Creative Realities Inc (CREX) 2011 Q4 法說會逐字稿

Good afternoon. Welcome to Wireless Ronin Technologies' fiscal 2011 year-end earnings call. My name is Craig and I will be your conference operator this afternoon.

Before we begin today's call I would like to remind everyone that this call will be available for replay through April 8, 2012, starting later this evening. A webcast replay of this will also be available via the link provided in today's press release, as well as available on the Company's website at www.WirelessRonin.com.

I would now like to turn the call over to Brenda Seiler, Wireless Ronin's Marketing Contact. Brenda?

Thank you and welcome, everyone, to Wireless Ronin's fiscal 2011 year-end earnings call. With me today are Scott Koller, President and CEO; and Darin McAreavey, Senior Vice President and CFO. Following Scott's opening remarks, Darin will review our financial performance for the year, and turn the call back over to Scott for an operational update. Then we will open up the call to your questions.

To access today's webcast, please go to the Investors section of our corporate website at www.WirelessRonin.com. Please note that the information presented and discussed today includes forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results in future periods may differ materially, and you should not attribute undue certainty to our forward-looking statements. Risks and uncertainties that could cause our actual results to differ from those expressed or implied by forward-looking statements, including those set forth in the Risk Factors section of the annual report on Form 10-K we filed on March 22, 2011.

In addition, our comments may contain certain non-GAAP financial measures, including non-GAAP operating loss per share. For additional information, including reconciliations from GAAP results to non-GAAP measures, how the non-GAAP measures provide useful information, and why we use non-GAAP measures, please see the reconciliation section of our press release, which appears on our website at www.WirelessRonin.com.

Now I will turn the call over to our President and CEO, Scott Koller. Scott?

Thank you, Brenda. Good afternoon, everyone, and thank you for joining us on today's call to discuss our fiscal 2011 results. 2011 was an exciting year for Wireless Ronin and marked our third consecutive year of revenue growth.

It also marked a year of transformation for Wireless Ronin, with a stronger, more diversified technology offering and a stronger executive team and Board of Directors. I believe we have laid the foundation for a successful 2012.

But before I comment further, I would like to turn the call over our CFO, Darin McAreavey, who will walk you through the financial results. Afterward, I will talk about our operational highlights and business outlook. Darin?

Thanks, Scott. Good afternoon, everyone.

Revenue for 2011 increased 8% to a record $9.3 million from 2010. The increase was primarily attributable to Chrysler's deployments of our iShowroom branded power application into Chrysler and FIAT dealerships.

Since the inception of the program, we have now received orders from 578 dealerships. We believe that Chrysler will continue to roll out additional interactive kiosks featuring the iShowroom application, with further dealership adoption in 2012. Total revenue generated in 2011 from Chrysler and FIAT dealerships was up 28% to $5.1 million from 2010.

Revenue in 2011 was also driven by orders from ARAMARK, which were up 48% to $1.7 million from 2010. We continued to expand the number of Grille Work installations with several new colleges and universities. Upon the completion, the installation for orders received through December 31, 2011, the total number of ARAMARK locations being managed through our network increased more than 175% to approximately 250 sites compared to 90 sites at the end of 2010.

Recurring revenue for 2011 increased 23% to a record $1.6 million or 17% of total revenue, as compared to $1.3 million or 15% of total revenue in 2010. At the end of the fourth quarter we had a total of $1.3 million of purchase orders for which revenue will be recognized in future quarters.

Gross margin in 2011 was 44% as compared to 47% in the prior year. The decrease was primarily due to hardware and software sales mix. We believe our gross margin percentage of will increase as our recurring revenue continues to grow.

Our 2011 net loss totaled $6.7 million or $0.34 per basic and diluted share, an improvement from a net loss of $7.9 million or $0.44 per basic and diluted share in 2010. During 2011, net loss included $740,000 of non-cash stock compensation expense compared to $868,000 in 2010.

Our 2011 non-GAAP operating loss totaled $5.5 million or $0.28 per basic and diluted share, an improvement from a loss of $6.3 million or $0.35 per basic and diluted share in 2010. It is also important to note fiscal 2011 marked our lowest level of cash burn in the Company's history since our IPO in 2006.

Now turning to the balance sheet, our net working capital position was $5 million at the end of the fourth quarter compared to $3.3 million in the prior quarter. The increase was due to the $3.3 million financing we closed on December 12, 2011.

This completes my financial summary. For a more detailed and complete analysis of our financial results, I would like to direct everyone to our Form 10-K, which we expect to file on March 31, 2012, and will be available at www.SEC.gov as well as our website.

I am also happy to answer any questions you have during the Q&A session of today's presentation. Now for an overview of our operational activity and developments, I would like turn the call back over to Scott. Scott?

Thank you for the financial overview, Darin. 2011 was a transformative year for Wireless Ronin. From an operational perspective we achieved year-over-year revenue growth; launched a new strategic plan with our marketing technologies portfolio of products; enhanced our executive team and Board of Directors; developed strategic industry relationships; and further penetrated our key verticals.

In 2011 we transitioned from a digital science company to a marketing technologies company by taking a comprehensive approach, bringing together digital signage, interactive kiosks, mobile, social media, and Web to provide our clients with solutions that drive customer experience while delivering the business intelligence and data analytics required to measure success. These measurements drive effective business decisions that impact both top-line results and bottom-line margins.

Our focus is to maximize the profitability of in-person interactions and to extend the customer's relationship with our clients, in order to increase the number and profitability of these interactions. We received strong validation for our approach in 2011, giving us confidence that the strategic direction we have taken will differentiate Wireless Ronin and align our solutions with our clients' marketing technology needs.

This new strategic direction is beginning to generate success. In Q4, we initiated the rollout of our RoninCast system to 40 sites of a major retailer with more than 390 stores across North America. We were chosen based on our proven ability to streamline the sales process with a comprehensive solution that provides client satisfaction and delivers a high ROI.

To enhance the various touchpoints within the sales cycle, the retailer engaged Wireless Ronin to develop interactive experiences managed through a network of Apple iPad devices for sales consultants, customer-facing in-store touchscreen kiosks, and a consumer Web interface. Integrating marketing and sales support communications across various customer touchpoints was one of our main objectives for this client, and this is what we excel at.

Our innovative and highly engaging retail solutions turn regular store environments into powerful customer experiences that can take a brand to new levels. We are especially excited about this project, as it's a great example of our marketing technologies' capabilities in action and provides confirmation that the market is looking for these types of multichannel digital solutions. We believe this type of deployment represents a springboard to more wins in 2012.

During 2011 we also grew the number of sites deploying Thomson Reuters Infopoint digital signage to 440 locations and look forward to new opportunities with Thomson Reuters in 2012. This expansion with Thomson Reuters as well as several other clients including Chrysler, ARAMARK, Snap Fitness, and Johnny Rockets brings the total number of media players supported by Wireless Ronin's technology to more than 7,000.

As we look to 2012, we see our sales opportunities and pipeline in our three key verticals -- QSR, automotive, and retail -- growing. We continue to receive orders from various clients in these verticals as they integrate technology to create a unique experience with their customers.

Additionally, we continue to make traction on our pilot work in the QSR vertical, particularly as we anticipate the FDA announcement for its new nutritional disclosure regulations for QSR menu boards in 2012. We are confident that our centralized digital solutions create operating efficiencies and promote higher compliance for QSRs under the FDA regulations.

Also in 2011 we significantly enhanced our leadership team, adding four key new Board members with relevant industry and financial experience, as well as bringing on a new Senior Vice President of Sales, Jane Johnson, and [Ben Nilsen] as Senior Vice President of Product Development and Chief Technology Officer. Their collective experience, knowledge, and enthusiasm will guide Wireless Ronin to continued success.

Jane is working closely with our new marketing partner, Keyser Industries, a provider of menu boards to McDonald's in the US and a number of other important QSR. Our combined companies help our clients offer a more integrated marketing approach that can provide a superior ROI by enhancing the customer experience and driving lift. We believe our joint marketing agreement with Keyser Industries, together with our strengthened balance sheet, gives us the resources to pursue new clients and large-scale rollouts to QSR and other verticals.

In summary, our improving financial results reflect our commitment to achieving profitability. We continuously push ourselves to optimize our organization, improve our processes, and reduce expenses. The growing demand for new marketing technologies continues to accelerate, and we believe we now have the key elements in place to realize future revenue growth through further penetration of our verticals.

As we reflect on 2011 and look forward to the success of 2012, I am reminded of what we accomplished during my first year as CEO. We developed and successfully launched a new strategic plan, taking our product line far past traditional digital signage systems and into an array of different marketing technologies. This shift in strategic direction has already paid dividends, as we have continued to grow revenue while we target new opportunities outside our historic core competencies.

Wireless Ronin continues to show our commitment to profitability and wants our investors to know we are focused on revenue growth, while making sure that our expenses are aligned to meet our clients' commitments and in line with our anticipated revenue.

As outlined by Darin, revenue continued to grow, with Chrysler up 28% and ARAMARK up 48% year-over-year. We believe our pilot programs and pipeline will yield other key accounts that will contribute to revenue in 2012.

And we strengthened our executive team during the year, adding key executives like Jane Johnson and Ben Nilsen, and new Board members including Michael Howe, Howard Liszt, Kent Lillemoe, and Oz Tangun. Together, the executive team and Board of Directors have worked as a cohesive team and are committed to delivering continued success.

Before we open the call to your questions, I would like to express on the behalf of the entire leadership team our appreciation for the continued support we receive from our partners, clients, employees, and shareholders. Now with that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions.

(Operator Instructions) Nick Mauro, Sidoti & Company.

Hey, guys. How are you doing? With the iShowroom for Chrysler, it seems like some of the revenues from work that is being done just keeps getting pushed back. Do you know when you might start collecting on some of that?

Yes, when we -- as Darin has stated in the fourth quarter, definitely saw what is a slowdown in the Chrysler ordering. However, we have seen that before, a seasonality between November and December. Like a lot of the clients we deal with, ARAMARK and Chrysler, are very large companies, and we do see some of the seasonality of the vacation time period.

However, just like last year, when we were anticipating further kiosk orders, we are in the same position as we were last year, that we anticipate that they will continue adoption and we will have further kiosk orders moving forward.

Okay, so just like a seasonality for the quarter, which is why the revenues were down a little bit?

Yes, you could contribute the revenue being down to that, exactly.

Okay. Then you might have mentioned, I could have missed it, but the gross margins also took a big hit in this quarter as well. Can you talk about that?

Yes, there were a couple things that were affected. One is we had to take a one-time charge on the hardware, just as part of our annual audit, going through and doing an inventory review. We identified some items that we had to reserve for; and that was probably the larger impact of the quarter.

Then our services too was down. A couple things going on there. One is that we did add some resources.

We are focused on scalability. And also with the continued work we are getting with Chrysler, the development projects, that we had to bring on some contract workers.

But we do expect them to increase here going forward, bouncing back from what we experienced in the fourth quarter.

Okay. So 2012 you should see the gross margins get back to the normal rates, they were earlier in the year?

Yes, that is (multiple speakers) right now.

Okay. Then just from 2012, it sounds like you got a few things going on. What kind of growth can we expect?

Historically we don't give any type of guidance, but I would tell you that we are confident that we will continue to see revenue growth, as we did last year and the year before. You saw the press release today on ECOtality.

And you look back -- and the reason I highlighted it in the summary -- the growth with ARAMARK and the growth with Chrysler is again bringing in companies like an ECOtality. Continue to grow with Thomson Reuters. Getting one, two, three more major companies that are contributing, like ARAMARK and Thomson Reuters are, we expect to see continued revenue growth. But we are not going to put a number out on the Street.

Okay. Are you still planning -- you have that partnership with Keyser, is that correct?

Absolutely, yes. The partnership is still in place. It is very healthy. We have done numerous calls, joint calls with an array of different companies, not just the ones that have been focused on in the past.

It is a valuable asset for us and for them to be able to bring in both the perspective of the merchandising and the marketing influence and as well as the technology to back up what they design. So it's a very healthy relationship and it will bear fruit. We are very confident in that.

Okay. Then lastly, just trying to look at the share count for 2012. Are you going -- do you anticipate raising any kind of equity in the upcoming year?

We have roughly 23 million shares outstanding right now. I mean it is not our intention to go out and raise capital at this point. We completed that raise in the fourth quarter and feel that we had adequate capital to execute here in 2012.

Okay. All right. Thank you.

Ty Lilja, Feltl and Company.

Hi, guys. Thanks for taking my questions. Hey, first question; you mentioned you had $1.3 million in orders at the end of the quarter. Was that from one customer? Was that mixed between a couple?

No, it is going to be several; but the majority of it would be Chrysler. A lot of Chrysler development work that we will be working on here in the first quarter, some of it will bleed over to the second. But the majority of it should get done in the first quarter here.

Okay, and it's --

And then there is also ARAMARK. Sure, we had some installations that we were finishing up here in the first quarter, and then it falls off pretty quickly after that.

Okay. So it is development work from Chrysler?

Correct.

Okay.

Correct. We have mentioned that before, that we have -- along with hosting the website on ChryslerAcademy.com and doing the in-store kiosks and doing a lot of content work for them, we are also developing the iPad application and also working on taking iShowroom to a more mobile, global aspect. So there is development work.

Okay. Are they holding off on getting more iShowroom 'til the content work is done? Or is it just kind of random fluctuation?

No, there is -- I can't speak entirely for Chrysler. They are pretty big and complex in the way they manage their dealerships.

But they put their Dealer Standards Program on hold earlier in the year. That didn't just affect us; that affected a lot of people. They are trying to understand what they're going to do with their dealerships.

But I really can't talk for them. But no, it doesn't displace that work.

Okay, sure. Also was wondering if you could give us an update on where things stand with Thomson Reuters -- who they are approaching with Infopoint, what is the sales pitch, what is the interest level?

Yes. We hope to -- there is interest. I can tell you in a lot of confidence there is interest. We're hoping to be able to add some transparency to that relationship in the near future.

But we're working very closely with them and historically have been in the marketing group only, and we're working with other groups within that, that are actually responsible to take into the Street. And there is interest. But at this point in time, formally, we would like to wait 'til we are in a position to talk about it in a more formal manner.

Okay, sure. Also, just saw you cut operating expenses significantly in the quarter. I was wondering; is that a one-quarter thing or is that what we should think about for a run rate going forward?

No, I -- yes, you can expect that our goal all along was to get it down so if we were at a $4 million quarterly revenue levels, approximately 50% margin, that we were going to be at a breakeven. And we are continuing to look to optimize our expenses here within the organization.

So yes, you can expect -- you may see a little bit of an increase in the first quarter, given the FICA re-tick. We do have some trade shows that we -- have taken place during the quarter, although we elected not to have the big spend at DSE this year. So you won't see a dramatic increase like you saw in 2011 in 2012 here, as a result.

I think what is also important is we talked a lot in the script about adding some key people, Senior VP of Sales and also bringing on my Chief Technology Officer Ben Nilsen. We have also had key additions in the NOC. We have been able to add those additions while optimizing costs in other area and maintain that OpEx at a level we want it at.

Okay, sure. All right, thanks. I'll get back in queue.

(Operator Instructions) Don McKiernan, Landolt Securities.

Thank you. Wondering if in the QSR space, if there has been any decision-making by any of these QSRs to go with a competitor.

Well, I think there was some public knowledge earlier that Dairy Queen went with another competitor. But the ones that we have been in pilot with and the ones we have been working with, no.

Okay. Is that the only one out there, Dairy Queen, that you are aware of?

Yes. That is the only one that we can say that we were not chosen -- with the ones we are working with right now and piloting with right now.

Well, you would think by now of course -- it sounds like a broken record the last couple of quarters, but something, some decision-making would be made and things would be moving forward. But I guess we will have to continue to wait.

I can add a little to that. The urgency with the calorie information to get on the menu board has subsided just a tad. The FDA has not come out with their final ruling.

We don't know when they are going to. They haven't given any guidance when they will come out with a final ruling.

However, in an election year, it is our gut feel that it may not come out in this year, prior to the election. But at the same time they have continued to say they were coming out with some kind of mandate for the calorie count.

We just -- it just hasn't come out, and we have been waiting since probably -- with the rest of the industry, since August.

Right, right. Okay. Thanks and good luck this year.

Tom Pierce, Feltl and Company.

Hi, guys. You, I think, Scott, just got back from the Digital Signage Expo, and I know you guys were in the running with Starbucks for an award. I'm just curious if you got one.

Yes, we did get an award; and we should be able to share that soon. But yes, we did.

Very good. So Starbucks walked away with the trophy, or did you both get one?

We both get one. And we just want to thank Starbucks for letting us work on that particular initiative with them, because it was very -- it has been a rewarding initiative. And it was -- the store celebrated last night, which was good for Starbucks.

That was in the Times Square?

Yes.

Yes, thank you. That's all.

(Operator Instructions) At this time I am not showing any further questions in the queue. I would like to turn the call back over to management for any closing comments.

We want to thank our investors and everybody involved for their continued support, and we appreciate it. Thank you very much.

Thank you. Ladies and gentlemen, that will conclude the conference for today. We do thank you for your participation. You may now disconnect your lines at this time.