Remark Holdings, Inc.

Stand by, we're about to begin. Welcome to the Remark Holdings Inc. Second Quarter 2021 Financial Results Conference Call. My name is Cody, and I'll be the operator today, and we'll handle the Q&A. As a reminder, this conference is being recorded. I would now like to turn the call over to Brian Harvey, Director of Capital Markets and Investor Relations. Please go ahead.

Thank you, Cody. Good afternoon, everybody, and welcome to Remark Holdings' Fiscal Second Quarter 2021 Financial Results Conference Call. I'm Brian Harvey, Senior Vice President of Capital Markets and Investor Relations for Remark. On the call with me this afternoon is Kai-Hsing Tao, Remark's Chairman and Chief Executive Officer. In just a moment, Mr. Tao will provide an update on our business, and I will recap our second quarter 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 full in its filings with the SEC. I will now turn the call over to Remarks Chairman and Chief Executive Officer, Mr. Tau, so he can provide additional color on Remarks business and recent developments. Shane?

Good afternoon, and thank you for joining the Remarks Holdings Second Quarter 21 Financial Results Conference Call. Before I turn the call back to Brian to review the financials, I want to provide an update on the progress we've made in certain business segments since our last call and provide information on where we see additional opportunities. I'd also like to first take this moment to acknowledge our research and development team for their continued success as our latest software achieved a top five ranking in the recent computer vision testing known as the Face Recognition Vendor Test, or FRVT, conducted by the U.S. National Institute of Standards and Technology, otherwise known as NIST. Specifically, 198 systems were tested in the FRVT for the ability to verify that a person is wearing a face mask, and we finished in the top five ahead of well-known public companies, several billion-dollar private AI unicorns, and well-known AI research labs. Our consistent and continual leadership in AI innovation and practical execution has given us a strong advantage to beating our much larger and capitalized competitors in this space. 2021 is turning out to be a transformation year for us. We have already nearly surpassed our 2020 revenue numbers and only expect our third quarter and fourth quarter to be stronger, setting us up in a perfect position to continue to win new businesses, continue to capitalize on in-sell opportunities, and expand into new verticals. Our current pipeline and future potential wins remain very strong, and we will continue to commercialize our industry-leading AI technology around the world. Here are some of the highlights. In Asia, after Q1's successful implementation of smart bank retail stores and good results from our DMP solutions, in the second quarter, we won the second phase with Bank of China in their DMP business, where we run their offline traffic and convert them both offline and online across the entire Sichuan province. At the same time, through our banking industry partners, we have won more than 100 smart bank retail store deals with Bank of China as well. School businesses. In the second quarter, we developed several school product distributors who have started to help us get into schools in Sichuan and Chongqing provinces. where we have deployed our smart school solutions in 35 out of the 200 schools. Combining with other provinces schools, we have now deployed in more than 250 schools in 2021. China Mobile. Although China Mobile's retail store innovation and smart community projects have been experiencing a slower than expected rollout due to COVID situations, we still managed to complete phase one and continue to execute Phase 2 and Phase 3 smart retail store contracts. While the Smart Community Project Phase 1 is still being executed for China Mobile Smart Communities and expected to be completed by Q3, we are confident in our ability to win the second phase of China Mobile Smart Community Project. We will provide our AI solution to enforce COVID-19 protection rules for communities by enforcing health codes, conducting real-time temperature checks, ensuring mask wearing, allowing access only to residents or authorized persons, controlling vehicle access, and helping to protect the elderly and children, all in addition to what we delivered in phase one. Factory businesses. After several successful POC projects in Q4 2020 and Q1 2021, with many cement factory clients, in the second quarter, we have won the first five cement factories out of the 35 expected deployment for 2021, where we've provided a complete safety solution that covers AI worker management, the AI key device management, three, conveyor belt safety management, and four, protective gear checkup. In the wave of technological improvements for traditional factories, our proprietary AI technologies are now being tested in many different heavy industries, including cement factories, mines, power plants, ports, railways, and et cetera. For Q3, our speed of deployment has increased quite significantly, and our target for 21 and 22 is to deploy across 300 factories. Winter Olympics in Beijing in 2022, we are in the process of deploying our smart hotel solution an energy-saving solution for one of the largest ski resorts outside of Beijing of where the Beijing Winter Olympics will be held, where some of the snow sports competitions will be expected to be completed before the snow season starts. As mentioned on other previous earnings calls, these solutions will range from helping to lower the labor costs, monitoring employee and guest safety in areas of power management where they can help significantly lower the cost from transferring water to snow. Our pipeline is very strong, as I mentioned, and here are some of them. After a successful POC project with one of China's largest airlines, we are in the process of securing an AI as service project where our AI algorithms can be the foundation of many aviation applications. We believe this is the first of its kind complete platform for the aviation industry and presents a tremendous future opportunity for a remark AI around the world. The potential AI algorithms for aviation applications include facial recognition, PPE recognition, metal surface defect detection, LIDAR signal-based object recognition, and personnel REID. This project is expected to be completed by the end of 2021. We've also entered the bidding process for a large EV bus charging station where we will provide real-time fire and smoke detection monitoring for over 500 EV buses every night. It is critical to be able to detect fire and smoke fast and accurately enough and trigger fire distinguishing equipment before the charge station gets on fire. There are over 2,000 EV bus charging stations throughout China, and given all the issues with battery safety for all EV vehicles, As the recent headlines have spotlighted, we believe this is not just a China opportunity, but a global one. Moving to the U.S. During the second quarter, we continued to build our data intelligence business using our AI data intelligence platform. Based on initial success, we are looking forward to the start of the fall sports season and to additional growth options with other online sports gaming and iGaming businesses. Our AI is used to find insights with their own proprietary data sets, particularly with respect to understanding a customer's needs and buying patterns. This helps with analyzing first-party protected data and benefits from the shift away from cookies and third-party data sources. These initiatives, which began in Q1 2021, led to a doubling of U.S. revenue in Q2 21, as compared to the comparable quarter a year ago in 2020. Our technology includes geo-framing targeted audiences where we can track their physical and virtual visits, qualifying them as an interested potential customer. Historically, companies used Facebook because they had the best identity graph. Therefore, you know your customer. You can ask Facebook to find similar customers. With all the new privacy rules against Facebook, it makes the identity graph much less useful. Taking advantage of this opportunity, we've created our own proprietary identity graph. Our ability to exactly geo-target based on longitude and latitude in geo-framing our competitors have allowed us to really understand who is going to the website and allowed us to refine our targeting. For example, if you're an NBA Lakers fan, you are likely to be interested in participating in anything Lakers related. Our geo-targeting allows us to identify anyone that's been in the Staples Center or any of the restaurants or retail stores around it. We can figure exactly what email that Lakers.com has sent out outbound, scraped their fan clubs and Facebook groups. Now that we know who the profile of this person is, we can match it with our own data sets. Usually you have the name and email, but you know nothing about the customer or vice versa. you know the profile of your customer, but not how to contact them. We've become that bridge for our customers. And once we are able to identify, we can go through their social behavior and see who their friends are or people they associate with similar behavior. We then create a customized offer for them. And through our AI data intelligence, we are able to do automated rapid A-B testing. Our platform is running 24 hours, seven days, 365 days, a year while not taking breaks and dealing with human constraints. In the daily fantasy sports industry, we're able to track the largest competitors as well as the fan engagements on Facebook groups. Knowing that customer is actively receiving emails from a team site and participating in fan chatter with their friends, we're able to confirm their interest in following the seasonal games as well as their favorite athletes who can positively market it to regarding who, how, who and how to participate in their clients' daily fantasy contests. With the upcoming NFL and college football season expected to be the busiest period for players participating in daily fantasy sports, we expect to fully leverage the 32 million historic daily fantasy sports players we have identified in our identity graph, including the active 1.8 million active participants who currently bet on competitor daily fantasy sites to introduce and attract them to our clients' offerings. This is our first venture in the US applying our AI data analytics platform. As you remember, we've had success in doing this before in other parts of the world. We are excited by our initial results and look forward to continuing to work with Superdraft and their peers. Brands that use our AI are using it for a richer and more effective connection with their customers. In addition, we are also enthused by the additional opportunities and other verticals that are looking for similar situations in solving the issue of how do I acquire more customers with a higher conversion rate while lowering our overall acquisition cost. For example, in the mortgage loan industry, we're able to geoframe customers who participate in real estate open houses, which suggests that they would likely be interested in pursuing a mortgage for their eventual purpose. The mortgage loan origination process is waiting to be disrupted as it is slow and costly. We will soon be entering this industry with a couple of named partners along our side. Other updates in our U.S. businesses. Our biosafety business saw a slowdown in the second quarter commensurate with the vaccine push and the overall relaxing of regulations with some customers delaying orders while they await the final regulations. However, with variants such as the Delta virus emerging, we've begun to see business development activity pick up again. It is our continued belief that creating a safe environment for both customers and employees will be crucial and a differentiator in the marketplace, and we believe our solutions are ideally suited to meet these needs. We are working with ShareCare as their partner to help their ShareCare Safe certification process, leveraging our thermal safety products. We are also currently testing our AI safety and security solutions at the West Palm beach location of one of the largest private and publicly funded high speed railway in the U S currently connecting Miami to West Palm beach. And in the future with Orlando to come, we are looking to hit our goal of a full rollout when the station becomes fully operational in Q1, 2022. In Q3, We expect full deployment of our AI security surveillance platform with the Shrine Group, the largest vertically integrated cannabis company in California. With Shrine Group becoming our anchor partner in this fast-growing industry, we are enthused by the number of different solutions we can provide for the industry in general, which extends beyond helping manage the retail dispensary operations. This includes opportunities to use the Remark AI platform for cultivation and manufacturing as well. We continue to also be working with a large hospitality customer as they begin the planning for their new hotel ventures in the US with the intention to leverage the latest AI technologies to save costs and improve operations. And finally, as mentioned before, with our ESG efforts in China already underway, we look forward to the massive infrastructure bill in the US allocating a combined $15 billion to EV infrastructure, including $7.5 billion to electric buses alone. Our technology is well tested and needed in the U.S., so we like our chances in entering this market. Subsequent to June 30, 2021, Sharecare completed its merger with Falcon Acquisition, providing us with an initial liquidity of $2.3 million plus approximately 9.5 million shares of Sharecare. We anticipate that monetizing our position will fund our balance sheet while simultaneously supporting working capital needs to meet our growth goals and new initiatives. Despite the recent turmoil with SPAC-related deals, we remain very bullish on ShareCare's leadership, business plan, and execution. Unlike most companies in the digital healthcare space, ShareCare is a category of one digital health business that is growing revenues at 25% plus while generating positive EBITDA. There are not many companies in this hyper-growth digital health space that can say that. And in addition, the recent Anthem Blue Cross Blue Shield strategic partnership brings 44 million prospective members to the cross-marketed ShareCare platform. Looking forward into Q3 and Q4, Remark Holdings will now be taking our first step into building and bringing the metaverse to life. Inspired by the vision of the global leading companies like Epic Games, who created Fortnite, Facebook, Roblox, and Nvidia, we will pivot to leverage our Bikini.com brand equity and IP asset to create a beach lifestyle metaverse where we can integrate the digital and physical worlds together. With the Bikini.com metaverse, we are creating a full-fledged economy and offering an unprecedented, I'll quote this, unprecedented interoperability. Users have the ability to take their avatars and goods from one place in the metaverse to another, no matter who runs it. And with Bikini.com, we will capitalize on our name being recognized around the world as it means the same in every language. In addition, we are now leveraging Remark Entertainment's platform to create proprietary content from leading influencers, entertainers, and artists, building a non-fungible token otherwise known as the NFT business in the US and Asia with a targeted Q4 launch anchored by a very well-known global celebrity with substantial valuable intellectual property and assets. For those unfamiliar with what an NFT is, a non-fungible token is a unit of data stored on a digital ledger called a blockchain that certifies a digital asset to be unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. The market for NFT exploded earlier this year with $2.5 billion in platform sales in the first six months of 2021, up from just $13.7 million in the first half of 2020. And the investment we made to capitalize on that business is poised to capture that growth. Our core strengths in artificial intelligence give us the market intelligence to make early investments to develop and support the NFT and metaverse vision. And we believe we are well positioned to prosper in this fast-growing industry. The recent pandemic has changed both lifestyle and work habits, advancing technology trends that have taken decades to adopt instead of taking place in years. Human beings continue to crave social interaction while keeping a form of unique identity. The virtual world has mirrored the physical world with owners deciding to own unique branded status symbols to show off the same way customers of Chanel and Hermes proudly wear their brands to reflect social status. In summary, our remark holdings continues to grow and transform our business, that it's either reoccurring or repetitive in nature. Our AI-based platform with proprietary services attached to it a business and earnings model that leads to increased margins and significant cross-channel selling opportunities. I'd now like to turn the call back to Brian for a review of the second quarter 21 financial results.