Q1 2022 Remark Holdings Inc Earnings Call
Please standby.
Good day and welcome to the remark Holdings' fiscal first quarter 2022 financial results Conference call. Today's conference is being recorded at this time I would like to turn the conference or to say to young. Please go ahead.
Thank you Justin good afternoon, and welcome to remark Holdings' cause.
That's the ballpark courtyard 2022 financial results conference call I'm Bacon, Vice President of Investor Relations for remark on the call with me. This afternoon is Kai Shing, Tao remarks, Chairman and Chief Executive Officer, and talk route remarks, Vice President of finance.
And just a moment nitpick, Paul will provide an update on our business and Mr. Brown 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. Paul 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 differ.
Differ materially from those expressed or implied by these forward looking statements.
Any forward looking statements reflect remark holdings' current views.
Mark 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.
Remark Holdings' statutory forward looking statements disclaimer, which is included in full in its filings with the SEC.
I will now turn the call over to remarks, Chairman and Chief Executive Officer, Mr. Paul. So he can provide additional color on our remarks fitness and recent development.
Great.
Thank you for joining remark Holdings' first quarter call.
We're excited by our first quarter results and the start of 2022.
As everyone knows.
Q1 was challenging for China due to a very strict zero COVID-19 policy.
<unk> said that we've continued to adapt and build upon our existing businesses and grow new ones in the face of the strict lockdowns.
Our first quarter results were driven by continued deployment of our smart campus products to 52 more schools in Q1, a 40% revenue growth compared to Q1 'twenty one.
Our new campus products, the AI learning quality evaluation system for students and AI health condition evaluation system for students launched this past quarter and contributed over $2 million.
Overall, our AI campus products are now covered in 500, plus schools over 1 million students already nationwide.
We are aiming to past the 800 school Mark in 2022 and servicing over 2 million students nationwide.
Our first quarter results were also driven by our completion of deployment for 189 residents communities.
Which which brings us to close to 800 communities and over 3 million people daily.
We are optimistic expecting the rest of the 200 residents communities.
To start as soon as the Lockdowns are lifted in 2022.
In the first quarter, we continued the deployment of our smart safety.
Surveillance platform for construction sites, which covers worker check in checkout systems worker PPE monitoring system.
Mart helmets pollution monitoring system.
Smoke detection system.
Following prevention system, creating safety system and the construction site surveillance system.
By the end of Q1, we have successfully completed 21 more construction projects with more being deployed and completed in the next few quarters.
Obviously with the Lockdown, we are unable to start some projects and finish existing contracts, we expect that process to resume shortly as lockdown is being lifted.
Customers, where we will resume our department are China mobile.
One of China's largest fast food chains, using our AI platform to improve service quality.
Cleanliness food processing safety and customer experiences.
Due to the Lockdown, our installation was suspended after 10 stores and we will finish the remaining 20 stores as the lockdown is lifted.
Third.
Bank of China, and other things with large retail operations. Most of the banking branches are still closed which has slowed us down but will resume once the floor once the lockdown is over.
As you can see our numbers for China will only get stronger as the lockdown is lifted.
Having said that we are continuing to still grow and win new business in areas, where there are no lockdowns.
Now moving to the U S as.
As we said in our last quarter's call President <unk>, one seven trillion plan offers a once in a lifetime opportunity, where we are well positioned to win the bids due to our leading AI technology and more importantly technology that has been tested over and over again in real life situations versus the <unk>.
Perfect lab environment.
Remark AI recently won the security and safety contract for one of the most high profile arenas in the U S.
Located in one of the largest cities in the U S. The arena is ground zero for many of the most high profile sporting and music events.
In addition, given its high profile nature and placement there are always under securities firms are.
Our initial phase with them is to focus on outdoor security.
Areas are AI will help with.
In occupancy counting loitering unintended object detection.
Gunshot bond glass and human screen sound detection.
We're very excited about this win as our customer views us as a strategic partner and are looking to spread the word about our technology to other areas other arenas and sports teams.
The organization has a strong reputation for being at the forefront of technology and we're excited to win this deal to help them continue to keep that reputation going.
Given the rapid rise in crime in shootings in large metropolitan cities. We are in the midst of bidding for several other contracts as it pertains to subway safety.
I'll remark AI Smart security platform will help reshape crime prevention.
Vacation and safety operation.
Our smart AI analytic engine monitors multiple cameras in various places.
Station platforms station staff areas train car outside the station in underground maintenance during the night.
This will give us the alerts on one pedestrian behavior recognition to high level object recognition alert.
Free fire and smoke alerts and for restricted area intrusion detection.
We have assembled a strong team in preparation for these bids and are confident in our success in winning them due to our technology and experience.
Other areas, which we are currently focused right now in bidding for and cities are bids related to fire and smoke detection.
As you know there has been many tragic occurrences lately, where residential and office buildings have caught fire and by the time the alerts happen. Unfortunately, it was too late.
Our remark AI fire and smoke detection will help prevent this happening in the future.
We have put forth a comprehensive plan to address the various issues as it relates to intelligent fire and smoke detection.
Warehouse and store facility detection.
Ft.
Parking lot safety, especially with the onset of electric vehicle charging stations for cars trucks and buses.
Factories construction sites are seen in other crime prevention and outdoor large fields.
Our police security and public safety platform will focus on loitering for pedestrians and vehicles people counting and crowd detection.
Behavioral analysis as it pertains to running and falling.
And intrusion alert with pedestrians and vehicles.
On this call I'd also like to highlight new areas, where we are in the process of building a new growth engine.
First the aviation industry.
Currently we have signed and are building for one of the largest airlines in the world. The first AI based digital airplane and airport management system.
This is where we will build the AI platform, where all new AI related applications will be built off of.
Initially our four key pieces to this engagement.
Our one using our remark AD platform, we will build the foundation for where all future AI models will be trained on and validate to meet the aviation safety and data standards.
Two.
Engine inspection, while the plane is part they will use the special camera to check the engine.
Stirred up relying on engineers and the human eye, which often may lead to human error remark AI computer vision will help with this process.
Three engine repair because each engine generally has over 1000 parts. It typically takes five days to inspect and engine used.
Using our computer vision, we can monitor caps and screws are in place and that the pipes are tight properly.
In addition, even though there is a current labor shortage, especially with skilled mechanics, a remark AI computer vision, coupled with the use of Lidar thermal imaging will help.
Alleviate this pinpoint and allowed 24 <unk>.
24 hours seven days a week work through.
And lastly for autonomous <unk> card, our computer vision will help with potential collision detection for example between the two or multiple planes or if a vehicle is parked underneath the plane or safety platform will help alert and prevent future incidents.
In conclusion, we feel we will be able to take this expertise to other parts of the world.
We're already in the testing phase with one of the top three airline companies in the U S and expect to begin talks with several of the largest airlines in Europe .
Clearly the needs of the aviation are all the same and it doesn't matter where you are located so we are very excited about the prospects in this particular vertical.
The second area, we'd like to highlight is.
As a remark AI safety platform for highway patrol.
Again highway upgrades as a key focus and the bipartisan infrastructure plan.
Utilizing our experience in Asia, we will be.
In the deep process to win the bids for things concerning highway maintenance and upgrades.
Ah Remarket platform will focus on hazard detection, which is the key area of focus.
Detection is broken up into 16 different categories, where we are confident in our platform to help address.
The categories include weather as it relates to fog rain and ice traffic traffic hazard detection as it relates to pedestrian walking bicycles illegal parking and dumping.
And highway maintenance hazard for example, being able to identify cracks in the highway.
Lastly.
In the area of the railway and train station safety.
We're in the process of integrating these solutions into our remark AI smart safety platform.
We are building for one of the largest railway systems in the world our platform system that monitors passengers to not cross the two ends of the platform.
Sure that we are meeting as having been having the ability to defer.
<unk>, who is potentially entering the track.
Our system needs to identify the difference between the stats.
If it's a railway worker security staff maintenance and cleaning individual versus actual passengers.
We are currently in the bid to build this outflow 40 train stations and look to finish it in Q3 Q4 of 2022.
With our continued partnership with Brightline, we're rapidly moving to increase our presence in the railroad industry in the U S.
Our technology is cutting edge and the reality is that there are not too many companies out there that are that have proven to be capable of doing what we're doing.
In China. We are currently in the midst of bidding as I mentioned before in the midst of bidding for the 40 train stations to use our platform and we look forward to updating you that over the course of the next few weeks.
Okay.
I'd like to touch upon the graph our rapidly growing business in Europe , and especially in the U K.
I briefly mentioned our burgeoning business in the UK on our last quarter call.
We are proud to announce our first deal in the UK a.
Illegal dumping or fly tipping has become a huge concern to the UK government and that's caused the government close to 400 million pounds, a year, which cannot be ignored.
Local authorities handle over 1 million illegal dumping incidents in 2021 during the pandemic up 16% from the year before.
With such an alarming figure the department of environmental food and Rural Affairs known as desktop.
Stepping up with a plan to crack down on this.
Remark AI won this contract to supply our legal illegal dumping solutions system as part of the project.
Our AI video analytics enabled cameras to detect illegal dumping behavior and vehicle plate recognition in real time at the legal dumping hotspots.
This links the vehicles of the suspects to be disposed of items, which allow local authorities to crack down on this.
This is just the very first deal that we've concluded anticipate to win 10 to 15 more deals over the course of 'twenty two in the U K. We are very excited about what lies ahead.
In Q1, we've also finally expanded our augmented reality meta versus business into the U S.
Using our AI platform to quickly build this for new markets. We took our success with the Winter Olympics in Beijing, and now most recently brought to Vegas and partnership with MGM resorts and Bts. The most successful pop group in recent history.
Taking a step back to understand what augmented reality is there is a disconnect between the wealth of digital data available to us in the physical world in which we apply this data.
However, currently we can only consume this data and the two diamond two dimensional world the pages and screens.
Augmented reality is a set of technology to superimpose this digital data and images on the physical world that helps US bridge the gap between the real and digital world by connecting all these data points.
While the industry is still in its infancy spending on AI technology will reach over $30 billion by the end of this year.
Ah augmented reality will affect companies in every industry and many other types of organizations from universities social enterprises.
With our successful launch with MGM resorts, we've already been approached by numerous companies to create similar experiences in their respective industries looking to improve productivity quality entry.
And then we expect to announce future new customers on our next call our.
Our strategic location as a local vendor in Las Vegas allows for a robust pipeline of convention customers, who are seeking similar experiences.
As you can see even with the zero Covid lock up our business is robust right now.
Clicking on all cylinders, our China business is strong and will only get stronger as the lockdown is lifted.
Just today, Shanghai announced June one as the end to the Lockdown and we expect to grow our business faster, while everything resumes back to business.
In the U S. We are making tremendous headway and feel we are in the Red zone on several large deals and the security and safety space plus transportation and <unk>.
Finally, rounding it out our new business efforts in the U K have now come to fruition and we are expecting strong growth. There. Our company is well positioned to capture the organic growth that we have built over the last few years and most importantly, do it profitably.
We're looking forward to our next quarter call to share our results and continued updates to our business.
Okay Alright.
Alright, thank you.
I will continue with the financial highlights for the first quarter.
Revenue for the first quarter of 2022 totaled $4 7 million, which was up about 6% from the amount of revenue we recognized in the first quarter of 2021.
That first quarter 2022 revenue was driven by a zero point $6 million increase in China revenue.
With the total revenue, China, including $2 $2 million from projects in the construction industry.
And $2 $2 million from projects in the education sector.
That's an additional <unk> 2 million from deployment of our smart retail systems in cities that were less affected by the ongoing lockdown.
Revenue from the sales of our biosurgery products in the U S. Further decrease as we adapted the post cover demands and shifted our focus to thermal thermal analytical products.
Which will provide AI, driven and risk management solutions for transportation providers construction enterprises.
And governmental clients as a result of that change and product focus we expect longer sales cycles on extended decision making procedures.
Gross profit was 0.4 million for the first quarter of 2022, which was a drop off.
Drop from the $1 7 million, we recorded in 2021 in the same period.
The overall gross profit margin for the first quarter of 2022 is eight 5%.
With increased cost of revenue of $4 $3 million, primarily being associated with the previously mentioned completions of more projects in the construction industry and education sector.
Yes.
We incurred an operating loss of $4 2 million for the first quarter of 2022, which was in comparison to an operating loss of $3 $7 million in the comparable quarter of 2021.
In addition to the increases in revenue and cost of revenue G&A expense increased primarily from about.
Zero point $5 million of share based compensation, which resulted from the recognition of a 2020 stock option grant that for accounting purposes did.
Didn't have a grant date until July of 2021.
Also contributing was an increase of zero point $3 million in business development expenses as we expand our client base.
<unk> $2 million increase in payroll and benefits.
Partially offsetting those increases in cost of revenue and general and administrative expense were decreases in sales and marketing expense as well as in technology and development expense.
The sales and marketing expense decrease because the prior year first quarter included.
Approximately zero point $6 million that we advance to our China business partner and such amounts in that period were classified as marketing expense, but no such activity occurred in the current year.
Technology and development expense declined <unk> 6 million due to reduce reliance on consultants as a result of our.
Acquisition of our U K entity and an immaterial business combination.
And also by <unk> 3 million due to a decrease in the company's liability for China cash bonuses.
Our net loss totaled 24, or pardon me 25, 4 million or <unk> 24 per diluted share in the first quarter compared to a net loss of $5 5 million or zero point.
Zero six cents per diluted share in the quarter ended March 31 2021.
The loss on investment of $19 $1 million, which consisted primarily of the change in the fair value of our investment in the common stock of <unk>, Inc. Was almost entirely responsible for the larger net loss in the first quarter of 2022.
Another significant contributor to the increase in net loss is.
Interest expense, including amortization of original issue discount and debt issuance cost, which resulted from our $30 million note payable that.
We executed in December 2021.
That item bearing a 16, 5% interest rate.
At the same period of the prior year included significantly less debt principal outstanding.
On March 31, 2022, our cash balance totaled $2 7 million.
Compared to a cash position of $14 2 million on December 31, 2021.
Cash was primarily impacted by a.
Principal repayment on the Companys note payable, which was about $3 7 million.
Interest payments totaling around $1 1 million on the note payable and <unk>.
Payment of approximately $1 million for work on our meta versus project.
As well as increased spending for business development.
And with that summary, I will go ahead and turn over the call to the moderator to queue up for questions for our Q&A session.
Well. Thank you if you would like to signal with questions. Please press star one.
One on your Touchtone telephone if you are joining us today using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again that is star one if you would like to signal with questions Star one.
And once again, if you would like to signal with questions. Please press star One again star one if you would like to ask questions. We will pause for a moment.
Great.
Okay.
Yes.
Yes.
Once again, please press star one if you would like to signal with questions again that is star one we will pause for a moment.
Okay.
And this time I'll now turn the conference back over to you.
Okay. Thank you. Thank you everyone for participating in remark holdings third quarter 2020 financial results call. A replay will be available in approximately four outlets through the same link issued on our May question.
Thank you and have a good afternoon.
Thank you that does conclude today's conference we do thank you for your participation.
An excellent day.