Remark Holdings, Inc. (MARK) Q3 2023 Earnings Call Transcript

Remark Holdings, Inc. (NASDAQ:MARK) Q3 2023 Earnings Call Transcript November 20, 2023 7:00 AM ET

Company Participants

Fay Tian – Vice President of Investor Relations

Kai-Shing Tao – Chairman and Chief Executive Officer

Todd Brown – Vice President of Finance

Conference Call Participants

Operator

Good day and welcome to the Remark Holdings Fiscal Third Quarter 2023 Financial Results Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Fay Tian. Please go ahead.

Fay Tian

Thank you, Sarah. Good afternoon, everyone, and welcome to Remark Holdings’ Third Quarter 2023 Financial Results Conference call. I am Fay Tian, Vice President of Investor Relations for Remark. On the call with me this afternoon is Kai-Shing 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 third quarter 2023 financial results. Following these remarks, we’ll 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 may be forward-looking statements. These statements involve risk uncertainties and other factors that will 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 statement disclaimer, which is included in full in its filings with the SEC.

I will now turn the call over to Remark’s Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional information on Remark’s businesses, and recent developments. Please go ahead, Shing.

Kai-Shing Tao

Thank you today for joining our call. Over the last few quarters, given the economic difficulty that China is experiencing and the rising political tensions between the U.S. and China, we’ve made a point in diversifying our business to outside of China, to the U.S., U.K. and Europe, the Middle East and South America. We are on the right path to both successfully pivot our business to other parts of the world and look forward for this call to explain what we’re doing. On this quarter’s call, we’ll update our projects in the US and other parts of the world. And please note, the common thread, is that wherever we win first, we are now able to take that opportunity and scale to other cities or other parts of the world using the same technology platform that we have developed over the last seven years.

Three immediate opportunities which we have spent a lot of time focusing on in the cities in the US. Number one is to handle the migrant city centers, which we’ve all seen has caused a lot of pressure to different cities’ budgets. One city in particular is already testing our solution, which includes facial recognition, weapons detection, violence detection. And as you know, the problem with — this problem is very serious for all the cities. And with our solutions, we’re able to save 80% for the city on security costs. This opportunity equates to roughly $1.4 million per migrant center. And there are hundreds of these migrant centers that are well documented in different sanctuary cities in the US.

The second large opportunity for us in the different cities in the US is working with the Department of Corrections. We’ve recently installed in several sites showcasing our technology. Again it’s for facial recognition, weapons detection, and violence detection. Upon approval in this particular city, there are roughly 14,000 cameras and at $1,500 camera, this is a $15 million annual revenue opportunity for us.

We’re also testing with the city our fire and smoke detection. As I’ve mentioned in the past, with the introduction of many more charging stations. The charging station causes, it becomes very combustible. And by the time the smoke detectors detect any type of potential problems, the fire already is out of hand. So they’re testing our AI platform to be able to detect the fire and smoke. And this is important as we believe that we’re one of only a handful of companies that are able to tell the difference between smoke, dust, and steam.

The fourth part is working and introducing our Smart Chat Agent to handle 311 service requests. As you know, the 311 call centers have been inundated with calls and experiencing 10 to 15 minute delays. By using our Smart Chat service, we will be introducing not only will the calls be handled in a timely fashion, but the paperwork will be done without mistakes and we’ll be able to conclude the calls in 40 different languages.

In the third quarter, we also moving to Brazil, we also won one of the largest RFPs in history for the Rio de Janeiro Police to provide mobile facial recognition and license plate reading. This process is expected to commence in Q4 as the police are looking to find people on their watch lists for theft and vandalism and riots can be easily detected and updated via central database.

Moving to Las Vegas, to the Clark County School System, as you might recall, the Clark County School System is top five in terms of size in the US. We expect to hear in a very short period the exciting opportunities, the $30 million opportunity to utilize our AI technology for gun and weapon detection. On our last quarter’s call, we mentioned that our focus for the remainder of 2023 was to develop and strengthen our partnership relationships in selling our unique computer vision solutions. In the last few months, we have entered into partnerships with Nvidia, PNY, Arrow Technology, and Intel. Our partnerships with them have started off with very encouraging initial results. And because of this initial success, our partners have already engaged us to do much more.

For example, we have already deepened our partnership relationships with both Nvidia and PNY technologies. Nvidia’s technology and product roadmap, and ours, will be more closely integrated, which means we will be involved in the new product and future launches. With PNY technologies, we’ll be working to develop our product market materials together, introduce our products to their sales team, and train their sales teams on how to sell our products. And PNY has a very strong existing sales and partners in the Middle East. Already they’re introducing to projects in the Middle East. For example, we are already down the path and working with one of the new high-speed railways in the Middle East using our computer vision to help them with traffic analysis and insight.

In addition, we also expect to break through into France, utilizing our AI to help manage five marine sites in its most high-profile area. Other areas that we talked about in the press release is our expansion to Malaysia, Colombia, India and Mexico. You’ll see more details in the future, but just for example with Mexico City, where we’ve begun our POC with one of Mexico’s largest banks in Mexico City. In this particular case, they’ll be deploying our facial recognition for VIP and Blacklist, queue management, and people counting to enhance the in-branch customer experience. We expect this to begin at the end of November and are running for 30 days. This particular bank has over 1,500 branches in Mexico, and upon the successful completion, we will roll out our analytics to all the branches in Mexico City in Q1 and then a similar rollout per quarter through the rest of the country.

Our pipeline, as we mentioned, is very broad and deep, which leads us to looking forward to signing a large partnership deal in Q4 with one of the world’s top three cloud providers in selling our systems. Our computer vision AI is very unique in its service and capabilities, and we look forward to being able to leverage upon the sales force to really marketing our opportunities around the world.

With that, I’ll pass it over to Todd.

Todd Brown

Thank you, Shing, and thank you to everybody for joining us on today’s call. Our revenue for the third quarter of 2023 totaled $0.2 million compared to the $2.8 million during the same quarter in 2022. The $0.2 million of revenue we did recognize during this third quarter of 2023 resulted primarily from additional installations of our campus solution in China. We did also complete certain projects during the same time period worth approximately $1.4 million, but the agreement with our new customer did not yet meet the requirements for revenue recognition during the quarter.

Overall, our project completions slowed in China due to the business and economic recovery efforts that [indiscernible] restrictions were lifted at the end of last year, as well as due to the political tensions that Shing mentioned, which have been increasing between the US and China. All of those conditions made it more difficult and expected for us to complete projects on a steadily increasing pace.

Our operating loss decreased to $4.1 million in the 2023 third quarter compared to $6.7 million in the same period of 2022. In addition to the decrease in revenue and a $2.2 million decrease in cost of revenue, operating loss primarily decreased due to activity in general and administrative expense, including decreases of $2.3 million in the amount of reserved for doubtful accounts recorded, $0.8 million in legal and professional fees, $0.5 million in stock-based compensation expense, and $0.3 million in business development expense. The decreases in administrative and general expense were partially offset by a $0.7 million increase in technology and development expense.

Net loss totaled $7.2 million or $0.39 per basic and diluted share in the 2023 third quarter, compared to a net loss of $8.9 million, or $0.85 per basic and diluted share, in the same quarter of 2022. In addition to the 39% decrease in operating loss compared to the same quarter of 2022, the decrease in net loss was primarily the result of the 2022 third quarter, including $0.4 million of an accrual that did not recur in the 2023 third quarter, as well as a $0.3 million loss on investment that did not recur in the 2023 third quarter.

At September 30, 2023, our cash balance was approximately $0.3 million compared to a cash balance of less than $0.1 million at December 31, 2022. Net cash used in operating activities was $9.1 million during the nine months ended September 30, 2023, which was a 33% decrease compared to the $13.6 million used in operating activity during the nine months ended September 30, 2022.

And with that, I’ll turn the call back over to the moderator to begin the question-and-answer portion of the call.

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Showing no questions, I would like to turn the conference back over to Fay Tian for any closing remarks.

Fay Tian

Thank you, Sarah. And thank you everyone for participating in Remark Holdings’ Third Quarter Fiscal 2023 Financial Results Conference Call. A replay will be available in approximately four hours through the same link issued in our November 15 press release. Have a good afternoon. Thank you.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.

Question-and-Answer Session

End of Q&A