Q3 2021 Remark Holdings Inc Earnings Call
Ladies and gentlemen, and welcome to the remark Holdings, Inc. Third quarter 2021 financial results Conference call. My name is Noah said I'll be the operator today and it will handle the Q&A as a reminder, this conference is being recorded now I would like to turn the call over to Brian Harvey Director of capital markets and Investor Relations.
Please go ahead.
Thank you Laura good afternoon, everybody and welcome to remark Holdings' fiscal third quarter 2021 financial results 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 Kai Shing, Tao remarks, Chairman and Chief Executive Officer and Justin.
Mr. Tom will provide an update on our businesses and I will recap our third quarter financial results.
Following those remarks, we will open the call to questions.
Before I turn the call over to Mr. Tom 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 to differ materially from those expressed or implied by these forward looking statements.
Any forward looking statements reflect remark holdings' current views and 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, which is included in full in its fine.
Fillings with the SEC.
I will now turn the call over to remarks, Chairman and Chief Executive Officer. Mr. Tao. So he can provide additional color on remarks business and recent developments Shang.
Good afternoon, and thank you for joining the remark holdings third quarter 'twenty, One financial results conference call.
In 2009, we made an initial investment of $1 million into share care.
Which was an early pioneer in capturing the digital health care market.
In the third quarter of 2021 12 years. Later, we are pleased to recognize a gain of 78 million, which reflects an annualized return of nearly 50%.
To put things in perspective, we only began attacking the AI markets in 2018 and have seen our revenues grow from $5 million in 2000 $19 million to $10 million in 2020, and now in 2021 and expect to finish the year above $15 million.
We are attracting large total addressable markets that we'll be shaping the future for the next decade.
The seats that we have planted and building a remark AI platform over the last four years have created a path to our future prosperity and monetization.
Last week, we attended the American Public Transportation Association.
No one has a P T a thereby annual conference focused on public transit, where we had lunch with representative Peter Defazio, the chairman of the transportation and infrastructure Committee in the house of Representatives, who led the passing of a once in a lifetime one two trillion dollar infrastructure.
Bill, which president Biden is in the process of signing as we speak.
The infrastructure in the United States has not been modernized and over 40 years and this is the first real effort in doing so.
This bill was approved in a rare moment of bipartisan.
[noise] bipartisan accord and will help address a very long list of public work projects.
Simply put the opportunities and funding allocated in the infrastructure Bill here are massive and we could have not written a better bill to reflect our core competencies and products to pursue and capture the specific growth markets allocated by the bill.
The AI platform that we've built and operated successfully in Asia has put us in a leading position to capture market share and providing those solutions for public transit and many of the highway and road projects already allocated for public spending and the infrastructure Bill.
For example out of the 1.25 trillion.
110 billion has been allocated to roads and bridges 73 billion allocated to power grid infrastructure 66 billion for passenger and freight rail.
<unk> 9 billion for public transit.
And 11 billion for passenger and traveler safety to prevent road accidents and fatalities.
Just local to the New York City Tri State region.
The Metropolitan Transportation Authority, which operates the New York Subways and buses and two commuter rail networks expects to receive 10 billion.
Amtrak is set to receive 27 billion. So as you can see the numbers here are massive.
Our products and our relationships tap each of the specific areas targeted by the infrastructure Bill, giving us multiple buckets for us to get funding from them.
This morning's press release detailing our working partnership with bright line continues to show the power and the credibility of our AI real safety platform. We have received tremendous interest from similar transit Ceos and transportation agencies and have already begun discussions with them.
Regarding their specific needs.
Bright line, which is the only provider of modern eco friendly high speed Intercity rail in the United States will use remark AI smart safety platform to initially monitor with a 67 mile traffic corridor.
The challenge of protecting 188 traffic corridors.
Intrusion detection as a necessary part of our first class safety program. It requires more than the human eye alone to function at a level that will significantly reduce risk.
Remarks sophisticated AI powered cameras and smart safety platform provides detailed computer vision coverage to detect intrusions and tracking nominees, providing real time actionable predictive analysis from data collected while monitoring long stretches of track and rail yard areas for unusual.
Behavior.
We have already identified talented leaders with the relevant experiences to help grow and build a real safety and infrastructure team with us and expect more announcements to come as we rollout our products and onboard new customers.
Each successful reference opportunity leads to a natural pipeline of interested customers as word spreads quickly among this tight collegial industry.
In short our ability to bring our proven AI platform to the U S from Asia has given us the leading opportunity to capture this business.
<unk> technology helps augment.
Effectiveness.
Of the infrastructure Bill.
On our last earnings call, we announced our intention into entering the N F T meta versus space by leveraging a remark entertainment platform to create proprietary content from leading influencers entertainers and artists and building it.
Non fungible token business known as N F T in the U S and Asia with a targeted fourth quarter launch anchored by a very well known global celebrity with substantial valuable intellectual property and assets.
Again for those unfilled I'm familiar with what an N F. T is a non fungible token is a unit of data stored on a digital ledger called the blockchain that certifies, a digital asset to be unique and therefore not interchangeable.
N F Ts can be used to represent items such as photos videos audio and other types of digital files. We are on track for a fourth quarter launch in conjunction with Miami and F T week and art Basel.
While many of you were confused by the prospects of the N F T meta versus opportunity we have seen many announcements recently that have only validated our commitment to this new area of growth.
But just renamed itself meta to reflect the new focus of the company and its embracement of what three pointed out.
Nike Levi Tong Gucci in all major global brands have now entered into this market in an aggressive manner.
And that remark, we are very well positioned to do so as our AI platform allows us to enter this market in a fast and efficient manner.
Inspired by the division of global leading companies like Epic games, who creative Fortnite, Facebook roadblocks, and Nvidia, we will pivot and leverage our bikini dotcom brand equity and IP asset to create a beach lifestyle meta versus where we can integrate the digital and physical worlds together.
With the launch of Bikini versus our trademark pending bikini dotcom meta versus we are creating a full fledged economy and offering unprecedented interoperable interoperability.
Users have the ability to take their avatars in goods for one place in the metal versus to another no matter who runs it and.
And with the Keeney Dot Com, we will capitalize on our named being recognized around the world as it means the same in every language.
Our core strengths and artificial intelligence gave us the market intelligence to make early investments to develop and support the N F. T of meta versus version and we believe we are well positioned to prosper in this fast growing industry.
The recent pandemic has changed both lifestyle and work habits advancing technology trends that would've taken decades to adopt instead of taking place in years.
Human beings continue to crave, social interaction, while keeping a form of unique identity.
The virtual world has mirrored the physical world with owners desire to own unique branded status symbols to show off the same way customers of Chanel and or Mezz proudly wear their brands to reflect social status.
Finally, we expect to announce a powerful partnership in the near future using our N S T platform and the entertainment and Arts World.
But while all of these opportunities are exciting and present massive opportunities. There's only happened because we were able to properly build an AI platform from the ground up remark AI platform strike. It is its ability to be multi dimensional while others are not.
As I mentioned last quarter, our consistent and continued leadership in AI innovation and.
In practical execution has given us a strong advantage to beating our much larger and capitalized competitors in this space to this point during the third quarter. We introduced an exciting New school campus management platform and were named by the U S National Institute of standards as a top five company in the area of.
They show recognition vendor tests ahead of many multibillion dollar unicorns.
2021 is turning out to be a transformative year for us we've already nearly surpassed our 2020 revenue number and expect our fourth quarter to be strong setting us up in a perfect position to continuing to win new businesses continued to capitalize on in cell opportunities and expand into new verticals.
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Our current pipeline and future potential wins remained very strong and will continue to commercialize our industry, leading AI technology around the world.
With bright line being our first major U S customer win using our remark AI Smart safety platform here are some of the highlights in other parts of the world.
In Asia, starting off with China mobile because of the sporadic COVID-19 cases smart store development is very slow due to the safety concerns. However, we have completed 21 stores in Q3.
China mobile is very optimistic and resuming the store deployment when COVID-19 situation turned to normal in 2022.
There are 16000 stores to be completed according to the contracts, we have signed before COVID-19.
Other areas of retail with Lotus supermarkets, we've completed the Lotus Xi'an Smart store improvement project, the upgraded facial I'd membership system theft prevention system product planning system and shelf replenishment system had been in their day to day operation and helping Lotus.
Increased membership conversion and sales from day one.
We've also deployed our smart campus system to 60, plus more schools in Q3, we have quickly expanded our sales into the Shanghai Province, our official check in and checkout system have been widely adopted due to its accuracy and easy to use features.
Our a I running and falling prevention system has now become a must have safety system in many schools.
Our system has been running in over 400 schools and we're expecting faster growth in Q4 and in 2022 due to the educational reform being conducted across the nation.
We plan on launching two more AI products for schools and education and will be released in online in the fourth quarter.
Smart banking.
We are in the process of deploying our smart self service system for China, construction bank and unite which covers over 318 branches for the current phase and what these same products. We've now deployed to 54 branches before China construction Bank 66 branches for bank of China.
31 branches for China Agricultural Bank 47 branches for the agricultural credit Union and these are all in the Sichuan Province, and addition, 49 branches for China Bank of China, you're not an 82 branches for the bank of China in Guangdong.
Moving onto smart community.
In Q3, we have started the deployment of 523 communities.
Which comprises over 1 million families and over 300 million residents with our smart community system for facial access control temperature plus mask, plus health code check and safety monitoring which are expected to be completed before Q1 of 'twenty two.
Into construction in Q3, we won a 5 million dollar U S deal with our construction partners on smart workplace system for construction, which covers worker check in checkout system work or a P. P monitoring system smart helmets.
Fire smoke detection systems falling prevention system Crane safety system and construction site surveillance system, we have to we have begun the deployment in Q4, and we'll complete the deployment by Q2 of 'twenty two.
And finally, we've also started several new plc projects with one of the largest airlines in China. The POC projects will cover from autonomous plain towing and positioning to AI assisted playing checkups.
In conclusion, our remark holdings continues to grow and transform into a business. That's number one either recurring or repetitive in nature to AI based platform with proprietary services attached to it three business and earnings model that will lead to increased margins.
And for significant cross channel selling opportunities I'd now like to turn the call back to Brian for a review of the third quarter of 'twenty one financial results.
Thank you Shing third quarter revenue fell 1.2 million as China's zero Covid policy led to a draconian citywide lockdowns that impacted our ability to roll out our D. M. P banking school and retail projects. Additionally, in the U S. Our principal customer for our data analytics slowed their rollout due to.
Technical issues with Onboarding customers, we brought them our value proposition in this space was proven however, with lower customer acquisition cost and higher customer conversion rates in the next few months, we expect to bring on additional customers for these services.
Our gross profit fell to 0.4 million from 1 million commensurate with the decline in revenue.
We incurred an operating loss of $6 7 million in the third quarter of 2021 compared to an operating loss of $3 1 million in the third quarter of 2020.
The primary drivers of the increase were lower gross profit and a $3 2 million dollar increase the share based compensation related to the recognition of stock options. Our originally issued in July 2020, and half a million dollars of issuance cost related to our private placement that was completed towards the end of the quarter.
The company recorded net income of $72 2 million or <unk> 72 per diluted share in the third quarter of 2021, which compared favorably to net income of $4 4 million or four cents per diluted share in the third quarter of 2020.
The increase primarily resulted from the gain on the company's investment in share care of $78 9 million.
A decrease in the company's stock price between December 30th 'twenty 'twenty and September 32021, led to a zero point $4 million noncash gain in the change in fair value of our warrant liability compared to a $5 6 million noncash gain for the same category in the same period of last year.
We also reported a zero point $4 million gain on the extinguishment of debt, which offset zero point $4 million of interest expense.
At September 32021, our cash balance totaled $3 1 million compared to a cash balance of 0.9 billion at December 31 2020.
Proceeds of $4 8 million from a debt issuance 800000 from stock option exercises $2 3 million in proceeds from the share care transaction and 5 million from our private placement were offset by $10 1 million of cash used in operations.
With that I will turn the call back to the operator, and we will now open the conference call to questions. We incur collar 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 nor could you. Please instruct the callers how to queue up with their questions.
Sure. Thank you, ladies and gentlemen, if you would like to ask question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to me.
Charlie equipment. Once again, please press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal.
Okay.
Yeah.
Yeah.
Yeah.
Yeah.
Well take our first question from Steve kind of whack now from integrity wealth advisors. Steven Your line is open. Please go ahead.
Thank you Hey, Brian Hey, Shanghai, you guys do and thank you for your call.
Thank you, Steve Steve Alright, So question Shing. It seems like every quarter, we're entering into a new business, which is just fantastic and it's very very exciting you'll know this quarter, we're talking about infrastructure N F T. The meta versus all that good stuff.
You know help help help me understand you know where I mean, how are we positioned really to take advantage of that and how did these all tied together for.
For the future of remark.
Yep.
I think its great question.
Because there there's been some confusion there are our core business is in AI is an artificial intelligence and <unk>.
And that's the foundation to all of these different areas that we're moving into and I think it speaks to the strength of our our platform that we built in and as you know it's taken us almost over five years to build this from the ground up and.
And it allows us now to be able to go into these different businesses, where there are large hands. So it's not so much for us to you know its not a lot of work for us to be able to go into it and when we're presented with a new new contact or new relationship. We're fine we're able to train our.
Models retrain, our models to be able to handle the tasks at hand.
When we go and compete.
Compete for different businesses. The fact that we are able to provide a platform versus a point solution really puts us in the lead right from the beginning and then it just becomes a point of convincing the customer why why and what are the use cases of using of adopting our platform.
Yeah.
But sorry, but certainly with the NFL and the vet med adverse opportunity.
This is a very real opportunity certainly where the world is going and in general.
With this you need AI or blockchain blockchain is fairly a commodity and the unique part is the artificial intelligence aspect, which we provide.
A follow up question on the meta versus the bikini versus which are it sounds interesting.
What are we talking about in terms of investment.
Investment and time frame that you see going forward.
Has that become a reality.
Where we're planning on launching this just say a full launch within the next within the next three months, we will be doing our initial launch at the end of the month at the Miami and F T week.
Oh, okay.
So it's fairly fast than the actual the actual commitment in terms of resources like I said, it's very it was very easy to move.
Move into this because we already have an existing foundation. So we could move into it not just fast but in a very efficient manner and we wanted to figure out how to take advantage of our brand equity and and so we're very excited about this.
Alright, good moving on to Shirk here, obviously, you had the nice on paper gain on that obviously, that's still in share care stock where his remark are right now in terms of monetizing that though to get it into an account where you can start to invest in some of these things.
Fund operations to a certain extent where are we there.
Yeah. So we're we're we're trying to figure where I'd say, we're in the final stages. We've been approached as you can imagine by a number of different funds and banks that are want to present us a monetization opportunity.
Given the strength of <unk> business and right now we're just trying to find the right partner to work with so it's not just about terms, it's more importantly to find the right partner, who understands our long term vision and can grow with us.
Okay.
Thank you for that so we look forward and obviously more detail on that in the coming weeks and months, but is it true that you're able to actually physically liquidate some of your shares and share care after the diversity here.
Yes.
Okay is that something you plan on doing are you still going to look at the loan thing or a combination of the two what where we're going to we have a number of different options and we're just gonna do obviously do what's best for the company. We are strong believers in share cares prospects, but we just.
So you know we're we're certainly long term supporters, but are you now of course, we would want to take things off does that take some money off the table and look to reposition.
Looking at the quarter and the year the I know Ross the animals. There had a I think it was a 2027 or 21 million dollar revenue number. So we came in well under that is that all attributable to to the Lockdowns in China is that mainly a result of China mobile.
It's not just China mobile actually all of China, I mean, it's it's not an easy environment. Working then this zero zero tolerance, a zero COVID-19 policy in China. So I mean, we've probably had on so many occasions, where a team of ours goes.
To goes to a particular site and then Theres some person in the city that they came from that tested positive for Covid and it's an immediate locked down and they're sent back to the you know the city doesn't let anyone that comes from that city that had the Covid case. So this is an issue that's happening all.
All over China, it's very well documented and and it's not easy. So we're doing the best that we can to navigate this but it's it's been obviously, a big issue and and but where we're adapting like we always do.
And I'd say the second part is with with the fantasy sports business.
That that Oh, they've they as they are a startup as well Dave.
They've been going through there.
Current issues as it relates to technology Onboarding.
But there are smart guys and we were very confident that once they solve those issues that are well well experienced some form of a of a catch up in the fourth quarter.
Well that would be really good to hear and obviously it takes a lot to bring all these things together are you now looking at I mean again, you've got some some cash in the bank as of September 31, 3 million further report.
I mean, how do you see that holding you guys going forward I mean or are you are you. Good for the next couple of months quarter.
Where where do you think we are and the reason I ask that question Shing is that obviously one of the challenges for a lot of businesses today.
You know I'm sure yours, as well as hiring folks at all.
All of these things you're talking about requires people to build.
And so I'm, just wondering where are we there in terms of the balance sheet going forward. What is your confidence level that youre going to be able to bring and onboard people that is going to be able to take care of all these commitments and hopefully you know obviously larger book of business going forward.
Yeah, I mean, what you know what we're comfortable we're very comfortable with our capital and you know going not too not just until the end of the year, but certainly into the first quarter. We now we're very comfortable with where our talks with our financing partners are certainly the lockup that some part of the locked up that.
Results that will end at the end of the year with share care will certainly help look recruiting even when you have money is as difficult right. So.
It's a constant challenge and but I'd say most people that we are recruiting I believe in the long term vision that we're doing are they've seen how we've built this company from the ground up we didn't throw money at the problem and are and we have a pretty tight knit group here. So I think.
It's been a very attractive and successful and being able to recruit additional personnel not just in the U S. But you know in China and in the in Europe.
Alright, well. Thank you very much shing I really appreciate it keep up the good work and we'll continue to look forward to the use of these deals you are talking about these partnerships and collaborations should.
It should be interesting times. Thank you very much yes. Thank you stay tuned thank you Steve.
Ladies and gentlemen, once again, please press star one to ask a question that is star one on your telephone keypad.
Yeah.
It appears we have no further question I will hand over the call back to Brian for any additional or closing remarks. Please go ahead.
Thank you Laura and thank you everyone for participating in remark holdings third quarter 2021 financial results Conference call. A replay will be available in approximately four hours through the same link issued in our November <unk>.
November 8th press release, Thank you all have a good afternoon.
Yeah.
Ladies and gentlemen that concludes today's call. Thank you everyone for your participation.
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