Remark Holdings, Inc. (MARK), a global technology company, reported its financial results for the second quarter of 2024, highlighting a significant contract win with the Clark County School District and an optimistic outlook on future opportunities. The company is transitioning its revenue base from Asia to the U.S., citing political tensions between the U.S. and China as a key driver for the shift. The successful deployment of weapon detection technology in the fifth-largest school district in the U.S. is expected to pave the way for more contracts in the education sector and beyond. The company also discussed its strategic partnerships with Microsoft (NASDAQ:MSFT) and Oracle (NYSE:ORCL), its expansion into the hotel hospitality industry, and its financial performance, including a decrease in operating loss and a net loss for the quarter.
Key Takeaways
- Remark Holdings secured a significant contract with Clark County School District for weapon detection technology.
- The company is focusing on transitioning its revenue base from Asia to the U.S. due to political conflicts.
- Remark AI showcased its products at the New York City Smart City Expo and is negotiating contracts with other U.S. entities.
- The company introduced the Remark Fast AI Training platform, a SaaS product for computer vision model training.
- Partnerships with Microsoft and Oracle are expected to drive sales and market expansion.
- Remark Holdings reported a net loss of $5.3 million for Q2 2024 but saw a decrease in operating loss compared to Q2 2023.
Company Outlook
- Remark Holdings is optimistic about the future, with the expectation that the Clark County School District contract will meet or exceed its proposed $45 million value over nine years.
- The company is expanding into the hotel hospitality industry with a partnership with a global brand.
Bearish Highlights
- Despite strategic moves, Remark Holdings reported a net loss of $5.3 million for the second quarter of 2024.
Bullish Highlights
- The company's transition to the U.S. market is showing successful signs, particularly with the Clark County School District contract.
- Remark AI's capabilities are gaining recognition, leading to further contract negotiations and potential new partnerships.
Misses
- Remark Holdings experienced a net loss of $5.3 million or $0.12 per diluted share in the second quarter of 2024.
Q&A Highlights
- The Q&A session focused on Remark Holdings' financial results, business strategies, and outlook. Specific questions and answers from the session were not provided in the summary.
Remark Holdings' shift towards the U.S. market and its strategic partnerships indicate a positive trajectory for the company's future growth. However, the financial results for the second quarter of 2024 show that the company is still facing challenges in achieving profitability. The company's innovative technology and recent contract wins provide a foundation for potential success in the upcoming quarters.
InvestingPro Insights
Remark Holdings, Inc. (MARK) has been navigating a challenging financial landscape, as reflected in its recent quarterly report. InvestingPro data provides a deeper look into the company's financial health and market performance:
- The company's market capitalization stands at a modest $5.07 million, indicating a relatively small size within its industry.
- Remark Holdings is currently trading at a negative P/E ratio of -0.06, suggesting that investors are concerned about the company's profitability prospects.
- Revenue for the last twelve months as of Q1 2024 was reported at $3.96 million, with a sharp decline of 49.35% compared to the previous period. This aligns with the InvestingPro Tip that analysts anticipate a sales decline in the current year.
InvestingPro Tips for Remark Holdings highlight several key points for investors to consider:
1. The company is trading at a low P/E ratio relative to near-term earnings growth, which may catch the eye of value-oriented investors searching for potential turnaround stories.
2. With analysts predicting a sales decline, it's crucial for potential investors to weigh this against the company's strategic initiatives and the potential for new contracts to offset these headwinds.
For those interested in a comprehensive analysis, InvestingPro offers additional insights and tips on Remark Holdings, which can be found at https://www.investing.com/pro/MARK. These tips can provide a more nuanced understanding of the company's position within the Banks industry and its financial performance.
Full transcript - Masraf al rayan (MARK) Q2 2024:
Operator: Good day, and welcome to the Remark Holdings Second Quarter 2024 Financial Results Call. All participants will be in a 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 call over to Fay Tian. Please go ahead.
Fay Tian: Thank you, Nick. Good afternoon, everyone, and welcome to Remark Holdings' second quarter 2021 financial results conference call. I am Fay Tian, Vice President of Investor Relations for remarks. 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 second quarter 2024 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 risks, 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 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 to Remark's businesses and recent developments. Please go ahead, Shing.
Kai-Shing Tao: Thank you. It's been no secret about our intention to transition our revenue base from Asia to the U.S., especially due to the political conflicts between the U.S. and China. While it's taken us some time to do so, as most government contracts do, we are proud to see the successful fruits of our labor begin to show with our recent contract win with the Clark County School District, which is the fifth largest school district in the United States. Our recent contract win for implementing weapon detection technology in the Clark County School District is a significant milestone that will likely lead to a multitude of future opportunities, both within Clark County and other school districts of similar size. We are optimistic that the contract value will meet or exceed its proposed $45 million value over nine years, as we expand and introduce the value added functionality of our smart safety platform. By successfully deploying weapon detection technology in a large school district, Remark AI demonstrates its capabilities, building trust with potential clients. The Clark County School District serves as a high-profile reference enabling Remark AI to showcase its expertise and technology in a large real-world setting. This contract win attracts attention from other educational institutions law enforcement agencies and government organizations, potentially leading to new partnerships. Remark AI can leverage this success to enter adjacent markets such as other school districts and educational institutions, public venues, government facilities and buildings and private enterprises. Remark AI can offer complementary solutions like facial recognition, fight detection, unattended object detection and advanced analytics to existing and new clients. We have already started our POC with one of the largest subway systems in the U.S. and we look forward to updating you on our progress. Other highlights for Remark AI this past quarter. We showcased our AI fire and smoke -- our AI fire and smoke smart city and smart agent solutions at the New York City Smart City Expo in conjunction with Oracle and NVIDIA (NASDAQ:NVDA). The success and uniqueness of our AI products has led to additional POCs to help the top 100 U.S. cities turn into modern 21st century smart city. We completed the at the headquarters train station for one of the largest European railway systems with over 600 stations, deploying our AI-powered passenger counting fair evasion, fire and smoke detection and unattended baggage detection. The success of this POC has led to current contract negotiations to close the deal in the second half of 2024. Another highlight is that we have completed a successful POC for the migrant centers in one of the largest sanctuary cities in the U.S., where we deployed our AI powered facial recognition, fight warnings fire and smoke detection as well as weapons detection modules. The success of this POC has led to preparations to deploy our technology across multiple city agencies as we negotiate to close a contract also for the second half of 2024. As far as the new platform and product introductions, going into the second half of 2024, we are introducing our Remark Fast AI Training platform. Fast AI is a SaaS product that can train and tune up general and specific computer vision models. For example, fire and smoke detection, unattended bags, unauthorized personnel and vehicles. As a SaaS platform, it provides AI training infrastructures, i.e., GPU optimization, GPU resource management, Tensor Flow framework, Clip framework and SAM framework, to ease the training and testing of computer vision and multi-mobile models. It also offers the zero-shot sample annotation which can annotate training samples by AI itself without a large amount of human labeling. Fast AI license is a permanent license and a fixed cost for individual AI models, with training, testing, hardware provided in the cloud. There is no extra cost for AI model retraining, upgrades or tune-ups for customization. The IP of the training data and the train tune models belongs to our customers. Why do we think this is a winning proposition in the U.S? I'm sure you have read about how our businesses are looking for smaller models, ones that solve real business problems with precision, while those large language models solve creativity problems with bearable errors, variable errors for them, but unbearable for business solutions. Let alone the cost, data privacy and IP problems that are unsolvable yet with large language models like ChatGPT. During the second quarter, we've continued our alignment with both the Microsoft and Oracle sales team. Remark AI completed its migration to the Microsoft Azure platform, preparing Remark's smart safety platform, otherwise known as the SSP, to be marketplace ready, allowing Microsoft's global sales force to begin selling Remark's SSP across multiple industry verticals and through established systems integrators. Integrating with leading cloud providers like Microsoft Azure and Oracle Cloud is crucial for success, especially as we are now able to tap into their vast customer base and expand our market presence. Our focus with Microsoft Azure marketplace is simple and straightforward. Based upon our mutual analysis of the potential for Microsoft and Remark to jointly capture $400 million of business together in the next five years. We've committed to consume $80 million of services on the Azure platform, which incentivizes Microsoft's sales force to evangelize and widely deploy our AI products. We are conducting regular teaching sessions to their sales force by specific industry expertise. Microsoft sales force has tracked and paid commission based upon how much Remark's software is consumed and plus by the annual recurring revenue SaaS model. With Oracle, we'll be one of the companies featured in the Oracle AI pavilion along in partnership with NVIDIA at the upcoming Oracle CloudWorld taking place in our town of Las Vegas in early September as one of Oracle's key innovation partners. This will be the second event we'll be presenting together. The first happened this past May at the New York City Smart City Expo in conjunction with Oracle and NVIDIA, highlighting the broad capabilities of our AI smart city platform. As we go into the last couple of quarters of the year, we are excited to bring Remark AI into the hotel hospitality industry. In the near future, we will announce our partnership with a global hotel hospitality brand that combines music, art and culture, as its preferred vendor on all AI related initiatives. This strategic partnership aims to revolutionize the guest experience and operational efficiency across its properties worldwide. Remark AI will provide its innovative AI powered solutions to enhance various aspects of the hotel operations, including: one, personalized guest services -- experiences through AI-driven recommendations and tailored services; two, intelligent chat bots for seamless guest interactions and support; three, predictive analytics for optimized room allocation, pricing and revenue management; and four, automated workflows and process optimization for improved operational efficiency. Remark AI's proprietary AI platform will be integrated with its existing systems to provide a unified and intuitive interface for staff and guests alike. The partnership will also facilitate the development of new AI powered application and services, further solidifying their position -- further solidifying our position as a pioneer in the hospitality sector. Todd?
Todd Brown: Thank you, Shing, and thank you to everybody for joining us on today's call. As we have previously noted, we have been working to expand our business in the U.S. And during the second quarter of 2024, we were able to complete the first Clark County School District project which resulted in $3.7 million of revenue for the second quarter of 2024. As Shing noted earlier, this has already led to an additional order and other opportunities for us in the U.S. Our operating loss of $3.2 million during the second quarter of 2024, reflected a decrease of about $0.8 million from an operating loss of $4 million during the second quarter of 2023. During that second quarter of 2023, we had recorded an impairment of approximately $0.4 million related to certain prepaid expense amounts that were deemed unrecoverable. The absence of any impairments during the second quarter of 2024, and contributed to the decrease in operating loss as did the $0.2 million decrease in payroll-related expenses reported as part of tech. For the second quarter of 2024, we are reporting a net loss of $5.3 million or $0.12 per diluted share compared to a net loss of $5.9 million or $0.42 per diluted share during the same quarter of 2023. Interest expense during the second quarter of 2024 did not significantly change from the amount that we reported during the same period of 2023, while finance costs also remained relatively flat. Finance cost is related to the establishment of and remeasurement of our obligations to issue common stock, which arise as a result of our transactions with Ionic Ventures LLC, which consists of draws on an equity line of credit. At June 30, 2024, our cash balance totaled was $0.4 million, which compares to a cash balance of $0.1 million on December 31, 2023. We used $6.1 million of cash and operating activities during this second quarter of 2024. Lastly, in August of 2024, we were able to resolve all outstanding events of default regarding our debt agreement with Mudrick Capital Management by entering into an agreement with Mudrick to exchange the existing non-convertible notes we had issued to them for convertible debentures. And with that, I will turn the call over to the moderator to begin the question-and-answer portion of this call.
Operator:
Fay Tian: Thank you, Nick. Thank you, everyone for participating in Remark Holdings' second quarter 2024 fiscal financial results conference call. A replay will be available in approximately 4 hours through the same link issued in our August 19's 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.
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