Q1 2021 Remark Holdings Inc Earnings Call
Welcome to the remark holdings first quarter 2021 financial results Conference call My name is Jenny.
And I'll be the operator today and will handle the Q&A as a reminder, this conference is being recorded now I'd like to turn the call over to Brian Harvey.
Thank you Jenny good afternoon, and welcome to remark holdings fiscal first quarter 2021 financial results Conference call on Brian Harvey Senior Vice President of capital markets and Investor Relations for remark on the call with me. This afternoon is Kai Shing, Tao remarks, Chairman and Chief Executive Officer.
And just the moment, Mr. Tom will provide an update on our business and I will recap our first quarter financial results. Following those remarks, we will open the call to 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 maybe forward looking statements the.
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 <unk>.
Mark Holdings current years, the remark holdings expressly disclaims any obligation 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.
Included in full in its filings with the SEC.
I will now turn the call over to remark Chairman and Chief Executive Officer. Mr. Chow. So he can provide additional color on remarks business and recent developments strength.
Good afternoon, and thank you for joining us.
The recently on an earnings call, where I went over Q4 activities and talked about what we're doing links of Q1.
For this call I will focus on the new deal initiated that has come to fruition after working on it over the last 18 months.
Our Q1 continue is what we have been saying all of the wall.
Number one our business is China.
Strong and only growing stronger as our reputation and market is getting more well known.
For two of our U S business will be a significant contributor to our 2021 revenue and beyond the number.
Three our balance sheet issues in the past will be fixed imminently as the shared care deal is almost complete and will give us ample liquidity to fulfill our current demand and our ever growing pipeline of new opportunities globally.
I have always emphasized the breadth and depth of our built some of the bottom of the remark AI platform.
As we move into Q2 and beyond this is becoming very evident.
In China, I will highlight three significant growth engines to our remark AI platform more.
More importantly, we are able to take our unique technology and transport it to the U S and Europe.
We are one of the handful of companies whose products are not just tested.
Our lives in the real time real life situations.
We are making strong transformation on moves into the ESG market.
By way of background by 'twenty 60, President XI Jinping has mandated a net zero carbon emissions and I've made sustainability mandatory.
We are working with one of the worlds largest cement companies with over 2000 production lines and the <unk>.
Plus the mines globally.
Providing them remark AI solutions to improve safety measures on the production lines, and making equipment maintenance more efficient, which not only improves the quality of cement products, but also help lower the carbon and dust emissions as well.
And we are well positioned to participate in the new initiatives on upgrading their power source to solar power on all mines and changing thousands of diesel cement transportation trucks to electric and autonomous trucks.
While the Tam is clearly large and the specific industry. We are focusing on approximately 30 to 50 cement factories to start.
We are also in the final stages and confident of winning our first significant smart traffic.
The contract in China.
Our partner is one of the largest operators in China, and the highway courts and subway segment.
The test was not easy as it consisted of 17 different scenarios, mostly for hazard detection.
Examples of the tests would be one to detect slow traffic and.
And by using our computer vision cameras. This creates significant savings using our technology versus using sensors.
Number two.
Using our computer vision for the detection of hazardous objects arm of this could be humans bicycles accidents, and even suitcases that fall on to the world.
And number three illegal parking on the emergency lanes.
Lastly, number for hazardous weather or road conditions like fog icy roads heavy rain and snowstorms.
And finally, we have begun working with one of the main resort operators of the of Winter Olympics in 2022 happening almost eight months away.
We not only provides us the hotel management AI products, but also provide AI solutions sort of COVID-19 pandemic prevention.
Long with energy saving initiatives.
As you can imagine the energy consumption and operating a massive resort is tremendous.
The resort has to transform water to snow on over 38 slopes in this case the resort spends roughly $1 million U S. A month just on <unk>.
Our remark AI smart power platform is expected to help them save 30% per month and over time up $2 50 per cent.
These case studies are good examples.
How we are building our use cases in China, and then transporting them to other parts of the world.
With cement construction activity is at an all time high and companies globally are looking for same solutions to help them with better efficiencies safety security and lower power consumption, while achieving the same or better results.
With president of Biogen's massive infrastructure Bill we are poised to be well positioned to take advantage of this.
Our smart traffic platform will be well received here with the government upgrading our highways through the use of technology.
Our AI platform is more effective and cost efficient than what we see currently out there in the market.
And three we are actively in discussions to taking our security and safety platform technology to the World Cup in Doha in 2022.
This is in addition to the obvious applications of our energy saving.
Technology for the hotel resort industry around the world are experienced with the upcoming Winter Olympics puts us in the prime position to do the same for the World Cup in 2022.
Moving domestically to the U S. In Q1, we began deploying our AI user optimization marketing platform, whose super dressed in partnership with Caesars Entertainment.
The daily Fantasy sports market, along with online sports betting has seen customer acquisition costs skyrocket.
As each of the land based casinos seeking on life partner to aggressively pursue customers leveraging their player databases, and thereby increasing the customer acquisition costs with generation two of generous incentives and cash promotions remark.
<unk> user optimization platform lowers the client's customer acquisition costs by intelligently targeting of prospective customer with the customized offer.
Leveraging remark AI is on proprietary data sources.
The customers existing user database.
We are excited to demonstrate our value add proposition going into the seasonally active start of the football season.
Our initial client success has allowed remark to expand our platform to the mortgage financing industry and the live streaming industry.
Both industries are looking for any of the innovative ways to significantly lower the user acquisition costs below the industry average choosing of remark to be that solution, which gives them the marketing edge over the competitors.
And on the health care side, we achieved tremendous success with our partnership with the Springfield Clinic of 2 billion dollar of year revenue healthcare organization based in Illinois with over 30 locations Springfield clinics elected to utilize remarks healthcare safety platform to provide temperature monitor.
<unk> for the safety of its patients and employees.
<unk> partnership with Springfield achieved the 10 extra return on investment, allowing screened seal to deploy its professional employees to perform higher value added services and tasks, while increasing customer satisfaction and service.
As a result of the success of this partnership Springfield is currently exploring with the remark on how to expand the partnerships to include other AI services, such as emotions and sentiment analysis.
The IP customer checking.
On premise security.
And access control.
We are excited to share these experiences with other health care clinics and expect this to be of strong source of growth in 2021.
On the infrastructure and transportation side, we are currently working with the high speed private the operating railroad company headquartered in Florida.
Which is currently building of high speed track that connects from Orlando to Palm Beach to Miami as well as building of that long overdue.
High speed track between Las Vegas, and Los Angeles.
On the hospitality side, we are partnering with one of the largest media companies in the world as the expand into hospitality when they opened their three locations in the U S. Over the next 12 months.
Currently it is estimated that over 10% of the hotels capital expenditure is spent on technology infrastructure and services, we are partnering with them to deploy our AI platform, our access control check in the.
Customer service as well as our proven line of health safety products as part of the hotels technology buildup.
And finally on the retail side as we recently announced our entry into the cannabis industry with the largest cannabis company in California.
We are working with other leading catalyst retailers to help enhance the customer experience through our smart retail platform.
We are able to enhance the operator's security protocols through our intrusion and perimeter of detection as well as identify blacklist, the customers as well as speed through the customer check in process.
In addition, our smart shelf inventory control provides alerts when items need to be restocked.
As you can see we have a lot on our plate over the next few years.
Our technology has been well received in China, and you see it through the Blue chip customers that we have been able to win.
More importantly, our technology is now being adopted globally in the U S and in Europe.
And finally, our prior issues with our balance sheet will soon be behind us.
Thank you Shang I'd now like to provide a brief overview of the financial results for our fiscal first quarter ended March 31 2021.
Revenue in the first quarter totaled $4 4 million more than 10 times. The 0.4 million recorded during the first quarter of 2020 the.
The increase was primarily the result of the easing of COVID-19 restrictions in China, and the new business lines in the U S ramping up.
U S revenue was <unk> 7 billion compared to zero point $1 billion in last year's first quarter with significant contributions coming from our new health safety business as thermal imaging products were delivered to the Springfield clinics more than 30 locations and we began executing on our daily fantasy sports partner.
The ship with Caesars and Super graft.
Revenue from China grew to $3 7 million from zero point of $3 million due to the due to the ramped up execution of projects with China mobile and the recognition of revenue from ongoing projects with school districts banks and smart communities.
Total operating expense for the quarter were $8 1 billion more than twice the $3 9 billion reported in the first quarter of 2020, driven by an increase of $2 7 billion and the cost of revenue associated with the increased sales.
0.9 billion increase in the technology and development costs, primarily attributable to improvements and upgrades to our biosafety product line.
Our operating loss increased slightly to $3 7 million in the first quarter of 2021 from an operating loss of $3 5 million in the first quarter of 2020 due to the aforementioned increases in our cost and revenue and technology and development expenses.
Our net loss totaled $5 5 million or <unk> <unk> per diluted share.
In the fiscal first quarter ended March 31, 2021, compared to a net loss of $2 4 million or five cents per diluted share in the fiscal first quarter ended March 31 2020.
Our net loss was negatively impacted by a $1 6 million noncash charge, but the change in fair value of our warrant liability that resulted from the increase in our common stock price between December 31, 2020, and March 31 2021.
At March 31, 2021 on cash and cash equivalents balance was 0.9 billion essentially unchanged with the balance at December 31, 2020 cash.
Cash operating losses of $5 5 million were offset by a short term debt issuance of $4 8 million and 0.8 million of stock issuances associated with option exercises.
We will now open up the conference call at the questions.
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.
Jenny could you please instruct the callers how to queue up with their questions.
Thank you if you'd like to ask the question. Please signal by pressing star one on your telephone keypad and if youre using the speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question on pause for just a moment to allow everyone an opportunity to signal for questions.
And we will go first to Darren <unk> of <unk>.
<unk> capital partners.
Hey, guys. Good afternoon, Thanks for taking my question.
Three if I may of first how big was the Super drafts in terms of revenue contribution of the quarter.
Think Shang last call you talked about quantifying the impact is like $15 million to $20 million of revenue. This year is that still the case.
Hey, Darrin.
I'd say for Q1 will be a few hundred thousand.
The Q2, two I'd say right now as I just mentioned on the call. We expect to see the ramp up during football season, So our projections still stand where it is today.
Q2, you'll see the.
The $200000 of revenue.
We expect that to jumped to seven figures.
Got it.
And then on your ESG partner in China is that going to be skewed towards the third and fourth quarter or what do you see revenue of the second quarter.
We're not sure exactly I think.
We are targeting obviously Q2, but depending on how our accountants allow us to recognize the revenue.
But we're in.
In the process of implementing we're obviously trying to move as fast as possible. So I'd say, the Q2 Q3 kind of thing.
Great and then just last for me.
If and when share care closes, which I think is still expected to be this month.
The update of the in terms of kind of monetization that you're going to take a loan against your position in the update there would be great. Thank you.
There is no update there, but certainly.
We expect the.
Share care deal to close imminently I think there are a number of groups out of approached us to offer attractive terms.
And right now we're just trying to figure out what's what's the next best step. So I think we're in a pretty good position, where we are right now.
And.
I think share care has a lot of good things to share.
On the tender on their own front.
So I think youll begin to see that as well as we get closer to the close.
Great. Thank you.
And we'll go next to Ron Nash of Nash partners.
Yes, good afternoon.
You mentioned that youre going to be coming more to the United States with some of the small technology the new.
Tell me how the plays in the ESG technology and then the energy of the right now in the industry is in the United States.
Sure just like.
So we mentioned before is.
As you know.
We're going off of two areas.
Primarily one is certainly the likes of for example, the deals that we win in China say for example, with these large ski resorts debt will be hosting the winter Olympics were helping them save massive electricity costs.
And the many as you can imagine.
Many of the hotels in the U S and Europe and really around the world as as the patent pandemic is ending and people begin to travel are looking for ways to operate more efficiently.
So outside of the.
Hello security platform that we'd look to sell to the hotels.
We also look to sell them a power management.
Platform, where we think that given our past experience that they are able to sit.
Significantly lower their costs, almost probably starting off at 30% and over time of growth of 50%.
As it relates to the.
The cement industry.
All know about the.
President of <unk> infrastructure plan that he has proposed but it is very clear around the world that that'll be a great way for the out.
On the top of a lot of People's minds in China, we've been working with the largest.
Cement producer not just in China, but actually in the world.
They have over 1200 mines, just in China alone and a big part of becoming a.
Kind of the net zero carbon emissions company they.
They need to significantly lower the outflow, while being able to maintain the efficiency.
How that affects the end product that's built.
It is really important how the raw materials are transported to the factories is important.
And we're part of that process, we will be.
Managing the solar panels that are installed on top of the factories and mines to help them lower the cost of electricity.
In with this particular companies they will be there of about 200000 diesel trucks that theyre looking to change into electric.
And autonomous vehicle and.
And we will be helping with that transformation as well so.
I think it's a massive opportunity obviously with just this customer alone.
These are the same needs that youre seeing in the U S in the middle East and in Europe.
So we're pretty excited about the ability to transport this technology to other parts of the world.
Mhm soon as it is this would you say this is gonna be relatively new business to you or on top of your existing business.
This is all additional business we have in.
You know certainly the the the revenue guidance. The overall revenue guidance that we have given we haven't.
We haven't included this in any of the numbers.
Great.
Thank you very much.
And we'll go next to Robert Rob Mountain of Mountain Capital Management.
Hi, Shang and thrive here how are you.
Hi, Rob.
Good.
Thank you for the update just a couple of questions, particularly on the stack when you mentioned that you.
You felt that the process going forward on this we're going to close by the end of May you think.
Well I'm not sure about that I think it'll be more around the mid July Jeff I'm not July June.
The Jeff Arnold the seal recently went on I forgot which for him, but he expected to happen around.
Early June.
And so I think those happened some time between early June to mid June.
And.
I think they just filed Falcon acquisition, just filed with the SEC of few days ago. So once that's the once that gets approved by the FCC then it'll be sent out to the shareholders.
To get the approval.
I think right now at this point, where we're certainly pretty comfortable where everything is the pipe was very well over subscribed.
Subscribed.
So certainly.
As a number of far greater than what the number was needed to close the deal.
And most importantly beyond all of that is the share of care business is doing fantastic.
It's growing ahead of expectations.
I think investors that participate in the deal will be very happy to see what comes out of it.
I like to hear that that's the.
Great News.
The same with our shares remark chairs are there any restrictions on those shares that we have.
Yes.
Once the deal is done where the.
Yes, we are being debt where an insider.
There's a six months of lockup I believe.
And then since I'm on the board it may extend a little bit further.
We're still working through that there are some clauses in there that if the stock trades ahead of the $12 that are leases.
Certain amount of shares that were able to sell into the market.
Okay.
And.
The last thing.
I've gotten a lot of notices and vote on a lot of times I think you have of meeting coming up at the end of May.
For additional shares in the marketplace, which you've done a couple of times.
Unsuccessfully.
If we find it on the end of May that it is not past what are you going to do.
I think there are a number of things you know are in terms of our options.
I think our shareholder base is more and more educated the frankly now are more long term focused on what we're doing in and believe in what.
The path that we're going so.
It could be a number of things it could be us extending of the day, one more time it could be us using the proceeds from.
For example, if we were to have the loan facility generated against the gender against our share of care stake we.
As previously announced we would use that to buy use of significant portion of the to buyback our shares.
So I think theres, a theres a number of different of.
Options for us.
Okay, well I will stay tuned for that and I do appreciate it and thank you for taking my call.
Thank you Rob.
And we'll go next to take up of Waller of lasers natural.
Hi, guys.
Firstly, just on let's say congratulations on your success, so far and hoping for continued success.
At the beginning of the year on in January you had made a note in your pre announced earnings that you felt the current share value was less than what the.
You felt it was worth I know I understand that there are certain obligations for certain warrants can you kind of have you kind of in the pick all of until you get those shares but.
What do you plan to do to increase shareholder value in the short term following today for example.
Our I think it's you know it's a.
Great point.
I think a really everything obviously it comes down to us continuing to.
The print print our revenue numbers.
Show that we continue to win new contracts and show recurring revenue I think with the most.
The recent I'm on.
I'm not sure. If you saw the a are there is a another AI company I'll scale AI debt raised money out of $7 billion valuation.
And they have a revenue the revenue is similar to ours.
And so clearly there they were valued as much.
Greater valuation, we certainly feel very strong on where our business is heading and all of that so there are a lot of things that we are trying to consider how we kind of close that gap.
I think a big part of it.
Is that as <unk>.
As the share of care stake gets monetized as we mentioned before we will look to buyback a significant portion of our shares.
Two there are a number of groups I think in the U S debt the debt.
Debt you see in the papers that are doing their due diligence on due diligence on us to help us increase the partnership and the speed that we could move here in the U S. I mean, we are still a company that the.
We're very we standby our technology, we're winning a lot of these deals but the actual implementation is slower and if we are to team up with a large channel partner it'll just make US go even faster. So I think those are the two areas.
Where we're going to continue to focus on.
Winning large deals in China.
Continue to do that and.
I think of lot of our investors in the U S aren't as familiar as to kind of the size of these customers that we have in China, but they won't time.
As we begin to see the revenue flow through as they begin to add on more services to the ones that the initially purchased to kind of the new verticals that we've gone into I think we are close to signing one of our biggest deals in.
In the banking industry are doing what we talked about which was the digital marketing platform.
And we're close to signing one of our largest deals and that was very similar situation, where we first came in and sold our kiosks with our initial kind of AI capabilities. They liked what they saw.
We are close to winning a high single digit seven figure number and that's pretty much all that's all profit.
So youll continue to see that and I think as investors as we begin to graduate from kind of retail investors institutional investors.
Youll begin to see that share value increase significantly.
You are you able to speak in terms of when you guys anticipate.
Knowing of profit or is that too far down the line to anticipate.
No I don't think so I mean, our target is to show of profitability. This year on so you know if you're looking at our competitors, whether they're public or private they're growing a lot, but taking a lot of significant losses to grow that revenue.
Growing very fast right now but.
We've been public for a long time, so we have to make money on what we do so.
We've always said the once we achieve over $25 million of revenue.
That's when we begin the we can begin to show profits and you know and.
So I'm pretty confident by this.
Of this end of this year or early next year, we can begin to show that.
Alright, Thank you very much.
And with no other questions in the queue I'll now turn the call back to our presenters.
Okay. Thank you everyone.
For participating remark holdings first quarter 2021 financial results call a replay will be available in approximately four hours through the same link issued in our May press release, Thank you and have a good afternoon.
And this concludes today's call. Thank you for your participation you may now disconnect.
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