Remark Holdings Inc

NASDAQ:MARK

Earnings Call Transcript 2023-Q3

[Operator]

Good day and welcome to Remark Holdings Fiscal Third Quarter 2023 Financial Results Earnings Call. All participants would be in a listen-only-mode. [Operation 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, executive]

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 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 may be forward-looking statements. These statements involve risks, 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' stature forward-looking statements 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, executive]

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 to 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 U.S. 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 7 years.Three immediate opportunities which we have spent a lot of time focusing on the cities in the U.S., 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 protection, violent detection. And as you know, that 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 for migrant center, and there are hundreds of these micro centers that are well taken in different sanctuary cities in the U.S.A second large opportunity for us in the different cities in the U.S. is working with the Department of Corrections. We've recently installed in several sites showcasing our technology. Again, it's more facial recognition, weapon protection and violent detection. Upon approval in this particular city, there are roughly 14,000 cameras and a $1,500 camera, this is a $15 million annual revenue opportunity for us.We are also testing at 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 becomes very combustible. And by the time these 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 that handle 311 service requests. As you know, the 311 call centers have been integrated with calls and experiencing 10- to 15-minute delays. By using our Smart chat service we will be introducing, not only will the case be handled in a timely fashion, but the paper work 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 [indiscernible] Genetec release to provide mobile facial recognition and license play reading. This process is expected to commence in Q4 as the police are looking to find people on their watches for test and vandalism and why can be easily detected and updated the essential database.Moving to Las Vegas, the Clark County School System. As you might recall, the Clark County school system is top 5 in terms of size in the U.S. 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 and selling our unique computer vision solutions.In the last few months, we have entered into partnerships with NVIDIA, PNY, our 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 road map 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 trained our sales team 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 in working with one of the new high-speed railways in the Middle East using our computer vision to help them with traffic analysis and insights.In addition, we also expect to break through into France, utilizing our AI to help manage 5 marine sites in its most high-profile area. Other areas that we talked about in the press release is our expansion into 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 to 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 to 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 3 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, executive]

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 the third quarter of 2023 resulted primarily from additional installations of our 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 can gated 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 U.S. and China, all of those conditions made it more difficult than expected for us to complete projects on the sale, pardon me, 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 and the amount of reserve 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 expenses 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 billion at December 31, 2022. Net cash used in operating activities was $9.1 million during the 9 months ended September 30, 2023, which was a 33% decrease compared to the $13.6 million used in operating activity during the 9 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] At this time, we will pause momentarily to assemble our roster. So no questions. I would like to turn the conference back over to Fay Tian for any closing remarks.

[Fay Tian, executive]

Thank you, Sarah, and thank you, everyone, for participating in Remark Holdings, Third Quarter Fiscal 2020 Financial Results Conference Call. A replay will be available in approximately 4 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.