Q4 2023 Remark Holdings Inc Earnings Call
Mike: Holdings Holdings
Mike: H. Thank you.
Speaker Change: Good day and welcome to the Remark Holdings Fiscal 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press Starter than 1 on your telephone keypad. To withdraw your question, please press Starter than 2.
Speaker Change: Please note today's event is being recorded.
Speaker Change: I would now like to turn the conference over to Fei Tian. Please go ahead, ma'am.
Speaker Change: Thank you, Rocco. Good afternoon, everyone, and welcome to Remark Holdings Physical 2023 Financial Results Conference Call. I am Fei Qin, Vice President of Investor Relations for Remark. On the call with me this afternoon is Mr. Kai-Hsing Tao, Remark's Chairman and Chief Executive Officer, and Mr. Todd Brown, Vice President of Finance. In just a moment, Mr. Tao will provide an update on our businesses, and Mr. Brown will recap our 2023 financial results conference call. Thank you, everyone.
Speaker Change: Following these remarks, we will open the call to questions.
Speaker Change: But before I turn the call over to Mr. Chow, I would like to take this opportunity to remind you that some of the statements made today may be forward-looking statements.
Speaker Change: 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.
Speaker Change: 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 set off.
Speaker Change: This disclaimer is only a summary of EMARC Holdings Statuary 4 looking statement disclaimer, which is included in full in its filings with the SEC.
Speaker Change: I will now turn the call over to RE-MARKS Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional information on RE-MARKS businesses and recent developments.
Tau: Shame, please.
Tao: Thank you for joining the call.
Tao: Our most important achievement in 2023 was setting the groundwork for 2024 and beyond.
Tao: The primary highlight was the signing of our business partnership with Microsoft.
Tao: Up until this point, our sales efforts have been mostly direct.
Tao: However, that has changed.
Tao: and that has changed and that is due to the value proposition that the Remark AI platform has brought to the table.
Tao: It took almost 18 months of due diligence on a platform
Tao: And we are now honored and excited to be able to leverage with Microsoft the thousands of sales teams to market our solutions to their enterprise customers.
Tao: This collaboration allows Remark to rapidly broaden its sales and marketing for the Microsoft Azure Marketplace, providing institutional credibility for prospective IT departments approval, as well as the rapidly scaling Remark AI's inference and training models.
Tao: The five-year agreement is expected to drive $240 million in
Tao: of AI business for remark by 2029.
Speaker Change: With all the hoopla on AI, I want to clarify on how we are positioned.
Speaker Change: Right now, AI is all in the press, but most typically, it's about generative AI.
Speaker Change: or large language models.
Speaker Change: At Remark, we have been doing generative AI since 2017.
Speaker Change: however
Speaker Change: We felt back then, as we do now, that it's a tough business proposition.
Speaker Change: Cool technology does not mean people will buy your product in a profitable manner.
Speaker Change: The open secret, as they say, is that in generative AI, everyone is copying each other and therefore will result in a disastrous war.
Speaker Change: At Remark, while generative AI is a feature we provide, our strength and focus is on computer vision and the building of large vision models, which in turn leads to our core platform of multimodal models as a service.
Speaker Change: In 2023, we launched our first SaaS AI platforms.
Speaker Change: first large vision model business application
Speaker Change: the large vision model smart construction
Speaker Change: Fast AI Platform is a few-shot training framework
Speaker Change: based on our large vision model.
Speaker Change: a large computer vision and semantic multimodal model. The release version is its $34 billion parameter model with the proprietary dynamic prototype fusion network.
Speaker Change: It is designed to address limited training samples and complex environmental problems in various industries and it's achieved extremely high performance with Microsoft COCO data set for complicated object detection and segmentation.
Speaker Change: The large vision model, otherwise known as LVM, smart construction product, has learned federal, state, and industrial level safety, quality, and environmental protection guidelines.
Speaker Change: and SOPs, as well as OSHA laws.
Speaker Change: It can autonomously perform safety, quality, and environmental check through video streams from fixed security surveillance cameras and wearables, i.e. 360 degree cameras, hard head mounted GoPro cameras.
Speaker Change: and is specialized for worker safety,
Speaker Change: hazard risk management.
Speaker Change: meaning fire, collision, and traffic.
Speaker Change: Equipment Operation Safety
Speaker Change: environmental safety
Speaker Change: construction progress estimation and quality checks.
Speaker Change: It is even powerful enough to allow for new and updated SOP and rules to take effect as soon as they're updated.
Speaker Change: It provides construction business intelligence by real-time video analytics and autonomous work locks.
Speaker Change: Currently, the product is being customer tested in one of the largest construction projects in the world, located in Saudi Arabia.
Speaker Change: . Starting in Q4 2023, working with our cloud partners, our smart safety platform SSP is being upgraded to a cloud-based
Speaker Change: Global SaaS Platform with Guaranteed Scalability and Mission-Critical Processing Capabilities.
Speaker Change: The SSP covers public safety applications like access control, crowd safety management, fire and smoke real-time alerts, weapons detection,
Speaker Change: Fair Evasion, Fighting, and Unattended Object Detection.
Speaker Change: Enhanced with our LVM, our SSP is being used with various levels of public safety agencies in the United States.
Speaker Change: and the United Kingdom.
Speaker Change: but what is multimodal?
Speaker Change: Multimodal models can process a wide variety of inputs, including text, images, and audio.
Speaker Change: as prompts and converts those prompts into various outputs, not just the source time.
Speaker Change: to give you two examples of what Remark AI does.
Speaker Change: We recently announced
Speaker Change: are large multimodal
Speaker Change: model, an AI-powered aviation safety platform called ASP.
Speaker Change: Remark AI developed the ASP to safely reduce inspection times associated with aircraft engine maintenance, as well as provide anti-collision tools for aircraft towing and other functionalities, all while improving the collection and reporting of essential performance data in a multimodal format.
Speaker Change: Given the recent safety inspection failures and supply chain disruptions experienced by Boeing and its airline customers, there has never been a better time to utilize AI to improve safety performance.
Speaker Change: The ASP uses a large multi-level model to provide several functionalities, including in three essential components on engine expansion kit,
Speaker Change: an aircraft towing anti-collision system, and a large multimodal model for business intelligence and reporting.
Speaker Change: The Portable Aero Engine Inspection Kit
Speaker Change: detects damage to aircraft engines, including damage such as combustion chamber erosion, tear detection, blade curl,
Speaker Change: Ablation Dimples or pits Laugh wear and misalignment
Speaker Change: Upon recognizing such damage, the AIK evaluates it for severity and automatically generates an inspection report with detailed images, thereby reducing staff workload and inspection times from days to approximately 30 minutes, allowing for real-time pre-flight inspections before takeoff.
Speaker Change: The Towing Anti-Collision System
Speaker Change: TACS provides aircraft towing operators with functionalities that look for, warn of, and thereby potentially prevent accidents.
Speaker Change: The system helps those towing airplanes to avoid obstacles by utilizing the concrete string to provide a real-time, three-dimensional view of the aircraft's travel path.
Speaker Change: A Dynamic Environmental Status and Potential Collision Warnings
Speaker Change: The functionalities include collision prediction, speed monitoring, and detection of abnormal driving, and an important slide arm.
Speaker Change: to provide comprehensive coverage under all weather conditions.
Speaker Change: the aviation industry business intelligence reporter is a powerful AI system that analyzes massive business data
Speaker Change: files, photos, videos, and other files, and then provides valuable business intelligence. The system allows for data processing, predictive analysis, semantic search, and statistical analysis.
Speaker Change: and it provides intelligent recommendations that allow for process improvement in many aspects of aviation operations.
Speaker Change: We've already launched a similar platform like this, but for trains, subways and railways. And we are soon to launch our Remark AI multimodal safety platform,
Speaker Change: for marine and sea safety as we have significant potential customers in the Middle East and South America.
Speaker Change: Our pipeline continues to be very strong and is only getting stronger.
Speaker Change: with our recent win at the Clark County School District, which is top five largest in the United States.
Speaker Change: it has set us up well for other large school districts across the U.S.,
Speaker Change: In addition, currently as we are targeting the U.S. domestic security market,
Speaker Change: There are 100 million domestic security cameras and 200 million global cameras, excluding China, that do not provide intelligence or AI real-time analytics.
Speaker Change: Assuming a base case of $1,200 annual stream per camera to empower it with AI analytics, this represents a $360 billion total addressable market.
Speaker Change: With that, we believe we are well positioned and in the final stages to win a large security contract with over 100 migrant centers.
Speaker Change: walking you through the numbers to show how quickly this business can sail in just this industry alone.
Speaker Change: we generally sell six solutions which we charge a hundred dollars per solution one violence detection to facial recognition
Speaker Change: 3. Weapons Detection 4. Slip, Trip, and Fall 5. Fire and Smoke Detection 6. Intrusion Detection
Speaker Change: So if you multiply $100 times six, that's $600 a month times 12, which equates to $7,200 a year.
Speaker Change: $7,200 a year times 100 cameras, which is the typical amount of cameras located in each migrant center, equates to $720,000, $72,000 a year.
Speaker Change: and with 100 migrant centers, that equates to 72 million a year.
Speaker Change: This is an exciting day here as the revenue is all software and does not include our hardware revenue, which still generates approximately 50% gross margin.
Speaker Change: I hope this is a strong example of what we see for remark AI in 2024 and beyond Todd
Speaker Change: I'm gonnae.
Todd Brown: Thank you, Sheng, and thank you to everybody for joining us on the call today.
Speaker Change: Our revenue for fiscal year 2023 totaled $4.4 million, reflecting a decrease from the $11.7 million we recorded during fiscal year 2022.
Todd Brown: The revenue we recognized during 2023 resulted primarily from additional installations of our smart campus solution and our smart construction solution in China.
Todd Brown: We did also complete certain projects during 2023 worth approximately $1.4 million.
Todd Brown: But the agreement with our new customer did not meet requirements for revenue recognition on an accrual basis, so we only recognized an immaterial amount from such agreement in 2023, but we expect to record the remaining amount as revenue in future periods.
Todd Brown: Overall, our project completion slowed in China initially due to the slow economic recovery efforts after the COVID-19 pandemic-related restrictions lifted at the end of 2022, and then as political tensions increased between the U.S. and China.
Todd Brown: Though we were able to have some moderate success earlier in 2023, the economic conditions and the political tensions made it more difficult than expected for us to complete projects on a steadily increasing pace.
Todd Brown: Our operating loss of $17.2 million during the fiscal year 2023 reflected a decrease of $4.1 million from an operating loss of $21.3 million during fiscal year 2022.
Todd Brown: in addition to recording less revenue during 2023, our cost of revenue decreased $8 million, primarily in conjunction with the decrease
Todd Brown: and also because cost of revenue in 2022 included $1.3 million of inventory obsolescence that did not recur materially in 2023.
Todd Brown: General and Administrative Expense
Todd Brown: decreased by $5 million as bad debt expense, legal and professional fees, certain business development costs, and stock-based compensation all declined during 2023.
Todd Brown: Partially offsetting the decreases in cost of revenue and in general and administrative expense were increases of $1.3 million and $0.4 million respectively in asset impairments and sales and marketing expense.
Todd Brown: We are reporting a net loss of $29.1 million, or $1.74 per diluted share, during fiscal year 2023, compared to a net loss of $55 million,
Todd Brown: $55.5 million or $5.22 per diluted share during the fiscal year ended December 31,
Todd Brown: Our net loss decreased primarily because we reported a $26.4 million loss on investment during 2022.
Todd Brown: whereas we did not maintain investment assets during 2023 and therefore did not report any gain or loss on investment in 2023.
Todd Brown: the decrease in our operating loss described above, and the, or pardon me, was partially offset by a net effect of $1.8 million of decrease in interest expense,
Todd Brown: which resulted from less debt principal outstanding and a decrease in debt fee and debt discount amortization,
Todd Brown: and a $6.3 million increase in finance costs, which was related to our issuance of additional convertible to ventures and draws on an equity line of credit pursuant to our agreements with Ionic Ventures LLC.
Todd Brown: As of December 31, 2023, cash balances totaled $0.1 million, which compares to cash balances of less than $0.1 million on December 31, 2022.
Todd Brown: net cash used in our operating activities during 2023 was $10.5 million.
Speaker Change: With that, I'll turn the call over to the moderator to begin the question and answer portion of our call.
Speaker Change: Thank you. Before we begin, I believe Xingtao has another comment they'd like to make before the Q&A.
Xingtao: yes I just wanted to clarify the numbers it is 72 million a year just for this one contract
Xingtao: again walking through the numbers it's $100 a solution which we have six of them so that's $600 a camera times 12 months which equates to $7,200 a year
Xingtao: typically each one of these migrant centers have 100 cameras so 7200 times 100 is 720 thousand dollars per migrant center times 100 migrant centers which equates to about 72 million dollars a year okay great moderate
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Speaker Change: Holdings
Speaker Change: And as a reminder, ladies and gentlemen, if you'd like to ask a question, please press star then 1 at this time.
Speaker Change: This concludes our question and answer session. I'd like to turn the conference over to Faye Tien for closing remarks.
Faye Tien: Good morning.
Faye Tien: Thank you Rocco and thank you everyone for participating in Remark Holdings' physical 2023 financial results conference call. A replay will be available in approximately four hours through the same link issued in our April 4th, sorry April 8th press release. Have a good afternoon. Thank you.