Q2 2020 Remark Holdings Inc Earnings Call

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Welcome.

Second quarter 2025.

Conference call My name is.

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<unk> is being recorded.

During the call over to Mr. Ryan. Please go ahead.

Thank you Derek good afternoon, everybody and welcome to remark Holdings second quarter 2020 financial results Conference call I'm, Brian Harvey Directorate capital markets under Investor Relations for remark on the called me. This afternoon used car sharing Karl Marx, Chairman and Chief Executive Officer in just a moment district.

I will provide an update on our business and then I will recap our second quarter financial results. Following those remarks, we will open the call to questions.

Your turn the call over to Mr., though I would like to take this opportunity to remind you that some of the statements made today maybe forward looking statements. These statements involve risks uncertainties and other factors that could.

Cause actual results could differ materially from those expressed or implied by these forward looking statements.

Any forward looking statements reflect remark holdings current views and remarks holdings expressly disclaims any obligation to update or revise any forward looking statements. After the date hero.

Disclaimers only a summary of remark holding statutory forward looking statements disclaimer, which can be found in the full filings with the FCC.

I'll now turn the call Overdrew remarks, Chairman and Chief Executive Officer, Mr. Tao. So he can provide additional color our remarks business and recent developments Shane.

Thank you bye.

Second quarter in April with much of the world on locked down and most businesses in all countries closed.

It wasn't pilots confusion for businesses as they're trying to determine how to since we reopened walt protect little qualities and customers, while not getting much visibility from the federal and state government I'm not just one day could reopen or what the operational coal cost Oh, we opened the work.

Having just re purpose Donnie I powered thermal imaging for the U.S. market. We're confident that we have built from the ground up and Oh and the best of breed products that were far superior to existing market competitors due to our speed accuracy and supplemental offerings.

We saw solid immediate initial success registering over 1 million revenue during the quarter from a diverse group of companies in industries, including previously mentioned casinos restaurants hotels office buildings Entertainment news sports franchises hospitals and public.

60 groups.

The common denominator with all these new customers or that they not only the leaders within their respective industries, but were uncompromising into high standards of safety to protect their customers and employees.

Well its initial successes have provided great momentum in quarter, two and is now carrying into quarter three.

Having won the Las Vegas Metro Police Department.

Did we successfully beat out the established competitors to install our cameras at every major entry and exit point for both public customers employees to help our global Las Vegas headquartered game, a little short who has set the standard for covert prevention and we open label safety protocols.

Resort was the first to test 100% all its employees onsite to the help of U.M.C. University Medical Center for local Clark healthy operating hospital organization.

Having viewed the ease of use and success of our product and helping with rapid thermal temperature screening U.M.C. elected to purchase cameras throughout their system to help screen for other consumer employees at the Las Vegas Convention Center, which laser expanded to include two additional loan.

Patients operated by the Las Vegas Fire Department in order to fulfill demand the screen four to 5000 people per location per day.

These experiences have led to additional opportunities in Clarke county that were referred by existing customers and institutions in the area.

Oh, we released early in the week.

I've also watched had all first U.S. school the Middle School in Las Vegas, We previously noted our success with schools and try though and now that you have schools like the Baiding how to that's open safely we can point to the Middle school, usually for thermal kits throughout the campus stick with skin temperature readings on.

South puppy stuff student and guess.

Initially we are providing the middle school with skin temperature reading technology, but we plan to add important upwards fall from our AI suite of products, including people counting.

PPD compliance.

Which is not squares and social distances.

We are grateful to be working with before thinking ahead of school Jeremy Gregersen. That's you prepare to students south appeal stuff for save for turned to cap. This next week. The metal school is a pretty more academy for pre K through 12 students known for its very high academic standards and we are excited to be part of the reopening for students.

Going back to school.

The parents and teachers Union the mental state schools. We believe this is a market that is poised for growth and already seeing it and experiencing it.

And given our success in China and now in the U.S., We believe our product suite, which includes a tennis management and other high powered applications can be a powerful tool for administrators.

And speaking as to how the initial successes achieved in the second quarter setting us up for a fundamental growth.

We are working with a very well known football franchise that originally purchased a thermal kit for employees and contractor testing and it was looking for solutions trips battling fans return.

Obviously that isn't happening anytime soon and the customers face a little bit difficulty knowing when they can we open.

But given the initial results of the first installation they've expanded beyond our thermal kit and now also purchase pads for all employee access points and we hope that as fans are allowed to return we expect more about AI solutions to be used to make.

Both marketing and security more efficient and effective for them, it's substantially for the rest of elite.

As you can see here as we have been establishing our initial business with all of these different leaders in their respective fields, we see tremendous opportunity to grow with them as the economy, we opened and their needs continue to expand.

We have built in AI platform over a point solution, which allows us to up sell to customers not just in various ways looking in the continuous recurring fashion.

We continue to actively pursue the health care markets with multiple wins across the United States as we seek to help clinics implement the latest safety protocols. So that they can provide the proper pulled it production and screening services for their local communities.

Our relationship with U.S.C. has also led to purchases from other large hospital clinics that have witnessed first the effectiveness of our AI platform to make their daily business for safety much more effective and efficient.

So while we are pleased with our initial U.S. results, we have much more to do to prepare the company to become a full platform solutions provider, where our smart retail Smart school and workplace safety series AI products can help business is not only with their safety, but also with the business.

Recovery.

Economic conditions in the U.S. have allowed us to upgrade our overall team, adding seasonal develop those jobs R&D team and expanding our sales and installation groups.

We view, we've utilized I'll now expired aspire line credit to raise 32 million during the quarter, which allowed us to repay over 13, knowing that that other liabilities and put over 10 million of cash on our balance sheet.

Our goal is to best determine how to move faster utilizing our new sound balance sheet strength.

We've been moving fast, but we now need to move faster and now that we resolved or debt issues were focused on several new initiatives to enable us to do so.

And then the third quarter and fourth quarter, we'll be announcing distribution partnerships with large enterprise solution providers not just in the U.S., but in other parts of the world.

We know our technology capability is unique and best of class and ask you continue to prove this leading business groups from their region industries have been finishing their due diligence on those and we look to cross the finish line, including these partnerships in the near future.

We are attracted to that because it is difficult to recreate the full AI platform that we put together over the past five plus years.

As an odeon, which means or original design manufacture.

We will look to continue to upgrade the designs of our own camera and Pat hardware.

Make no mistake, we are not the hardware company, but we have designed our own cameras kits and pads utilizing international contract manufacturers to build the hardware for US and then we overlay our software.

To provide our customer the best <unk> products, we've been designing our own hardware, including multi spectrum caballos pad in tablets and Aaas boxes with the top AI chip manufacturer globally, and utilizing international contract manufacturers to build the equipment for us that can run out.

Hey, I software with better performance more efficiency.

Better reliability, and more safe secure and better energy saving for customers.

Now moving onto our China business.

With the recovery of the China economy.

Previously frozen orders due to colder in Q1, I technology products have begun to saw in Q2.

Our China team has been executing the contracts not only from our existing customers like China mobile National power grid, We told bank.

Construction Bank Lotus Super market, but also from our new customers like the bank of China and since one the aggregate agricultural bank of China in Sichuan over 100, New primary schools, several hospitals and shopping malls.

We're also pleased to announce that our first aaas biosafety product for cattle farms hubs pass the customer acceptance test and formally in production in northern China and younger process at the point of the system into other cattle farms weapons fighting against cattle viruses since last year.

In Q2, we have also upgraded our smart retail product, where we've enhanced our live video analytics capabilities by integrating with newly installed Fiveg wireless communication infrastructure is in many bank retail stores, which allows us to distribute the process more live videos in real time income.

Provide bank managers like the though from all of their branches all the time.

We've also upgraded our smart cap.

Which has AI Kogan 19 prevention system.

Hey, I attended the system AI energy system.

<unk> energy saving system.

Hey, I had normal activity prevention system, and our eight high kitchen food safety safety system.

To include our new <unk> anti intrusion system, where an authorized or health condition disqualified personnel will be prevents it from entering school campuses or getting nearer to the children.

We are helping to schools, especially K through 12 schools get ready for the September opening.

Overall after experiencing a quarter one countryside shutdown, our <unk> business in China has the recovery in a very fast pace in Q2, and we look forward to have become a busy and prosperous Q3 and Q4 with the bounce back of the economy and technology demands.

We are proven tested and live globally now.

Sure.

With the recent 18.5 billion dollar acquisition.

By Teladoc, Oh look long ago.

Which created.

Together, a 30 billion plus dollar business I wanted to take a step back and go into detail regarding a 4.5% ownership stake in share care.

Our state continues to grow rapidly in value and with Lovaza. Those acquisition. This validates share care strategy of creating a platform versus point solution.

This is a huge deal for share care and obviously remark as we are one of its largest shareholders.

Laval, though well sharecare as close as public call.

By comparison Sharecare is a larger business in terms of revenue profitability and scale of services.

As a reminder, sharecare has spent the past decade executing a business plan to become todays leading digital health company in the market.

The current board member I've watched share care raise over 430 million in capital.

Execute an integrated 16 acquisitions and solid foundation for Leverageable growth.

The company has achieved in enterprise valuation.

Of approximately a couple billion based on our most recent equity raise.

Entering into an important period value realization of the next few years.

To share cares internal sales efforts and our various acquisitions. They had built and then a viable customer base, a leading health care providers insurance comfortable and self insured payers pharmaceutical and medical device companies.

Employers across multiple industries and government agencies and communities.

But that the quality of the customer base provides them with a tremendous strategic asset that they can use for credible references for new customer generation that they can grow by cross selling and Upselling additional solutions into the existing base.

These cross sell and Upselling initiatives offer numerous revenue growth opportunities for sharecare without adding a single additional customer to their base or single additional products to their existing solution set.

The share care management team has developed a core competency managing costs and a great and strategic acquisitions and developing business lines. This significant operating leverage their leadership team is capable of managing significant growth without major expansion of the overhead expenses.

So as the industry, leading solutions in strategic customer base drive future revenue growth share cares operating model will provide an even faster growth of their bottom line.

In conclusion remark AI has built the most comprehensive suite with artificial intelligence solutions and the number of different industries, ranging from retail to construction into agriculture.

These solutions are able to deliver on a unified and scalable platform.

And this multi solution approach provides us with multiple points of entry in commercial conversations with a wide audience potential customers.

Our own ability to bundle multiple solutions also provides us with a huge competitive advantage and bidding against point solution companies in the marketplace. That's looking to escape the difficulties of managing multiple and disparate vendors. So as we are in Q3, we are very confident in our growth businesses.

Both sides of the Pacific as well as the large asset value, we all know sharecare, especially as as the validation that most recent acquisition of Avago. Thank you.

The same thing I'd now like to provide a brief overview of our financial results, but the second quarter ended June Thirtyth 2020.

Revenue for the second quarter of 2020 was 2.3 million down from 2.9 billion. During the second quarter 219, However revenue from our new Biosafety business totaled 1.1 billion at thermal imaging parts were delivered the casinos restaurants hotels law enforcement agencies Medical center.

Office buildings and other industry throughout the United States.

Our China business continued to be adversely impacted during the second quarter like several factors, but most notably by covert 19 related quarantined, which never negatively affected revenue are preventing our personnel in China from continuing project Rollouts and by delaying target testing and customization work on.

Some of our larger projects.

However, she noted we've got an easing in the latter half of our second quarter and that led us to recognize a million of revenue from China.

Total cost and expense for the second quarter of 2020 was 5.1 million a decrease from the 5.8 million reported in the same period of 2019.

Decrease is primarily attributable to a 300000 dollar decline and the cost of revenue, resulting from fewer project completion and decreases in sales and marketing of approximately 200000 Aegean expense of 600000 as head count decline.

These were also offset by 600000 dollar increase in technology and development cost associated with the launch of the biosafety thermal imaging business.

Our operating loss declined to 2.8 million in the second quarter from 2.9 billion and they'd comparable period of last year.

Our loss from continuing operations totaled 9.8 million or 11 cents per diluted share in the second quarter ended June Thirtyth 20, funny that compared to a net loss from continuing operations of 1.3 million or three cents per diluted share in the second quarter ended June 32019.

The bulk of that loss is tied to a non cash charge in the fair value of our warrant liability of $6.3 million, which compared to a $2.1 billion gain and the comparable period of 2019.

And this resulted from the increase share price of remarks carbon shares again. This is a non cash charge has no impact on our cash operations and resulted from the increase in our share class.

At June 30, 2020, our cash and cash equivalents balance was 10.2 million compared to cash position 300000 at December 31st 2019.

Cash increased primarily due to 32.1 billion and proceeds from common stock issuances.

Which were offset by operating losses in the payment of certain liabilities and the repayment of 13.3 billion of debt.

Finally, subsequent to quarter and we settled a lawsuit with our former landlord and we're working towards settling additional litigation soon and that settlement was for about half of the original approval.

The Derrick we'd now like to open the conference to questions. We encourage collars with questions the queue up with the operator as soon as possible. So that there will be minimal lag time between each caller derocher do instruct the callers how to keep up with their question.

Absolutely and ladies and gentlemen, if you'd like to ask a question over your phone be signal by pressing star one on your telephone keypad.

Using speakerphone. Please make sure your mute function is turned off your lives signal treating women again that is star one to signal for a question at this time.

Well take our first question from Darren Aftahi with Roth capital.

Hey, guys. Good morning, Thanks for taking my questions.

She maybe you could start you mentioned some potential.

Yeah, the distribution partnerships or I'm, just kind of curious the type of or.

Essentially partner that you're looking for to scale. This and then as you think about kind of longer term.

How do you think about kind of direct versus indirect channels in terms of scaling the business.

Oh, Thanks to a I think these type of comfort is that what I'm, referring to our.

You know these large enterprise solutions are comfortable that we've been accustomed to seeing them over the last 24 to yours or they're all very large global problems in companies that Claude Laval, establishing itself on the hardware and software solid, but what we do it will artificial intelligence.

Oh, it's not something that is easy TB created so a lot of our conversations and discussions with Dan Palmer started out well what I'm trying to create something by themselves are realizing that wonder how they're unable to do or magnitude takes much longer hold on to recreate it.

Oh and also we are people, who will discuss some of the bomb to allow us to partner with them a lot just in the U.S., but you know around the world.

So I think working well.

The rock than normal and ER interrupt with these difficult from partners.

We are reviewing all the go from proposals.

Good morning focus of our team in this quarter and in certainly in Q4 rural allows us to explore much faster.

Got it.

Be [noise].

Two questions on your on your business one.

You made commentary that the things started to saw in China towards the end of two Q and into Threeq huge so.

Did you juxtapose, where the third quarter is in China and in terms of being kind of fully back to operation maybe relative to deplete cobot levels.

And then second question on your pipeline.

How does that change from the last conference call in terms of prominent companies you have in the pipeline and then are there any other.

Industries beyond kind of what you've talked about today that are presented.

Got it and have there's opportunities thanks.

Yes, so I wouldn't say channels top two three calls and levels, but it's coming back very thoughtful I'll think club because of the models will stop swapped.

The government has taken over there.

They are you know life, it's coming back to normal you know so our pipeline.

I think is very strong a lot of the discussions that we had a proposal our law box.

The our program the litigations bought were stopped in Q1 in Q2 all back.

And Bob will still a very strong pipeline borrowing in the developing as I mentioned before I was just to be opening of the schools certainly will well without without technology, we're getting a lot of inbound requests on how we can set up our systems and it's not just for body temperature scanner right is it because.

We are able to 10 to 15 beautiful applications all horse school lunch menu lots of talk to people with the fact is now a lot of them coming back online.

Some additional area of dog, we were focused on you know in terms of helping them getting the facilities management and so we're seeing a lot of demand in China.

And so we are working right now I'm just meeting what we were really working well and obviously, we don't want to leave and all these new off the teams to go to waste.

Thank you.

Thank you thank you Dan.

Your next to Steven.

And your line is open.

Yeah, Hi, guys, a focus so much or taking the questions.

So first and foremost Ah you know I I want to clarify for some people may not have an exact understanding that.

The majority of this loss you guys coming into this quarter.

Obviously being much more than expected is due to the black Shoals accounting method and pay for loss.

Yes exactly.

There's a it has a different Brian just had to do with.

The increase in our share price affected the warrant liability on our balance sheet with a noncash transaction and again it resulted from our stock price being up in the prior quarter comparable period last year.

The stock was down and so it was a $2 million game.

So again you have it right. It has to do with the functionality of the Black Shoals option method.

Okay next is that what is the current status of the amex lawsuit and what's the companies.

Good so can deal with that.

I believe that admin slots that that's been cleared a several months ago. So I think that was done back in maybe the end of Q1 or Ah I think it was done at the end of two of that the Amazon. She was hasn't been an issue for us for a while.

Excellent. Please I have a question.

Right.

Hi, gentlemen, just please pardon me, it's it's myself and my quick question with regard to share care that.

Somebody has been posting a video earlier this week, suggesting that you would no longer in possession of your share care share that they were taken by a share it certainly folks today.

I guess, a rich showing that the they took possession of the shares so I'm glad that confidence that would not have stayed up the long without getting a release of the shares.

The cloud around those shares because that's really.

In reality makes up a tremendous amounts of value for your stock share.

Its share cared valued at 2 billion EUR 3 billion EUR 4 billion by the time to go public.

That translates to a lot of money for this company and a lot of value when the stock price. So for those who have Judith I'd like to know myself included.

What is going on with a share what's going on with which one of the collateral.

Honky her question I.

Last week, we have overall, who responded the Boston will blow of also just volatile world misleading.

Then just wrong.

As of June Herb will quantum plumbing, we on approximately 4.5% offshore kills issued Clos.

And loophole representation its board of directors ruling and that's all I'm on Walgreens small lawsuit was a legal action punkin to try to full control of our interest in order to sort of follow on approximately $1 million odd ball, but it is still of course.

Eating more probably come off the schools will double hurdle.

Oh, okay.

Okay, only because we.

We believe them with where the confident that you actually do have control of the shares and you start you all bye bye bye.

Yeah I used last week, we all we all in all we all know for sure, but how world how old are rolled up on board to all the issue or will you.

With our previous situation that we're wrong, but we settle for.

For 50, plus all mouse, while discussions and do something similar.

Okay, that's true shareholder should what sleep well at night knowing that.

There was good value and Youre 4.5 cents ownership of Chirca.

Thank you.

Okay and my question.

Just one last quick question, if you guys I might be a the last call. The vote call, where you mentioned the 50 kindergartens and loves that were being added on those contracts being down at the same average price that we discussed the contracts in the past that 25 to 50 bed fees.

[noise] mountains, each each while each case in his girlfriend, because obviously in school side.

The door Chrome and also some different schools have a number now brought a number that we all know and offer a number of Brooklyn school. So each case is different I wouldn't have any color just progresses and rock bumper, Bob that would close on school.

Okay. Thank you so much for yourself.

One question on the analysts look capital once the question your analyst.

It looks like.

On the analyst reports, we tried Philippine a few weeks ago. It looks like you have to beat on the revenue, but you had a.

Loss on the earnings I'm wondering if the analyst.

At that point I guess, you could not have projected a black shoals implication.

The war.

I didn't know how that works exactly I'm, most Reits with regard to logs on the on the.

On the there's an equally on the walk from five cents to 11 cents and what would the lots have been without the black shoals indication for share.

And so the loss was approximately 6.3 million associated with the warrant liability change.

So it would've been about a 3 million or about so approximately three cents I haven't figured that out but it would be up probably would've been approximately two or three times.

Okay. So I'm, assuming that the animals a wouldn't be projected at bison was.

We were considering a cash loss of five cents, although I can't give me some just assuming and so you actually did beat the analyst expectation on cash loss from operations.

And the paper will it makes a differential you explained earlier.

Hi, I look forward to reading your report I guess, we agree.

Okay. Thank you so much.

You're welcome that.

Thank you once again that is star on the signal for a question.

Hi for one more question from Ryan Nash with Nash Partners. Please go ahead. Your line is open.

Good morning.

How do you expect more to grow.

The economy now no.

I run I think brought has the harking problem reopens in probably have more visibility or and how they can operate a you know lumber reopened a lot allows us a great opportunity to up sell all of our different services.

And and I see this very similar to other industries that are facing similar things just say for example, with online sports betting like sports is not happening right now about a once it opens a lot of the probably the opposition to very well.

To take advantage of that growth, we view ourselves the same way a we made the decision when we first started R&D Ais business to create a platform over one solution, which allows us to provide.

Eight of the solution on all the different operating issues that companies may face and and we see that as a good opportunity for us So as I've said in the last couple of calls.

The thermal technology is just the tip of the speaker for us a we provide and have over hundred other they are applications that we feel that we can upsell to them successfully on on a recurring basis and we're already seeing that affects right now not just in China, but in the U.S. as well.

Got you and well so you should the formal technology, how did you a thermal camera.

To a lot of deals assembled families that are out there because that seems to be the hot area right now.

Yeah. So so just to be clear you know we are not hardware manufacturers were not as we mentioned we design, our we divide it up but the the you moved out with we provided is our software Oh the ability to provide more of them just body temperature retail sets us apart.

And let me have the blue operating protocols as it relates to social distancing.

Not the collection, which is a PPG detection and people counting knives, a lot of these places a little to operate out of below 25, or 50% capacity. No. These are high so I applications that we built on the ground up on and can integrate and our overall Sweden.

Products I remember all these other.

Companies that do self wearable technology or don't have that and if they do it doesn't work that well so we're finding.

A lot has evolved from middle of the customers that we mentioned right now a new customers because they're looking for no Oh, a comfortable if we can provide all of these solutions rather than managing a bunch of different vendors for.

Okay. Thank you very much.

Thank you.

Thank you and at this time and I turn the conference back over to Mr., Brian Harvey for any additional or closing remarks.

Thank you Derek and thank you everyone for participating that early morning remark Holdings first quarter 2020 financial results conference call a replay will be available and approximately four hours grew the same link issued on our August <unk> press release, they do and have a good morning.

And again that does conclude today's call. We do thank you for your participation you may now disconnect.

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