The blended entity that came out of conjoining Wireless Ronin, Broadcast International and Creative Realities has released its first set of financials, and the tradition continues. More red ink for what is now listed as CREX.
Now, to be fair, the deal just closed in late August, and CEO Paul Price (who was already running CRI in New York) would have spent many weeks just sorting things out and right-sizing some aspects of the operation, like shutting offices and trimming staff by a third (see below).
The Q3 summary goes like this: $4.4 million in sales, which was up year on year, but $1.785 million net loss, and the company used $2.8 million in operations. The operating costs were lopsidedly high because of the transition and a bunch of changes made, including upping ex-CEO Scott Koller’s salary and then punting him, effectively giving him a more gilded parachute.
Business Realignment, Integration, and Restructuring
Beginning in June 2014, we began the planning process for the anticipated closing of the merger transactions described herein. This included a comprehensive review of our existing customers, sales pipeline, sales and account management, service and solution offerings, technology platforms, processes and work streams, systems and operations, leadership team, personnel by function, contractors and vendors, facilities, and related matters. Our primary objective was to realign, integrate and restructure our operations to the maximum extent practicable by or before December 31, 2014.
During the period from June 2014 through the date of this report, we have completed many of these actions while several others remain ongoing.
Actions completed as of the date of this report include:
? Realigning and reorganizing our sales, account management, and service delivery organization for 2015 growth;
? Restructuring and retargeting marketing operations for 2015 growth;
? Terminating and replacing certain vendors and contractors, resulting in increased service quality to our customers and the company, and material reductions in our cost structure;
? Relocating and consolidating our network operations center, resulting in greater control over the quality of service delivery to our customers, and a reduction in our cost structure;
? Consolidating our facilities and operations, including subletting approximately 50% of the square footage of our office space in one location, and terminating our lease for another location; and
? Reducing our headcount.
As of June 2014, the individual companies had approximately 97 employees. Today, as of the date of this report, we have approximately 66 employees. This is a reduction of approximately 32% of employees and approximately 28% of monthly recurring salary expense, excluding benefits, severance costs and other one-time adjustments.
Actions in Process
We have several other actions and initiatives planned or already currently underway which are designed to further enhance our client service capabilities, quality of service delivery, operational efficiency and reduce our cost structure. These include:
? Key account and resource reviews related to our realigned sales, account management, and service delivery organization;
? Completing the integration of our accounting systems and related processes;
? Enabling certain system-based customer relationship management and project management processes across the consolidated enterprise;
? Comprehensively reviewing and streamlining our consolidated list of contractors, vendors, and service providers, improving quality of service and eliminating duplication wherever possible; and
? Finalizing our 2015 development roadmap related to our proprietary technology platforms.
We believe the consolidated Creative Realities, Inc. is positioned to be the global leader helping retailers and brands use the latest technology to improve their shopping experiences. We also believe that the combination of the foregoing actions, excluding significant transaction and other one-time costs related to our ongoing restructuring efforts and organizational realignment, will result in greater sales, margin, scale and operating efficiencies, all of which will ultimately lead to operating profitability and positive cash flows from operations.
Our cash and cash equivalents balances as of the date of this report and potential financing needs in 2015 reflect a number of factors, including: the completed and ongoing realignment, integration and restructuring actions above, among others; a series of one-time transaction costs associated with the Creative Realities, LLC and Broadcast International merger transactions; effectively managing and converting our sales pipeline to increase nonrecurring and recurring revenue as well as mitigate the risk and tendency for the timing of certain converted business opportunities to shift throughout the year and subsequently affect our forecasting; and our ongoing ability to continue to effectively manage and optimize our expenses, fixed cost base and working capital needs associated with funding a growing business delivering and supporting several large projects in a rapidly evolving industry.
We are confident of strong 2015 financial results as our new and organic business pipelines continue to increase together with existing customers beginning to confirm their 2015 plans. We are also seeing tangible benefits from our focused positioning and marketing outreach in recent years attracting and capturing project based and recurring business opportunities that characteristically have long conversion cycles.
Liquidity and Capital Resources
We incurred net losses and negative cash flows from operating activities for the nine months ended September 30, 2014 and 2013. At September 30, 2014, we had cash and cash equivalents of $2,224 and working capital of $724. Cash used in operating activities for the nine months ended September 30, 2014 was $(2,857).
Management believes that, despite its losses to date and while we can provide no assurance that our ongoing integration efforts will be successful, the operations of the combined Company resulting from the completed acquisitions and related restructuring actions (See “Business Realignment, Integration, and Restructuring” above) will provide greater sales, margin, scale and operating efficiencies, all of which will ultimately lead to operating profitability and positive cash flows from operations. We expect that our future available capital resources will consist primarily of cash on hand, cash generated from our business operations, if any, and future equity and/or debt financings, if any, to support our growth objectives, ongoing working capital needs, and 2015 business plan. As of the date of this report, management believes that its existing working capital resources, together with projected cash flow, are sufficient to fund its operations through at least December 2015. Our business strategy also includes the possibility of engaging in additional strategic acquisitions.
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for some 14 years. Dave does strategic advisory consulting work for many end-users and vendors, and also writes for many of them. He’s based near Halifax, Nova Scotia, on Canada’s east coast.