Q3 2020 Remark Holdings Inc Earnings Call
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Welcome to the remark holdings third quarter 2020 preliminary revenue conference call. My name is Shelly I'll be the operator for today's call and what kind of the question and answer session. As a reminder of this conference is being recorded no I like to turn the call all sorts of Brian Harvey Diary.
<unk> of capital markets and Investor Relations. Please go ahead.
Thank you Shelly good afternoon, everybody and welcome to remark Holdings third quarter 2020 preliminary revenue conference call I'm, Brian Harvey Senior Vice President of capital markets and Investor Relations for remark on the call with me. This afternoon is cashing Tal the Marx, Chairman and Chief Executive Officer, and just the moment midst of tower.
Provided an update on all the businesses and I will provide information on our preliminary revenue.
Those remarks, we will open the call the questions before I turn the call over to Mr., John I would like to take this opportunity to the 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 to differ materially from those expressed.
Or implied by these forward looking statements they.
Any forward looking statements reflect the remark holdings current news every day.
Mark Holdings expressly disclaims any obligation to update or revise any forward looking statements. After the date of <unk>.
This disclaimer is only a summary of remark holdings statutory forward looking statements disclaimer, which is included in its full filings with the FCC I would now like the turn the call over to remarks, Chairman and Chief Executive Officer Mr. Todd. So he can provide additional color on the March businesses and recent developments Shane.
Good afternoon.
The update you on the third quarter results.
Hopefully you can give them of clothes for all the most it's been a challenging time of our thoughts and prayers are with those standard doesn't affect it.
Our thermal scanning solution has been a great tool for organizations to better deal with this bad debt.
We are proud of our team's tireless work to make sure our partners get the best wandering father's day as soon as possible.
The three major factors to our strong Q3 performance true.
Hi. This is economy has come back with strong demand for the platform.
We expect our remark you guys try the business to be profitable within the next six months.
Our global pipeline has dramatically expand the last six months.
The unlike other companies remark the eye is a true platform not just the point solution that we built from the ground up at all in its entirety.
In this case, we do not just provide superior thermal imaging.
Temperature of detection is the tip of the skier.
We are seeing customer, adding the additional services.
And now it's become a land and expand strategy, which will increase our ARPU or average revenue per user the LTV or lifetime value.
In China, we recognized in Q3, 20 talking roughly 2 million U.S. dollars well.
We had a sequential hundred per sub growth from.
From Q2, 2020, and approximately 300% growth year over year.
We are expecting another 100% of sequential growth in Q4, five double our revenue in Q3.
We expect to achieve profitability of our China business sometime within the next six months the majority of our revenue growth.
Gains from our execution of the contract side of the China mobile for their smart stores banks for the smart retail outlets in schools for Smart School systems due.
Due to the of current cash flow situation, we're able to execute several projects I wonder from from here 2019.
As I've said in the past our pipeline is tremendous it was very strong because of our ability to combine our industry, leading technology with specific commercial experience for various industries here are some highlights for Q3 and beyond.
China Mobile Smart store project Phase one of the was expected to complete in 20 Twond.
The due to the close of Tenda. The the completion of phase one has been postponed to 2021.
Oh, that's worth of system development from Phase one has been completed by Q2 this year.
Phase one three systems Q, that's management's is the smart kiosk system and smart customer store traffic analysis of stuff has will be deployed over 18000 stores.
By Q3 2020, the Q match of the system has already been deployed over 2000 stores and 10 provinces.
In the third quarter, we also announced our phase two will try the mobile.
The phase two includes smart employee management system and store patrolling system.
End of Q3, we completed the release of the edge computing boxes for China Mobile stores. This day I box connects to the surveillance cameras and from.
VIP recognition and.
The employee behavior, that's true customer.
Customer behavior analysis.
That hasn't prevention.
The system has been tested in China the ball there.
China mobile hold the stores and as expected the boat deployed phase two software to try the mobile stores and the large scale in the next couple of quarters.
We expect our revenue to go more significantly the number of the faces that we've won were delayed over the last year, what commencing early 2021.
Smart retail store for thanks.
Because of our successful charter the mobiles retail business, we've developed and launched a parallel smart retail store system for banks to paint the opportunity overall there are over 20000 retail bank locations going through smart store upgrades every year since 2018.
$2 billion annually, which is roughly 100000 per store has been earmarked for smart store upgrades and remark EOG is positioned very well to capture a good share of it.
To put things in perspective, there of about 220000 locations in total across China.
Our platform solutions, our AI customer flow traffic analysis system.
Targeted advertising system, and smart store aisle T. device management system the.
System has already been deployed the over 80 retail bank locations for bank of China.
Which is from bank of China.
We are expecting over 120 more locations to use our system in Q4.
[noise] two new customers have signed up in Q4 as well.
The construction of bank of China, and the agricultural of bank of China.
The retail branches for banks is a tremendous opportunity for remark.
It's mark in the entity in Q3 2014, we completed our first smart can you profit and deployed the over 100 residential complexes ecotrac side with the RC International a large publicly listed company.
The deal has one of the strong credibility in the smart convenient the market and we are happy to announce our wins with contract with China Mobile Smart community divisions, which.
Which has an initial contract the value of 15 million U.S. dollars and 2021.
We have already commenced at the point of in Q4 in the since one of problems and we'll recognize revenue accordingly.
Remark smart remark smart community platform includes Vishal I'd based resident management system.
Hi parking the system surveillance and safety system.
And the <unk> axis system now.
There are over 10000 residential complex as it sits on the flow and with the wave of upgrades in China. We are looking out of overall tab of the 70 billion U.S. dollar market for smart community.
Mark School system.
We've continued to develop the eye products for two of the Garden elementary schools based on our strategic investments and see the campus of healthy student growth. We heard the true our facial recognition time attendance system epidemic prevention system and spark energy saving system.
We recently released our abnormal behavior of the Texas is the whole the schools in Q3.
There are over 120 schools, who are using our systems by the end of Q3.
We are looking to expand our sales channels and enter in the schools from various profit says with over 160000, the schools and major says the instead of major cities. This will be our target number for the coming years.
Our goal for Q4 of the God, the simply to execute on our existing contracts and the wouldn't new ones are the technology is first rate and our customers recognize that.
Which is why we will continue to expand and achieve our growth objectives, the establishing of partnership with strong of channel partners.
Other areas that we'll look to extend our remark the AD platform in China are of the smart kitchen, and smart factory in office verticals, we will release PR accordingly, when the full scope of the projects of files.
The U.S., we lost share remark <unk> bio safety solutions at the end of March was the knee jerk reaction to buying anything from that further slowed down as result of these were delayed and companies began taking a holistic look at health security and establishing safety protocols.
Hell Security is now past, the though and its importance as cyber security as.
As we all know Covance safety is more than just speak the screening.
We believe the benefits us greatly in the wall of as they are not looking the jobs for thermal solutions, but an end to end biotic the platform solution.
Customers are looking for facial recognition contact tracing p. protocols testing Q, our scanning and temperature readings as a platform not point solution, where they do not have to manage 10 different vendors.
We are one of the few groups that are capable of providing this comprehensive platform.
We continue the signed deals with new customers and expand our offerings with existing customers.
You can see from southern the Battle what started off as an initial thermal temperature of check has now its debt expanded to providing day before arrival of process of the establishing the health questionnaire of then creating a digital pass.
Moving on arrival process, which includes fever screen massive detection the of the past update.
Two side by the which includes contact tracing the scripted area axis track of violations cleanup protocol tracking and finally enforcement, which includes all the made the guidelines and real time rule based alerts.
Overall this does not only provide enhanced safety protocols. This reduces significant operational expenses and liabilities, which is what you have to see other hospitals in the medical clinics. The frankly any business I looking for in the near the door.
We've also recently completed our initial deal with one of the largest gaming companies.
Where we've expanded the old to over 40 of the offices around the world when it comes to what's going on with the United States. The Great example of what is happening in the market can be style and our recently announced deal.
This opportunity was originally contract in April day.
Once the realized they weren't going to fully reopened the offices for some time they put off the purchasing decisions choosing instead to purchase just a few units for a month long proof of concept at just one location.
Now the data established safety protocols in place the it came back to us to purchase for all of the 40 worldwide the locations.
Once the company's figure out the return to work policies, we feel will be the great shape as we have many proof of concepts underway with large enterprises.
We're continuing to sign large channel partnerships around the world.
One of the largest travel services company in North America using the says the case study. This company has over 50000 hotels on the platform.
In order to be part of that platform. They have to be share care certified and we would be part of the toolbox that each hotel the leads to the dock.
This process, we expect to be finished by Q1 of 2022. So we are getting ready to meet this the net.
And finally, we'll share care.
So while I'm on the share care board of limited as to how much do you talk and provide on the monetization side, what I will say is public telemedicine styles of.
One of the way above market share.
The comps all the Avago teladoc.
The strength of these two companies have validate the share count strategy of platform of appointed solution well.
Well vogl of sold to tell about four blocks until the 18th 1.5 billion.
And well north.
Perfect well recently went public and the 3 billion plus dilution is now the roughly doubled that the market cap the.
These data points of indicate the strong future for share care, which is performing at a level of equal to or both of these companies.
The I P. L. Inspect market continues to be strong and we're looking to take advantage of this window.
The plans for the use of these proceeds from our.
Our three ways number one bullet proof of our balance sheet to provide the GAAP growth capital to handle our pipeline that we mentioned and three the buyback the lesson the pay that we've experienced over the last few years building our platform.
Finally, the it's always hard to pin down, but we are constantly awesome optimistic to see of monetization of the well the next few months.
Remark holdings of finally at a place where we first laid out our vision we.
We built a defensive mode with our data and technology.
True the commercial applications of the assigning world class Blue chip companies around the world.
Our pipeline is very deep and it kind of continues to only get deeper and now we have the balance sheet to support our growth and any other off [noise].
Right.
Thank you Shane the.
The company's financial statements for the three and nine months ended September Thirtyth 2020, or not yet complete accordingly. The company is presenting the following preliminary estimates given the timing of these estimates the company has not completed its customary financial closings in review procedures and as the result, the estimates are subject to change.
I'll now provide a brief overview of the preliminary revenue range for our third quarter ended September 30, 20 Twond.
Revenue for the third quarter of 2020 is expected to be in a range of 2.5 to 2.67 million up from 700000 during the third quarter of 2019, when the overall more than tripling of revenue.
Revenue from our China business, specifically is expected to sequentially double the true the 2.2 million compared with 1 billion in our second quarter and nearly quadrupled compared with our third quarter and 29 team has joined the emerge from COVID-19, quarantines in the second quarter our.
Personnel in China, we're able to resume Rollouts and project testing at customer they customization work of projects, including China Mobile banks and school installations moving forward, we expect revenue from China joke.
Good day.
Doubled to over 4 million in our fourth quarter and show continued significant growth again in our first quarter.
Revenue from our U.S. based bio safety business is projected between <unk> 0.0, 0.30 point Fivemillion as the thermal imaging products were delivered the casinos hotels medical centers office buildings and the other interest the interest rates throughout the United States.
Finally, as you know we are asking for an increase in our authorized share we will hold a day or we will have our especially of the journey meeting the special meeting the German resume on Wednesday of.
And I'd like to take this opportunity to again remind people why we're asking for the authorized shares.
The reason is very simple we may need the shares of the strategic partnerships maybe.
Many of you know several years ago, we did a strategic partnership with CP growth a large Asian conglomerate that is using our systems and helping the seller systems overseas. They purchased nearly 1 million shares.
Oh, the strategic partnerships contemplated may require for shake of shares from which we don't currently have the authorization second is the acquisitions. If the timely acquisition became available to US we bought the back quickly without having the authorized shares available we might Miss out there's nothing in the pipeline right now but that came from.
Range quickly and as I noted, we most need flexibility.
A source of liquidity, having the availability under our prior authorization allowed us the issue those shares which allowed us the pay off our debt the mgg, what's unencumbered share care, thereby allowing us to all the hopefully realize its full value. It also allowed us the begin funding our working capital in order to meet the China mobile contract.
We're beginning to execute on it.
If the increases not passed our liquidity could be impacted going forward and may we may have to contemplate other sources of capital when it comes to new projects and investing in our business.
New hires of employee retention on the much smaller base of shares issued the RSU the adoptions of necessary to attract talent. That's part of the compensation package, we generally prefer to keep base salaries low and incentivize what stock. This also puts employees working towards the same goals as all shareholders not having more off the rights.
Chairs goods, because it really can't GAAP, our options going forward.
Shelley, we'd now like to open the conference call. The questions. We encourage callers with questions to queue up as soon as possible. So that there will be minimal lag time between each caller show the could you. Please instruct the callers how the queue up.
Thank you Sir.
He would like to ask a question. Please signal by price is star one on your telephone keypad, if they use of the speaker phone. Please make sure. Your mute function is turned off some of your signal to reach our equate match again. Please press star one to ask the question well past. The just the mall may to allow everyone an opportunity to signal for questions.
The first question comes from Darren Aftahi Roth Capital Partners. Please go ahead.
Hey, guys a the afternoon they actually my question.
First could you talk all of the other the China business. So I appreciate the business doubled the new looks like you're guiding to.
The another doubling the at least I live in the fourth quarter.
There's some language in the release that says the chair of the mobile your true on the stores right now in the Hay day provenance, and that's going to 5000 by end of the year.
That's like a 25 fold increase sort of so the 24 could you just help me logistically understand.
How feasible, but is how much of that work is done half way through the core the and then what that kind of looks like post for Q.
Sure. So is this the Brian.
We are currently installed in over 2000 before our Q management system, and that's what's going to 5000 by year end. The kiosk system. We installed our first 200 recently and that program will be called completed and our fiscal 2021, so it should read the there.
2000 stores have the queue management software going to 5000, and that's currently in 200 kiosks My kiosks.
Two different products.
But it's all part of the just want to talk more about the phase one.
So your visibility and confidence in the the doubling like I guess as we sit here.
Halfway through the quarter as is what.
That's very good very strong.
Got it.
And then I think I heard you say growth in Q1 in the.
One of the China business, So does that mean growth over the 4 million or better number in the fourth quarter.
Yes.
Okay.
And then if I'm doing the math right. It looks like your preliminary implied U.S. business GAAP fell quarter on quarter.
I appreciate the may have been some major business on.
The U.S. side of the code the.
But can you kind of help me understand what the pipeline looks like for the U.S. business and what types of companies are looking at the kind of it's true you said multivariate flat as oppose the type solutions.
Yeah. So I I would say we are very well represented all the different you know the in the multitude of the industries from the hospital the travel sector to the sports sector to the industrial sector and one thing the realized as when the first call the head.
Though the fever detection of which represents 80 per cent of the symptoms for coal. The it was exactly what people are looking for as the as a quick way to figure out the who can come in or not.
Now six months later, the customers simply want more and that really comes to you know our benefit because they're not just looking at the temperature testing, they're looking at how do we integrate the test results how do we make sure that the people that are in the building no and are able to follow the protocols.
Now you know we're in the new environment, where all these different protocols that are being put in you have the higher lot of people to be able to keep track of all of this because you will get fined.
Very you know the in the punitive way of say for example, with the with the Raiders you know the loss the draft pick and the GAAP.
You know find a lot of for not following some of the protocols. So we are finding that a lot of different comes our purchase of can you provide this platform strategy that includes not just of the temperature checking but the testing the compliance with the TB the compliance with how you keep the records and do it in the way we.
Where you can lower operational costs and also protect us from the liability of.
So this is something that is the common denominator across all industries and certainly with the announcement of the as you know hope we're very hopeful that the vaccines will prove out to be what they are but you know the demand for our products will only increase with that because of.
You know people now look at health security as important as cyber security. So all of these measures we could be place, we're very well positioned to take advantage of that a lot of it kind of from the last six months, where we have the true the most difficult of the of tying all these different do you sense of the established.
And who you are doing it in the contact this way.
And Ah. So we're very excited on the what's coming for us over the next I'd say three to six months in the U.S.
So.
Maybe if I could just indulged the little bit of 2021.
I really don't out of the sort of the non wants the that's.
The next year.
Well the mix of the that's still going to be very much skewed towards China, just given kind of the contracts and then whats actually being installed today.
Yeah, I mean, there there's no question I mean, I mean, I hope it doesn't matter what the isn't as you're in I think in the world or China of just because of the amount of people is the the numbers, which was not sort of a you know there the the the bad news is that it's the if there's a long sales cycle, but we've got.
After that and the you know we've gone through the long sales cycle weve per year, and our technology works. We've proven the we've been able to deploy a fast in the according to the schedule and so for right now, it's a very blocking and tackling or kind of the you know methodology, a U.S. a wall, obviously, a very strong.
Market, but you know I think we're still trying to figure out what the direction is over here in China. The direction of the inset divisions. The set the budgets have been set.
And now it's you know we're trying to move as fast to capture you know that market share two of the areas that we bought out outside of China mobile is as it relates to the banks right. There are 20000 branches or bank retail that are being upgraded every year roughly 100000 per store and that works.
Got to be a $2 billion annual A.I.T. upgrade cycle or there are about 200000, plus banks throughout the country, they're not going to upgrade them all at once but it becomes a very stable of business for us.
And we are very well positioned because of the success that we've had with China mobile.
I talked mentioned about the smart community same thing in China everything works of the five year plan right. There are over 160000 smart communities are in in China, and they are going through a five of your upgraded plan, where the your remark $70 billion to the upgrade now that sounds like the big.
Number the when you split of across 160000 spark immunities it works out to be under a or right around 400000 U.S. per smart community. Okay. So that's something that we certainly feel that the even with an external shock, it's not going to shake things up and right now because we.
Have true that ourselves with not just the largest the retail operator in China mobile and China, but also now we've been able to integrate our solutions. We're one of the largest real estate and smart coming out of the developers and BRC International So we're very well positioned there as well.
There's lots of them from me you know when we could see the final financial than I've seen it's been over the or to the is now about a sea of I'm just kind of curious why.
There's there's no hard and the CFO and what's kind of the way with the the form the mother's day out.
But the there I can address the of the financials, the they're scheduled to be out within a week and by.
By the next Monday, the 20 Threerd of we will file.
Okay, and then as it relates to the CFO, we are always looking for a CFO. So that's something that we.
We will look to bring on two of the right kind of the sound.
Yeah. Thanks.
Thank you.
Our next question comes from is on the Cleveland Cliffs capital. Please go ahead.
<unk>.
Yeah, Hi.
A couple of quick questions.
First of all the.
Your casino business improving.
As far as the thermal side you.
Do you feel like most people in this industry at this point of pick the Onep or do you feel like there's still like the.
<unk>.
I can't speak for the other businesses, but I I worked for the our other competitors for US we certainly feel only of the first inning I think we've made it very clear that temperature scanning is really just a small part of what we do.
Every casino because they're dealing with so many points of venture debt. So many different customers that are coming in and out some of the back of the house employees that come through there are a lot of requirements that just being the one trick pony and getting the temperature of the direction you know can't solve right. So we've always said that the temperature protection for us is the tip of the spear.
And what are we going after we got our foot in the door, we are able to sell additional services to the it could be PB detection. It could be people counting it could these of being able to index any type of violent behavior, you probably read in Vegas, you. There's been some of the highest number of violent acts.
Right out of the Las Vegas strip, but there hasn't been a way to document that and be able to track. The people doubt a you know we have the solution for that so.
So we certainly feel that our initial partner in Las Vegas of you know, who we consider take the security at the in a of with the highest level used our solution and used that because we have the ability to expand our platform we believe.
That the other casinos are not just in the biggest put around the world a world, we'll take that lead.
And that's certainly a market that we see as a very attractive for most of the next few months.
Okay, I noticed that the majority of.
The sports.
But you are working with every day seems to be in or around a year of your area, which is obviously the the best place to start the do you guys feel that you're spreading out for the.
Right now at least of the talks about the need to budget.
Oh, yes, absolutely you know we are you know Vegas, obviously, because they're less than 10 minutes from our office of the Natural example, if you can't win your backyard. The how you expect of expand anywhere else, but we have relationships are really across the U.S. with with.
I'd say the majority of the sports games, we have very strong relationship with the leaks Ah, but you know the let's let's be realistic to a lot of the stadiums and team is aren't ready to fully roll out until there is better clarity on when they can bring the the audience back right being at 20% or 10.
10% capacity is not something that the where it's not going to be the spark of but we're very of certainly as we mentioned on the call very well position to do that as soon as things begin to loosen up.
Okay, Great and the one final question just in regards the going back to the CFO question is one of the reasons of holding you back right now because you guys don't have the authorized share is to really offer much of an incentive to get somebody up is that one of the issues and.
I think that's part of it that's certainly part of the I think you know as you know we have certain of qualities of the CFO of that we're looking for given our presence globally.
And the stage of where our company is in the terms of its growth trajectory and the strategic or the opportunities are the other aspect of the exactly what you mentioned you know in general we we the bases for the company are low and we are inside of we incentivize through you know through.
The equity comp.
And we don't have that available right now Oh I think some of the kind of is that we've talked to watch the wait till we get that approved before we take the next step.
Okay. That's all thank you.
Thank you Steve.
Thank you there are no further questions at this time, if the tower I like to turn the conference back to you for any additional of closing remarks.
Thank you. The we just one of these with the key take away that it is finally, a new day four of the Mark <unk>.
We have now of our focus to be kind of the only true publicly listed pure play the I found the [noise] the.
The man for a super strong and.
And the run rate wise, we will be profitable in China by the end of Q2.
Pipeline is really strong all of our long cycle sales work has paid off in 2021 will be the stronger [noise].
Thank you [noise].
This concludes today's call. Thank you for your participation you may now disconnect.
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