Q1 2024 Remark Holdings Inc Earnings Call

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Hello, and welcome to the remark Holdings, Inc. First quarter 'twenty 'twenty four financial results conference call.

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After todays presentation, there will be an opportunity to ask questions too.

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As a reminder, this conference is being recorded.

I would now like to hand, the call to say Tien Vice President of Investor Relations. Please go ahead.

Thank you Jay good afternoon, everyone and welcome to remark Holdings' first quarter 'twenty 'twenty four financial results Conference call I Am <unk>, 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 <unk>.

Mr. Tod Brown, Vice President of finance in just a moment Mr. Brown I missed this how well provide an update on our businesses and Mr. Brown will recap our first quarter 'twenty 'twenty four financial results. Following these 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. These statements involve risks uncertainties.

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 <unk>.

And in its filings with the FCC.

I will now turn the call over to remarks, Chairman and Chief Executive Officer. Mr. Tao. So he can provide additional information on remarks businesses and recent developments. Please go ahead Xing.

Thank you Sir.

In our last quarter call, we highlighted the importance of where remark scans and the artificial intelligence arena.

We took the first quarter to continue to improve although large vision models and making everything we offer to customers multimodal.

Most of the names you read in the AI space right now focus on large language models for them.

Due to some great achievements in general just AI.

Oh I'm space in the past year or so.

It has shifted the focus from computer vision to Uh huh.

However vision still.

Major information source for humans, it represents 70% to 80% of our sensors.

And vision is still the major sense for humans to react to the world.

It is the same for AI and to really make a useful to our lives and our social development, we need not only to have semantic level AI, but also digital AI another word a multimodal AI to.

Interact with the physical world.

Benefiting from.

Rapid development computer vision AI has advanced dramatically as well.

However, we are still facing several critical hurdles that would prevent that computer vision AI from being widely adopted which are one lack of sample data to the particular business or industry to generalization versus customization.

And three affordability.

Remark AI as a computer vision pioneer has been working with customers from various industries for over a decade.

We've been tackling these problems for our customers and have built a zero shot training framework for limit to training samples and our computer vision based large multimodal model for general Generalizing computer vision capabilities.

Reducing <unk>.

The option cost significantly.

Our technologies have been applied to many smart city projects and fire prevention, Sydney 311 services construction traffic control.

Et cetera.

AI that can solve physical world problems is on the way.

'twenty 'twenty four is shaping up to be a year, where our 18 months of hard work to pivot our business from a mostly China.

<unk> two outside comes to fruition.

Most recently, we were formally awarded with the Clark County School District.

Which is the fifth largest school district in the U S to supply AI based weapons and gun detection.

Clearly guns has been an issue that affects all of us.

In particular, our children and their safety in schools.

One is highly contested deal due to our effectiveness and value proposition that we brought to the table.

We anticipate this deal to be the first step for us to be to have our AI solutions across the various industries that encompass Clark County.

And although needless to say this win also has resulted in many new potential opportunities for school districts across the U S.

While we understand the Tam.

For the initial weapon safety contract to be roughly $50 million split amongst three parties. We are optimistic that we will get the lion's share of that.

Already the initial orders earmarked for 2024 from the steel has surpassed even our own internal expectations and we only expect more from this point on.

Last quarter, we announced our partnership with Microsoft.

We will be using their vast and very capable sales team to deliver our computer vision AI solutions to their customers.

Currently as expected we are going through a technical migration process, which will soon be concluded. Once this is done we expect the strong interest that we initially received for Microsoft customers to be submitted.

And the next quarter or so we also expect to announce another fortune 500 partner to also sell our solutions across their respective sales teams.

Already we have received very strong interest from their employees looking at our products is something that they can sell successfully.

I've always talked about how unique our platform is to our current and potential customers, but it's one thing if I see it and clearly different when someone else does.

A testament to our unique platforms actually happening next week in New York City at the world's Smart City Expo.

Both Nvidia and Oracle will be representing and selling our smart city solutions in fact I'll be speaking on a panel with both their head of their smart cities Division at in video.

And the former CIO of Orange County in New York City's fire Department to discuss how our solutions can benefit them immediately.

And video and Oracle want us to showcase what we do.

One fire and smoke detection.

Two traffic analysis real time.

Three use of AI agents to handle city call centers like.

By the one one or three one points.

We were asked to showcase our solutions with them because prediction and prevention is one of the key features computer vision is being adopted and smart city applications.

In the case of fire prevention and early warning systems are AI through street cameras or building Street security cameras detects smoke and early sign of a fire before it breaks out or real time fire alert when a fire has just started whether it's in the garbage dump construction site or easy charged.

Speaker Change: <unk> station.

And the AI smart enough to tell the smoke from streams dust.

Or fog to minimize false alerts.

Working with the fire departments dispatching system that can help the fire department to determine the severity of the fire and deploy the firefighters properly and quickly.

In the case of fighting fires and are building on a campus our AI can get real people real time people count how many are in the building and how many have gone out and where the fiber firefighters are for better rescue planning and reduce risk for firefighters and was talked down speakers the.

I can guide people in real time for evacuation.

These kinds of real time analytics and assistance to the situation do save lives.

What makes us so unique when they asked that we are able to attract these industry heavyweights to be our partner.

AI capabilities are growing faster and stronger.

Speaker Change: People always have doubts on how AI can perform.

Especially on mission critical test until they see what.

I can create and generate.

While L. L. M. A is a great tool for digital content computer vision AI is essential and the key for physical world interaction that is precision and responsiveness sensitive.

Remarks computer vision AI is trained with the framework that gets the precision from the pixels.

Or visual into context understanding we call that human knowledge from semantic labels.

We're teaching it to understand the rules and physics of the real world. So that it's able to construct 100 ton stacking machine to unload piles of ore from a ship or train and stack them properly in a warehouse autonomous sleep or it is able to detect various damages on turbine engine.

<unk> and assist engineers to determine if a plane is safe to take off from the gates.

These are definitely exciting times.

And while we still clearly have.

Numerous loose ends to tie up.

Help us scale and achieve our goals faster.

We are doing that.

As I speak.

Speaker Change: And you should expect to see positive news regarding these issues in the near future.

Todd.

Thank you Shane and thank you to everybody for joining us on today's call.

Our revenue for the first quarter of 2024 total that zero point $4 million, reflecting a decrease from the zero point $8 million, we recorded during the same quarter of 2023.

The revenue we recognized during the first quarter of 2024 resulted from cash collections on certain projects that we had actually completed during 2023 worth a total of about $1 $4 million, but for which the agreement with our customer did not at that time meet the requirement for revenue recognition.

And on an accrual basis.

We expect to record the remaining amount related to such projects as revenue in future periods.

Overall due to our decision to reduce staff in China because of the negative effects on our business from the slow economic recovery in China, and the political tensions between the U S and China, we did not complete new projects during the quarter, although we will be able to complete new projects in China in the future.

For now our efforts are focused on executing the Clark County School District project and winning several other opportunities outside of China that we believe we are very close to winning.

Our operating loss of $3.7 million during the first quarter of 'twenty 'twenty four.

<unk>, an increase of about zero point $7 million from an operating loss of $3 million during the same period of 2023.

In addition, certain expenses related to business development increased by zero point $6 million during the first quarter of 2024.

Such increases were partially offset by a <unk> 2 million decrease in franchise taxes as well as by other small decreases in general and administrative expense categories that were not representative of significant business trends.

Also during the first quarter of 2020 for our technology and development expense increased in comparison to the same period of 2023 and that was the result of the prior year, including a tax credit of approximately zero point $5 million from the UK government, which we recorded at the time.

Offset to expense.

But we did not receive such credit during the first quarter of 2024.

The increase related to the tax credit was partially offset by zero point $3 million or a decrease in payroll related expenses during the first quarter of 2024 due to the.

Reduction in our workforce that we previously talked about.

We are reporting a net loss of $13 8 million or 40 cents per diluted share during the first quarter of 2024.

Compared to a net loss of $8 $2 million or <unk> 63 per diluted share during the same period of 2023.

In addition to the impact of items affecting operating loss that we just discussed our net loss increased primarily as a result of a $5 6 million dollar increase in finance costs finance costs related to the establishment of and measurement of our obligations to issue common stock.

Those obligations arise as a result of our transactions with Ionic ventures, LLC, including the convertible debentures, which are now fully settled.

And the draws on the equity line of credit.

The increase in finance costs was partially offset by a decrease in interest expense of zero point $6 million in that decrease primarily resulted because of the same period of 2023 included an extension fee zero point $8 million that was reported in interest expense.

Speaker Change: While during this first quarter of 2024, no such fee was incurred.

As of March 31, 2024, our cash balance totaled zero point $2 million and that compared to a cash balance of zero point $1 billion.

As of December 31, 2023.

And we also used $3 $4 million of cash in operating activities. During the first quarter of 'twenty 'twenty four.

And with that I will turn the call over to the moderator to begin the question and answer portion of this call.

Thank you very much.

We will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

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Speaker Change: I got to ask a question Thats Star then one.

We will now pause momentarily to assemble our roster.

Okay.

Seeing no questions at this time this concludes the Q&A session.

I would like to turn the call back over to Fay for any closing remarks.

Thank you Sanjay and thank you everyone for participating in remarks holdings first quarter fiscal 'twenty 'twenty four financial results conference call. A replay will be available in approximately four hours through the same link issued on our May 16 press release have a good afternoon.

Thank you.

The conference has now concluded. Thank you for your participation you may now disconnect your lines.

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