the net proceeds to repay $1.0 million of term loan and the rest of its revolving credit line. Debt was $46.6 million at quarter-end ($31.4 million term loan, $9.7 million revolver, $5.5 million short-term), plus $19.1 million of finance-lease obligations, mostly CDM's equipment leases. Liquidity now comes mainly from the revolver, which had $12.8 million of unused capacity at June 30 before the July paydown freed up more.
• Per-share losses will look smaller partly because of dilution. Q2 EPS of -$0.41 was calculated on 10.6 million average shares, because the new shares were issued on the last day of the quarter. From Q3 the share count is about 14.4 million including the pre-funded warrants (stock bought in advance for a nominal $0.01 exercise price), so the same dollar loss would show as roughly $0.30 per share.
• Preferred stock ranks ahead of common shareholders. The Series A redeemable convertible preferred accrues $0.4 million of dividends a quarter, and its liquidation preference (what it must be paid before common holders in a sale or wind-down) rose to $31.0 million from $30.2 million in six months.
• Customer concentration remains high. One customer made up 17% of Q2 revenue (20% a year earlier).
• No restatements or prior-year one-offs distort the quarter. The first half of 2025 included a $4.8 million gain from settling an earlier acquisition's earn-out, which is why H1 2025 showed a $1.6 million profit; Q2 2025 itself was clean, so the quarterly comparison is like-for-like apart from the acquisition.

Did Q1's explanation hold up?

After a weak first quarter (revenue $16.3 million, a $7.5 million net loss and a $0.5 million adjusted EBITDA loss), management blamed weather-delayed installations and CDM integration costs. Q2 is consistent with that: revenue rose 31.5% sequentially, gross margin improved to 38.6% from about 34.2%, integration costs dropped to $0.24 million, and the net loss roughly halved. The weather story explains the timing of hardware and installation revenue; it does not explain the decline in legacy recurring revenue, which is a separate problem.

Outlook

Management gave no numeric guidance for revenue or EBITDA. It said the company "remains on a path to record performance this year," and pointed to:

• A selection by an unnamed national grocery chain with more than 2,000 stores to build an in-store advertising network. The initial rollout is expected to cover more than 800 locations this year, with the contract estimated at more than $10 million in total and "upwards of $4 million" of ARR by the end of 2027. For scale, total ARR is $20.5 million today.
• A win as the digital signage provider for the Tennessee Titans' new Nissan Stadium.
• An expectation, stated on August 13, to announce two more clients with more than 1,000 locations each within 30 days.

Our read: Hardware and installation revenue from these rollouts should keep second-half sales well above last year's (H2 2025 did not include CDM until November), but those are low-margin, one-time sales; hardware margin was just 17.1% this quarter. The number that matters is ARR: it needs to grow fast enough to replace the expiring legacy contracts and to cover interest and equipment spending from operating cash rather than from more share sales. Watch three things in the Q3 10-Q, due around mid-November 2026: ARR moving clearly above $20.5 million, legacy managed-services revenue stabilizing, and debt and interest falling after the July paydown.