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Remark Holdings Inc (MARK) Q4 2023 Earnings Call Transcript Highlights: Strategic Partnerships ...

  • Revenue: Fiscal year 2023 totaled $4.4 million, a decrease from $11.7 million in fiscal year 2022.

  • Operating Loss: $17.2 million for fiscal year 2023, down from $21.3 million in fiscal year 2022.

  • Net Loss: $29.1 million or $1.74 per diluted share for fiscal year 2023, compared to $55.5 million or $5.22 per diluted share for fiscal year 2022.

  • Cash Balances: As of December 31, 2023, totaled $0.1 million.

  • Net Cash Used in Operating Activities: $10.5 million during 2023.

Release Date: April 15, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Remark Holdings Inc (MARK) established a significant business partnership with Microsoft, expected to drive $240 million of AI business by 2029.

  • Launched the first SaaS AI platform and large vision model business application, designed to address complex environmental problems in various industries.

  • The Smart Construction product is currently being customer tested in one of the largest construction projects in the world located in Saudi Arabia.

  • Remark Holdings Inc (MARK)'s Smart Safety Platform (SSP) has been upgraded to a cloud-based global SaaS platform with scalable and mission-critical processing capability.

  • The company has a strong pipeline with recent wins like the Clark County School District, positioning it well for other large school districts across the US.

Negative Points

  • Revenue for fiscal year 2023 totaled $4.4 million, reflecting a decrease from the $11.7 million recorded during fiscal year 2022.

  • Operating loss of $17.2 million during fiscal year 2023, though decreased from $21.3 million in fiscal year 2022, remains significant.

  • Project completion slowed in China initially due to COVID-19 pandemic restrictions and later due to increased political tensions between the U.S. and China.

  • Net loss of $29.1 million or $1.74 per diluted share during fiscal year 2023, albeit a decrease from a net loss of $55.5 million in the previous fiscal year.

  • Cash balances as of December 31, 2023, were very low at $0.1 million, with net cash used in operating activities during 2023 at $10.5 million.

Q & A Highlights

Q: Could you provide an update on Remark Holdings' business partnerships and sales efforts? A: Kai-Shing Tao, Chairman & CEO of Remark Holdings, mentioned that a significant achievement in 2023 was the signing of a business partnership with Microsoft, which allows Remark to leverage Microsoft's sales teams to market their AI solutions. This collaboration is expected to drive $240 million of AI business for Remark by 2029.

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Q: What is the focus of Remark Holdings' AI technology, and what are some of the applications? A: The company focuses on computer vision and building large vision models, leading to a platform of multimodal models as a service. They launched a SaaS AI platform for smart construction, which performs various checks and provides business intelligence through video analytics. They also developed an aviation safety platform and are planning to launch a safety platform for marine and sea safety.

Q: Can you elaborate on the financial results for fiscal year 2023? A: Todd Brown, VP of Finance, reported that revenue for fiscal year 2023 totaled $4.4 million, a decrease from the previous year's $11.7 million. The net loss was $29.1 million or $1.74 per diluted share, which was a decrease from the prior year's net loss of $55.5 million or $5.22 per diluted share. The decrease in net loss was primarily due to the absence of a loss on investment that was reported in the previous year.

Q: What are the expected revenue streams from the AI solutions provided by Remark Holdings? A: Kai-Shing Tao explained that they sell six solutions at $100 per solution per month, which equates to $7200 a year per camera. With 100 cameras typically located in each Micro Center, this could lead to $720,000 per year per center. With 100 Micro Centers, the potential revenue could be $72 million a year.

Q: What is the total addressable market for Remark Holdings' AI solutions? A: Kai-Shing Tao stated that there are 100 million domestic security cameras and 200 million global cameras, excluding China, that do not provide intelligence or AI real-time analytics. Assuming a base case of $1,200 annual stream per camera for analytics, this represents a $360 billion total addressable market.

Q: What are the challenges faced by Remark Holdings in China? A: Todd Brown mentioned that project completion slowed in China initially due to the slow economic recovery after COVID-19 restrictions lifted and then due to increased political tensions between the U.S. and China. These conditions made it difficult to complete projects at a steadily increasing pace.

Q: What is the status of the cash balances and net cash used in operating activities for Remark Holdings as of December 31, 2023? A: As of December 31, 2023, cash balances totaled $0.1 million, compared to less than $0.1 million on December 31, 2022. Net cash used in operating activities during 2023 was $10.5 million.

Q: Are there any clarifications regarding the potential revenue from the security contract with Micro Centers? A: Kai-Shing Tao clarified that for one contract, the potential revenue is $72 million a year, based on $100 per solution for six solutions, amounting to $600 per camera per month, and with 100 cameras per Micro Center, leading to $720,000 per year per center, and with 100 centers, it equates to about $72 million annually.

This article first appeared on GuruFocus.