Remark Holdings Inc. (MARK), a company specializing in artificial intelligence solutions, reported its financial results for the first quarter of 2024. The company highlighted its focus on multimodal AI, including computer vision and large language models (LLMs), and its recent contract with Clark County School District for AI-based weapons and gun detection.
Despite a revenue decrease from the same quarter last year, Remark Holdings is optimistic about its new partnerships and the potential for its AI technologies in various industries.
Key Takeaways
- Remark Holdings Inc. (MARK) reported a decrease in revenue for Q1 2024, totaling $0.4 million compared to $0.8 million in Q1 2023.
- The company secured a contract with the Clark County School District for AI-based weapons and gun detection solutions.
- Partnerships with Microsoft (NASDAQ:MSFT) and expected announcements with another Fortune 500 company are set to bolster sales efforts.
- NVIDIA (NASDAQ:NVDA) and Oracle (NYSE:ORCL) will represent and sell Remark's smart city solutions at the World Smart City Expo.
- An operating loss of $3.7 million was reported, an increase from the $3 million loss in the same quarter of the previous year.
- Net loss widened to $13.8 million, or $0.40 per diluted share, due to increased finance costs related to obligations to issue common stock.
Company Outlook
- Remark Holdings is pivoting its business focus from predominantly China to markets outside of China.
- The company anticipates increased adoption of its AI solutions across various industries, including smart city projects.
- Remark Holdings expects to leverage its recent contract with the Clark County School District to secure more opportunities in U.S. school districts.
Bearish Highlights
- Revenue for Q1 2024 has decreased by 50% compared to Q1 2023.
- The slow economic recovery in China and political tensions between the U.S. and China have negatively impacted the business, leading to a reduction in staff and completed projects in China.
Bullish Highlights
- Remark Holdings' AI technologies are being recognized and adopted for critical applications, such as fire prevention and traffic control.
- The company is engaging in partnerships and collaborations with industry heavyweights like Microsoft, NVIDIA, and Oracle to expand market reach.
Misses
- Revenue recognition was delayed for projects completed in 2023, contributing to lower reported revenue for Q1 2024.
- The company did not complete new projects in China during the quarter.
Q&A Highlights
- The Q&A session focused on the company's strategic initiatives and financial health.
- Discussions included the technical migration process with Microsoft and the potential for future partnerships to drive growth.
Remark Holdings Inc. faces challenges stemming from reduced revenue and increased operating losses, but remains optimistic about the future impact of its strategic partnerships and the application of its AI solutions in the market. The company's focus on multimodal AI and smart city solutions positions it to potentially capitalize on the growing demand for advanced technology in public safety and urban management. However, the financial health of Remark Holdings will continue to be monitored closely as it navigates the balance between investment in innovation and the need for financial stability.
InvestingPro Insights
Remark Holdings Inc. (MARK) is navigating through a complex financial landscape, as indicated by the recent data and analysis provided by InvestingPro. Here are some key insights:
- The company's market capitalization stands at a modest $8.77 million, reflecting the scale of its operations and the challenges it faces within the competitive AI sector.
- With a negative P/E ratio of -0.1 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at -0.28, investors may be cautious. This valuation metric suggests that the market has concerns about the company's profitability in the near term.
- Remark Holdings has seen a significant decline in revenue growth over the last twelve months, with a decrease of 62.27%, and an even steeper quarterly revenue drop in Q4 2023 of -86.13%. This aligns with the reported decrease in revenue for Q1 2024 and may indicate underlying challenges in sustaining sales.
InvestingPro Tips for Remark Holdings Inc. highlight some critical aspects that investors should consider:
- The company is trading at a low P/E ratio relative to near-term earnings growth, which could be an indicator for value investors looking for potential turnaround stories.
- Despite recent setbacks, analysts predict the company will be profitable this year, which could signal a pivotal moment for Remark Holdings.
For readers interested in a deeper dive into Remark Holdings Inc.'s financials and future prospects, there are additional InvestingPro Tips available. By visiting https://www.investing.com/pro/MARK, you can explore these valuable insights. And for those ready to take the next step, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where 6 more tips await to guide your investment decisions.
Full transcript - Masraf al raya (MARK) Q1 2024:
Operator: Hello, and welcome to the Remark Holdings Inc. First Quarter 2024 Financial Results Conference 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] As a reminder, this conference is being recorded. I would now like to hand the call to Fay Tian, Vice President of Investor Relations. Please go ahead.
Fay Tian: Thank you, MJ. Good afternoon, everyone and welcome to Remark Holdings first quarter 2024 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 first quarter 2024 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 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 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, Fay. In our last quarter call, we highlighted the importance of where Remark AI stands in the artificial intelligence arena. We took the first quarter to continue to improve on our large vision models, and making everything we offer to customer's multimodal. Most of the names you read in the AI space right now, focus on Large Language Models, or LLM. Due to some great achievements in generated AI, or LLM space in the past year or so, the market has shifted the focus from computer vision to LLM. However, vision is still a major information source for humans. It represents 70% to 80% of our senses, and vision is still the major sense for humans to react to the world. It is the same for AI, and to really make AI useful to our lives and our social development, we need not only to have semantic level AI, but also visual AI. Another word, a multimodal AI to interact with the physical world. Benefiting from LLM's rapid development, computer vision AI has advanced dramatically as well. However, we are still facing several critical hurdles that have prevented computer vision AI from being widely adopted, which are, one, lack of sample data to the particular business or industry. Two, 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 have been tackling these problems for our customers, and have built our zero-shot training framework for limited training samples and our computer vision-based large multimodal model for generalizing computer vision capabilities and reducing AI adoption costs significantly. Our technologies have been applied to many smart city projects in fire prevention, city 311 services, construction, traffic control, et cetera. AI that can solve physical world problems is on the way. 2024 is shaping up to be a year where our 18 months of hard work to pivot our business, from a mostly China business to 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 have been an issue that affects all of us and, in particular, our children and their safety in schools. We won this 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 this deal have surpassed even our own internal expectations, and we only expect more from this point on. Last quarter, we announced our partnerships with Microsoft, where 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 from Microsoft's customers to be cemented. In 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, as 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. Our testament to our unique AI platform is actually happening next week in New York City at the World Smart City Expo. Both NVIDIA and Oracle will be representing and selling our smart city solutions. In fact, I will be speaking on a panel, with both their head of their smart cities division at NVIDIA and the former CIO of Orange County in New York City's fire department, to discuss how our solutions can benefit them immediately. NVIDIA and Oracle want us to showcase what we do in one, fire and smoke detection. Two, traffic analysis, real-time, three, use of AI agents to handle city call centers like 911 or 311. We were asked to showcase our solutions with them, because prediction and prevention is one of the key features computer vision is being adopted in smart city applications. In the case of fire prevention and early warning systems, our AI through street cameras, or building-street - security cameras detect smoke, an early sign of a fire, before it breaks out, or a real-time fire alert when a fire is just starting, whether it's in a garbage dump, construction site, or EV charging station. And the AI is smart enough to tell the smoke from streams, dust, or fog to minimize false alerts. Working with the fire department's dispatching system, the AI 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 in a building or on a campus, our AI can give - real-time people count. How many are in the building and how many have gotten out, and where the - firefighters are, for better rescue planning and reduced risk for firefighters. And with talk down speakers, the AI 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 ask that we are able to attract these industry heavyweights to be our partner? AI capabilities are growing fast and stronger, but people always have doubts on how AI can perform, especially on mission-critical tasks, until they see what AI can create and generate. While LLM AI 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 and the context understanding. We call that human knowledge from semantic labels. We are teaching it to understand the rules and physics of the real world, so that it's able to construct a hundred ton stacking machine, to unload piles of ore from a ship or train, and stack them properly in a warehouse autonomously. Or it is able to detect various damages on turbine engine blades and assist engineers to determine, if the 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, to help us scale and achieve our goals faster, we are doing that as - I speak and you should expect to see positive news regarding these issues in the near future. Todd?
Todd Brown: Thank you, Shing and thank you to everybody, for joining us on today's call. Our revenue for the first quarter of 2024 totaled $0.4 million, reflecting a decrease from the $0.8 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 the time meet the requirement for revenue recognition 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 2024, reflected an increase of about $0.7 million from an operating loss of $3 million, during the same period of 2023. In addition, certain expenses related to business development increased, by $0.6 million during the first quarter of 2024. Those such increases were partially offset, by a $0.2 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 2024, 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 $0.5 million from the U.K. government, which we recorded at the time as an 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 $0.3 million of 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 $0.40 per diluted share during the first quarter of 2024, compared to a net loss of $8.2 million or $0.63 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 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 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 cost was partially offset, by a decrease in interest expense of $0.6 million and that decrease primarily resulted, because the same period of 2023 included an extension fee of $0.8 million that, was reported in interest expense. While during this first quarter of 2024, no such fee was incurred. As of March 31, 2024, our cash balance totaled $0.2 million, and that compared to a cash balance of $0.1 million as of December 31, 2023. And we also used $3.4 million of cash in operating activities, during the first quarter of 2024. 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, MJ. And thank you everyone for participating in Remark Holdings, first quarter fiscal 2024 financial results conference call. A replay will be available in approximately four hours, through the same links issued on our May 16 press release. Have a good afternoon. Thank you.
Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.
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