Q4 2020 Remark Holdings Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the remark Holdings third quarter 2020 financial results Conference call. My name is Keith I will be the operator today and will handle the Q&A. As a reminder, this conference is being recorded I would now like to turn the call over to.
Please go ahead.
Thank you Keith good afternoon, and welcome to remark holdings fiscal year, 2020 financial results Conference call I'm, Brian Harvey Senior Vice President and a capital markets and Investor Relations for remark.
On the call with me. This afternoon is Kai Shing Tao remarks Chuck.
Chairman and Chief Executive Officer.
And just a moment and Mr. Tao will provide an update on our businesses and I will recap our fiscal year financial results. Following those remarks, we will open the call for questions.
But before I turn the call over to Mr. Tao I would like to take this opportunity to remind you that some of the statements made today.
And maybe forward looking statements. These statements involve risks uncertainties and other factors that could cause results to differ materially from those expressed or implied by these forward looking statements.
Any forward looking statements reflect remark holdings current view and remark holdings expressly disclaims any.
And to update or revise any forward looking statements after the date hereof.
This disclaimer is only a summary of remark holdings statutory forward looking statements disclaimer, which is included in full and its filings with the SEC.
I will now turn the call over to remarks, chairman and chief.
And the Executive officer, Mr trial, So we can provide additional color on remarks businesses and.
And recent development Ching.
Thank you for joining us on our call today, we hope everyone is safe and are encouraged to see the progress that we're making and get into the global economy and backhaul and St.
With the vaccine.
We're excited with what lies ahead as things begin to open up.
For remark holdings 2020, it was a transformational year.
Artificial intelligence.
AI has been widely acknowledged as transformational technology and to invest in turning the current decade and beyond especially.
And with the COVID-19 era.
AI is the only and best way to achieve the dual goal of growing revenue while lowering costs.
Fortunately over the past seven years from our holdings has built a proprietary end to end AI platform solution.
Allows us to capitalize on this incident.
The global need for AI.
Our award winning computer vision and object recognition algorithms.
Recognized by the National Institute.
Two for standard otherwise known as NIST.
And the European Conference on computer vision for DCP.
Violent the Swift crossing a propriety.
And Dirty datasets, which is rapidly analyzed and he has deep learning and machine learning.
And tech repeatable and unrecognized book patterns and he is perfectly positioned to meet the needs of businesses worldwide.
Unlike most of our U S domestic competitors are enjoying the benefits.
Benefit of having built our AI platform and from the ground up.
Owning our IP and having applied our solutions and real time conditions and life environments versus laboratory and case studies, but initially winning the businesses are blue chip companies like China mobile and bank of China.
This robust platform has allowed us to enter companies with health safety and unlike many of our competitors that are only able to sell one product solution. We are then able to offer robust that on AI surfaces like safety and security marketing.
Data and intelligence power management.
Ben and others.
This is what separates us from the waterfront of charlatans.
We are a scalable and extensible solution.
And the entire businesses.
Workflows.
[noise] remark AI has created a technology moat a.
Our data moat and a platform for custom.
<unk> are looking for a complete solution with.
We set out to build a complete end to end solution and various industries.
And most transformational industry is like the cloud industry before us has taken a longer timeframe to execute and implement.
We are confident that the time it has taken to get here.
And pay off handsomely.
Handsomely as customers have vendor thinkgeek and do not want to deal with 16 different vendors.
China was the first market that we launched and as AI technology adoption was a here's and ahead of other countries.
With this experience we have continued to refine our AI platform to scale globally.
COVID-19 provided the spark to substantially grow our remark GAAP platform into the U S and beyond with the practical and real life knowledge gained from our commercial deployments.
And remark, we believe that great things happen when preparation meets opportunity.
We have built a platform.
Thats, one and preparing ourselves and the past seven years for this opportunity and standing in front of us.
Now is our time.
The second half of 2020, we saw our main growth engine and China reopened its markets as travel between provinces reopen and allowed us to continue our deployment.
Over Marc AI platform to customers, such as China Mobile bank of China, and the Hanzo School systems.
China mobile is on track to complete the deployment of 17800 stores as part of phase one while taking account the delays from the first half 2020 COVID-19 Lockdown.
And.
Previously announced we have become winning deployment and projects for phase two and three which will continue to increase the total spend per store.
We are well positioned here as we will continue to win further phases as our businesses now moves which what wasn't initially are roughly 50 50 split.
Between hardware and software to predominantly software as China mobile continues to incorporate our AI platform into their retail store network.
A strong testament to our credibility with China mobile.
And where our initial contract was done in partnership with another local technology company.
We now deal with China mobile directly and that will be the case and the future.
For 2020 with the successful implementation of our AD platform with China Mobile, we were able to take advantage of the dramatic increase and opportunities into the banking sector.
Bank of China chose us to initially.
Really transform 150 bank of China branches into smart branches and to use our digital management platform first and the Sichuan Province.
These branches serviced one 8 million banking customers and we expect to grow this product through.
The rest of the bank.
And with China's retail branch network.
We also expect to significantly grow our business with other banks, such as China construction Bank and the agricultural bank of China.
And 2020 and completed a roughly 1000 and branch installations and we.
We expect to double that number this year and.
Upscale bank of China alone has more than 20000 branches.
Clearly the total addressable market and this industry is massive and we are only and the beginning of rapid deployment.
And the fourth quarter, we've continued to grow our business with school systems. After lunch you with attendance management and.
Health Security applications. Initially we've expanded our school offering to six applications, including intelligent power management behavior detection, such as running and the hallways access control and others.
We are and the process to expand our sales channel and <unk>.
And to add 10, new local district.
It is in China during the year.
There's 150 schools up and running with our software, we're looking to expand to over 600 schools and 2021.
We are also continuing to grow our smart community business.
Adding onto our initial success with working with China Mobile's retail store network.
We've expanded our business with them and targeting smart communities.
Working with China, mobile, we have become and installations.
Of our smart community offerings, the learning phase I and applications, which include access control for vehicles residents and delivery personnel.
We expect to begin a phase II.
Later, this year with additional applications, including elderly and child safety elevator access control.
Did area access control behavioral analysis, and messaging and be a communication screens.
We have currently completed 400 communities and are looking to double that number in 2020 one.
And you can see our core business, China is growing and will continue to only grow faster as we continue to deploy our platform across various industries.
Going into 2021.
We will soon announce the launch of a remark AI ESG platform.
Our customer will be.
One of China's largest cement operators for AI platform and be used to help their factories operating more efficiently.
Operating less coal and gas.
And as part of China's net zero emission plan and I'll remark AI platform and is well positioned to help factories reduce pollution.
Within the decade, China.
I know, we will have over 800 gigawatts of installed solar and wind generating capacity, which will help lower the China's reliance on coal.
Currently at 57 per cent of China's energy mix comparable with the World average of 25 per cent, we are well positioned to go after this market and grow with it.
As China's automated market will be mostly electric our ESG platform will be used by this industry to initially help managing charging stations more specifically and the bus and large truck market.
They're beginning their transition from gas and diesel to electric and hydrogen our platform will.
And would be used to help efficiently manage the charging process, along with 10 hour charge and cycle time and managing the safety per each station.
In 2020 one.
We also laid the groundwork for the U S.
Initially when COVID-19 hit companies were more focused on their immediate needs and.
And emphasized pricing over and functionality.
Now almost a year later when Covid first shutdown in the U S. Many businesses have come to the realization that the decision was shortsighted.
We now have the secondary opportunity to expand our business far beyond the initial scope of masks and temperature.
Detection.
Our customers, which represented the best in class and their own respective industries had the vision to use our platform initially for accurate and fast math temperature scanning.
Now, they're looking to add additional solutions that our platform offers by crowd detection.
And the IP customer identification blacklisted customer expands by security.
And by prior or premise misbehavior.
And access control also take authentication through biometric identification.
Going into 2020 one here.
Some examples of our diverse pipeline that we're currently working on.
High speed railway from Miami to Orlando and plans to build from the Las Vegas to L. A.
Our safety technology that we have built and implemented and parts of China and needed to handle security need that encompass.
And as passenger seat.
And let's see.
Railroad tracks.
And train station and safety.
True our construction AI will be used with one of the world's largest privately held construction engineering companies.
Tree remark AI.
Safety and marketing platform.
Well be working in partnership with one of the world's largest airport operators.
With premises and the U S Europe and Asia. We are confident that this will be a great launch pad for us into Europe and India.
For Mark and I will also be launching its platform and to the cabinet.
Our history.
And the fastest growing categories brands and the U S book over 40, plus retail locations, which allows us our first breakthrough into this fast growing space, especially as stores are highly regulated and are looking to operate more efficiently.
Initial opportunity to.
And Pete to help their retail operations will be managed and expand into crop growing using our remark AI agricultural platform.
We're also partnering with one of the largest brands and music and their hotel business, but the launch of three hotels and the U S and our pipeline.
Our school hotels and 2022.
As you know we've also been accepted at the silver technology partner for Hewlett Packard, which certifies, our performance and compatibility and it leads to a joint marketing offering for our cameras and software solutions to run on their software.
Share count and turnover will be partnering with share care and internal book and.
And their health security rollout across 50000 hotels around the world.
We are excited and have strong conviction exponential growth of our business and 2021 and 2022.
As a robust pipeline gives us strong visibility into capturing our fair share of the Tam.
One area, where we've had unexpected large wind most recently is using our AI and marketing intelligence platform.
Some of you may recall that we launched the lending business back in 2017.
Wow.
While our initial efforts and helping generate specialties for banks was very successful. It was unfortunately shut down by the government.
We have always had strong conviction of the power and effect and the best of our AI models, working with customer data and tightening the funnel.
Our remarks.
Marketing intelligence platform and want us to transformation and I'll deal with Superdrug and Caesars Entertainment.
And has created a new growth engine for remark AI.
Adding to this way and we expect to shortly announce our first deal working with mortgage companies and fine tuned and their marketing operations using our.
Platform.
With Covid every business is looking for ways to grow their business, while lowering costs we are confident.
And your way to achieve these goals.
And finally share care share care and balances going public peers back the soft and capital back in early March.
Sponsors.
And were led by the same sponsored and led the successful listing wound dressings.
The pipe was well over subscribed by.
Most blue chip investors and the health fixed including anthem.
And they expect to close will be M&A.
With the proceeds and we're looking to fund.
Our strong.
<unk> organic growth buyback stock and look to acquire companies that can help feed our path to market.
With Covid and hopefully behind US who will benefit from the reopening of the world economy, and all parts of the world.
In conclusion, 2020 hasn't been a transformative year for remark going.
And into 'twenty, 'twenty, one and our core China business, and strong and will only get stronger and.
Our ESG initiatives will launch soon to be another significant growth driver for us.
Our business and the U S and expect it to grow significantly this year and the multitude of ways.
And finally.
And we now have the balance sheet to support local.
Thank you Jim.
And not to provide a brief overview of the financial results for fiscal year ended December 31 2020.
Revenue from fiscal 2020 was $10 1 million.
Double the 5 million record.
Quoted during 2019.
Increase was primarily the result of revenue from our new health and safety business, which totaled $1 7 million.
And imaging products, and we're deliberately casinos restaurants hotels and law enforcement agencies medical centers office buildings and other industries.
And the United States.
Revenue from China more than doubled in 2020 to $7 9 million due to ramped up execution of a larger project such as China mobile and the recognition of revenue from ongoing projects with school districts Index.
The increases in revenue from project XL.
<unk> and China, and a new health safety business were offset by decrease in revenue of <unk> 6 billion in a remark entertainment business due to contracts that ended in 2019 that were not renewed and a decrease and ecommerce revenue zero point $3 million due to our decisions and liquidate certain inventory at lower.
Our cost and.
As Jim noted, we are particularly excited about remark entertainments prospects in 2021, as our AI driven and targeted marketing solution was recently named the exclusive marketing partner for Superfast innovative online daily Fantasy sports platform, which is co owned by Caesars remark Entertainment.
Attainment will be responsible for developing and brand identity, and managing and leading the digital and offline marketing efforts on Super drafts behalf.
And we are working on additional opportunities and the AI driven target marketing industries, such as mortgage originations as.
And we put more and more big day.
Whether it's from retail stores bank branches or daily Fantasy sports are learning models become more and more valuable.
Overall, our gross margins improved to 37% from 30% from better utilization and more AI software projects total operating expense for fiscal 'twenty.
2020 was $18 million.
A decrease from the $24 3 million reported in fiscal 2019, driven by a $4 $8 million decline and G&A costs attributable to lower bad debt expense lower lease costs and head count reduction.
Sales and marketing expense increased by 400.
<unk> thousand primarily as a result of a $1 5 million payment to a third party computer hardware manufacturer for joint marketing of the AI projects.
Technology and development expenses increased by 600000, mostly due to a 500000 increase and share based compensation due to the increase.
And our common stock price over 2020.
Our operating loss declined $14 $2 million and 2020 from 22 $8 million and 2019 commensurate with the declines and G&A.
Our loss from continuing operations totaled $13 7 million or <unk> 16 per diluted share.
And the fiscal year ended December 31, 2020, compared to a net loss from continuing operations of $23 million or <unk> 52 per diluted share in the fiscal year ended December 31 2019.
At December 31, 2020, our cash and cash equivalents balance was zero point 90.
Okay.
Turning to our cash position, a zero point $3 million at December 31, and 2019.
The cash increase primarily due to $32 1 million and proceeds from common stock issuances, whose proceeds were offset by operating losses, the payments of certain liabilities and.
Nine net repayment of $12 4 million of GAAP.
We would now like to open up the conference call to questions. We encourage callers with questions to queue up with the operator as soon as possible. So that there will be minimal lag time between each caller.
Keith Please instruct the callers on how to queue up with their questions.
Ladies.
And then narrow and then if you'd like to ask a question and placing them by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to lay your signal and reach our equipment.
Star one for questions, we'll pause a moment to assemble our phone queue.
We'll take our first question.
Ladies and gentlemen, Darren <unk> with Roth Capital Partners. Please go ahead.
Hi, good afternoon, and thanks for taking my questions. A couple if I may 1st on share care. How are you guys planning on monetizing and you're going to love the position up in terms of selling the stake of that or just any kind.
<unk> be helpful.
I'm sorry could you repeat the question that you came in kind of garbled.
Yes, just kind of curious about how you're going to monetize this share growth, whether that's through debt or selling it outright.
Yes.
Four four.
Looking at.
At both both.
Both both options, but our first choices there as you can imagine.
The weighted.
And with this back a destocking probably right around may there are a lot more financing financing options from different funds to potentially take some debt against that share cares business is growing.
<unk> are very strong right now.
In 2020, it's growing very strongly and 21.
So it's definitely up to our interests to.
Keep as much of a position as possible. So we're definitely exploring options on that.
And then on Super graph can you just give a.
A sense for how much of that business, one I guess, if the scope of how big that dealers would be relative to some other business you've won in the past and then how much of that is.
Uh huh.
And I agency versus just traditional AI for book Supergrass and Dan.
Hum.
Look I think I think the opportunity force with Super Draft is a is a $15 million to $20 million opportunity for us.
Out of that I would say, 70% of that number will be AI related and then the other the remainder will be more kind of traditional agency related.
It's more of a married and last quarter you spoke about your China business, if I recall correctly, either being breakeven or profitable by the second quarter is that kind of silver case.
You know we work with that.
It is it is true.
The case, a big decision and as we've always said is just how fast do we want to grow our core business is growing strong.
I think we will be able to do which was opened up new financing options for us there are a lot of new opportunities.
We've been able to apply our technology platform too.
And now we'll just deal and what's the what's the next passed up from this announcement with our ESG product that will be coming out very soon is a massive opportunity for us that we've been working on for the last year year and a half it's almost ready to go launch and and I think we've all seen what's happened.
And that industry, so we want to be able to be well positioned to capitalize on that.
Great and then just last one for me and <unk>.
Look into 2020, one how much of the.
Your revenue composition is going to come from.
Either existing customers or expansion of existing book.
And new business.
And.
We're expecting you know it was all.
All the businesses that we have a I think in terms of the growth and our business coming up 50% will probably come from existing.
Customers are looking to add onto their services and then the remain.
And that will be the new customers that we have and.
And in the kind of in the same industry or new industries that we are able to expand to.
We've always said that our platform and industry ignite and industry agnostic. So I I think we have a great opportunity to to capture that.
That and one establish a foothold and new industries and continue to grab market share and the ones that we've already broken into.
Great. Thank you.
Thank you.
We'll take our next question from Liam Solomon with Summit River investments. Please go ahead.
Yeah, Hi, guys congratulation on the day quarter.
No.
Thank you.
One main question.
How much if any of your revenue and the fourth quarter.
It was record.
Deferred revenue.
From 2019, I believe and they have been recognized.
And it.
Yes.
I think the deferred revenue, we don't have the in terms of deferred revenue and regarding as and a China mobile or is that is that what you're asking.
Yes, you have deferred revenue on your balance sheet.
At the end of 2019.
Thank <unk>.
From recognized last year.
And.
Earlier in the year.
And there is no.
So the statement with the 8-K and.
So I can't really tell if there is anything.
And I think it is.
I think it's roughly half a million, we'll double check and get back to you, but we don't think it's and philosophy.
It's probably right around that number.
Okay.
And.
Cash.
And looking at the financial statements and you know I see.
For example, a $177000 of your accounts receivable.
We're actually held and the U S. My remark.
About three 5% low.
Arrest.
And how high your V I E.
And that.
And so essentially the case with.
And the majority of your assets.
But not the liability flows and remark.
So.
I guess.
That's what I'm getting at is why.
Are you planning on an and.
Disclosing the contracts that make up the V I E agreements and your 10-K.
And to kind of calm investment and.
Yes.
Or.
Continue to.
Yeah.
Leave us guessing I suppose true.
Just me approach.
Is the question.
And so there are just a plan for us to disclose our V I E contracts.
Yeah, well as.
As is common practice with other companies and the U S who use this V I E structure.
Are you planning on disclosing the VA and contracts.
And you're thinking.
We have no plans on doing that right now, but we'll certainly take a look at all the other companies that do disclose their value structure and then we.
Accordingly.
Yeah.
Yeah.
Just to be I think it would it would give investors a lot of.
I'm sorry.
A lot more confidence and.
The balance sheet and a little of the income statement too.
Considering.
And it was a large proportions.
And your assets and.
The revenues there.
And to the V E and weed.
Seven.
Yeah, he's structured about it.
Understood. Thank you. Thank you Brian.
Ladies and gentlemen, as a reminder, star one for questions or comments. Please.
Star one for a pause a moment to assemble the phone queue.
We will take our next question, Steve Allen with FSA investments. Please go ahead, yes.
<unk> two questions on Super graft, and Carrie did you say $15 million to $20 million would that be.
And 2021.
Yes, it would be.
Okay, and then on the Shirker ownership on a fully diluted basis when they close.
And what will remark on.
On the Florida will.
If you want that number but it'll be we'll be roughly around 4%.
Okay, so 4% and wood.
Roughly be $160 million worth of stock.
Yes, we're working through all the right before we're working through.
Get back to the calculations, but we'll come out with a number as it gets closer to the close okay. Thank you.
Thanks.
Thank you Jay.
And ladies and gentlemen, and this will conclude today's question and answer session. At this time I will turn the conference back to your presenters for any additional or closing remarks.
Thank.
<unk> everybody for participating in our fiscal year, 2020 financial results conference call, a replay will be available and approximately four hours through the same link issued and on March 20, <unk> press release, Thank you and have a good afternoon.
Ladies and gentlemen, and this does conclude today's conference. We appreciate your participation.
Thank you and you may now disconnect.
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