Remark Holdings, Inc.

And welcome to the Remark Holdings Fiscal Second Quarter 2023 Financial Results Earnings Call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, we have an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Ms. Faye Tan, Pastor Relations. Please go ahead.

Thank you, Nick. Good afternoon, everyone, and welcome to Remark Holdings' second quarter fiscal 2023 financial results conference call. I am Fei Qian, Vice President of Investor Relations for Remark. On the call with me this afternoon is Kai-Hsing 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 2023 physical 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 risk, 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 Holding's current views, and Remark Holding expressly disclaims any obligation to update or revise any forward-looking statements after this date's hear-off. This disclaimer is only a summary of Remark Holding's statutory forward-looking statement's 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. Tao, so he can provide additional information on Remarks businesses and recent developments. Please go ahead, Jing.

Thank you for taking the time to listen to our Q2 update, and we're excited to share what lies ahead of us. But first, a recap of Q2, which was revenue that was strongly driven by our business in China. by the current economic and political headwind that China is facing. First, the construction sector. In Q2 2023, we've completed 25 Remark AI construction product deployments, which contributed over $2 million. The deployments are for smart construction platform, which includes worker check-in and check-out, worker PPE monitoring, worker safety enforcement, hazard zone intrusion prevention, fire and smoke alerts, environmental protection monitoring. We continue to develop construction SOP and autonomous operation related AI algorithms and applications, which will include autonomous crane operation system and autonomous cement mixing system. Two, school sector. In Q2 23, we continue our remark AI school product development, and deployment. We've added 43 schools in our customer base in Q2, which makes our AI school products to serve over 700 schools and 1.5 million students. Our school safety, food safety, and AI energy controlling system, along with new products released in Q2, which include eye protection and restroom environment monitoring system, are making us a unique AI product provider in the school education market. We are now expanding our footprint into two new provinces in China and into the city of Chongqing, which is one of the four principal municipalities of China. Today, our systems cover less than 1% of the total of 400,000 campuses in China. Three, smart community. We completed the entire deployment of our smart community projects, over 1,800 communities deployed, in which we do that in conjunction with China Mobile for phase one. We are in the process of negotiating additional smart community project phase two, which will cover an additional 3,000 residential communities and over 5 million residents. Phase two is expected to start in Q3, Q4 of this year. Four, airline sector. As we mentioned before in our calls, Remark AI has introduced the first AI aviation platform in the industry. We are currently in the final bidding process for three of the airline AI projects after delay due to COVID from 2022. The projects include airport safety system, engine inspection system, and airplane collision prevention system. To remind you of the use cases here, typically it takes one hour plus for 10 workers to inspect the engine to make sure there are no burns or cracks in the blade. With our computer vision AI, we are now able to do this inspection in under 10 minutes and with only one inspector. And lastly, in the retail sector, we are currently working with one of the largest ice cream and pizza chains in China and have deployed our AI smart retail products to over 600 stores. The products include staff check-in and check-out and performance analysis, food processing safety, theft prevention, store food material waste management, product presentation and placement, and loss of sales prevention, replenishment management, and et cetera. We are expecting an additional 600 more chain stores to be online by the end of Q1 24. Going beyond China. During the last two conference calls, we have shared with you the large total addressable markets, otherwise known as TAM, for markets seeking to capture. To recap, there are currently approximately 100 million cameras in the United States and another 200 million globally, excluding greater China. Our mission is to utilize our award-winning AI power technology to bring intelligence to the 300 million dumb cameras that are in the marketplace outside China, providing detailed analytics such as identity recognition, large density people counting, loitering, object detection, weapons detection through our SSP, otherwise known as our Smart Safety Platform, that is camera and platform agnostic. Modeling $100 per month analytics fee per video stream, or $1,200 annually, that reflects an annual total addressable market of $3.6 billion in recurring revenue globally, excluding greater China. With such a large TAM, how are we going to capture this market opportunity? We have been in discussions actively with sales and marketing partnerships with technology market share leaders that have wide distribution and a vested interest in participating in the rapid growth and implementation of AI technology. It's not a secret that the competition is very intense for market share out there, and these large companies want to find the best partners to help them rapidly advance their AI business. While Remark AI's platform is broad in its capabilities, what we have uniquely distinguished ourselves is in the specific AI area of computer vision. Our focus is on making industrial applications run more efficiently, as that is a large-scale business that is moving rapidly, too, and is what customers are paying for now. As we deepen our relationships and partnerships, it is very clear that we are one of the leaders in this area, and we are well-positioned to further our lead in this race. We also recently announced our partnership in working with global leaders with both NVIDIA and Intel. We have optimized our AI computer technology with each respective company's latest chip, which now allows us to jointly market our computer vision technology to their customer bases, utilizing their 5,000-plus sales force who are trained to help sell our smart safety platform. The collaboration with Intel does not stop within the U.S. as we are actively partnering to deliver the SSP to their Latin American customers that complement our existing system integrator relationships. With Intel, we will be initially working with them in retail and quick service restaurant space, with both understanding how their customers shop and eat on the front end, and then working with their food and customer safety and security on the back end. This is exciting for us as we first work with Intel a couple years ago in launching a kitchen safety platform in China and have now jointly upgraded offering globally. Each group will be initially focused on different areas. Some may overlap, but in general, it's a divide and conquer strategy. Our partnership with NVIDIA through its Metropolis ecosystem was recently acknowledged by NVIDIA program manager David Gregory, who recognized our team's successful working relationship, and establishing a strong foothold in the smart city space. This includes traffic control and providing meaningful analytics and data insights to cities, stadiums, and major events. We are now also working with the largest global software company and the largest EV manufacturer in the world to train their product and salespeople on Remark's smart safety platform and how they can help their end customers enjoy an immediate return on investment by providing real-time analytical data that helps to understand their customer preferences, as well as augmenting their security team's monitoring capabilities with AI tools to prevent disruptive incidents. This operating leverage gained from our partners' existing distribution channels changes the playing field and allows us to scale quickly. During the quarter, we announced a partnership with one of the best companies in the people-counting space called wait time. We expect to share sales resources with them as they have very established sales channels with Cisco and Intel and have made a strong entry here in the U.S. selling their people-counting products. Our strategy is to piggyback their sales team and relationships to help expand their offerings to their customers. As you know, once we win this, many similar opportunities will present themselves after we win. As a point of reference, these deals are all seven-figure opportunities with a combination of both hardware and software, which ultimately means high margin business for Remark AI. To provide another example, previously we've disclosed our relationship with the Barclays Arena, where we are integrating our AI analytics with their existing Genentech video management system to help provide area arena security, monitor crowd density, as well as extend coverage for the exterior square attached to the public transit station. Our software partner has direct relationships with 150 sports teams in the NBA, NFL, NHL, MLB, MLS, as well as over 200 stadiums and arenas, speeding up the sales conversations with decision makers as we leverage our future placement in their platform marketplace as a preferred supplier resold directly by their sales force. More importantly, the credibility from this partnership provides an indirect technology stamp of approval for most corporate IT departments, which are already running on their operating systems. Recently, we are in discussion with the world's largest EV manufacturer for them to bring EV transport buses and school buses to Nevada. Given Remarks' extensive expertise in AI-powered video analytics, In our proven track record of developing fast and effective innovative solutions, we are well positioned to have our suite of SSB products to outfit the EV buses to provide functions such as people counting, violence detection, and driver monitoring. The federal government, through the Federal Transit Administration, FTA, will be funding ACCESS 2050, which is focused on improving the transportation system through the U.S. The number one of the top five priorities of this plan is safety. Safety is what Remarks products are built to provide, as we have now shown through our deployments around the world. This includes here in Fremont Street, Las Vegas, to Brazil with the police departments, and to the UK with border and traffic control. Our capabilities drive meaningful change, foster efficiency, and contribute to the realization of access 2050's overarching mission, solidifying our role as a frontrunner in the pursuit of the $3.74 billion that is allocated for improving safety from the Access 2050 overall spend. As you may recall in our last earnings, I noted about the opportunity for us to work with one of the largest providers of school buses in the U.S. using our AI safety security technology. We're able to make progress in those discussions, and with this opportunity, Nevada will only significantly enhance the opportunities. In addition, we are partnering with large global systems integrators with deep industry relationships who already sell and service the end market that we are seeking to capture. One example of this partnership is with IntelliCity, working with them to outfit the Rio de Janeiro police car fleet with mobile facial and license plate recognition capabilities, as police officers patrol the city looking for wanted persons or vehicles. In a short period of time, we were able to customize our technology offerings for the Brazil market and subsequently win. While this is just the initial phase, it showcased our ability to move fast and meet the requirements of our customers, and we're confident you will see many opportunities like this in Latin America in the second half of the year. One of the key advantages to Remark AI is the speed we're able to move and the versatility of our Remark AI platform. Recently, we were presented with a very small window of opportunity to present our platform to address the 911, 311 call center problems that cities around the U.S. are facing. Our competitors thought we would be unable to customize our AI. However, in a short timeframe, we were able to do so. We built a platform that was unique and embraced the latest in AI technology to help address the issues the city was facing. Many of you know the wait times for 311 or 911 are very long. A key reason for that is the lack of dispatchers. Remark AI's 311 platform can simultaneously service 20 sessions in 40 different languages. With the average 311 session costing $3.50 per session, and as high as $7 in some major cities, Remark AI's platform immediately delivers cost savings and a return on investments for its urban customers while increasing the speed and breadth of services to a wider audience. Our platform combines the best in generative AI and computer vision AI. When a caller dials 311, our AI agent will speak to them to help understand the situation. Simultaneously, as they are speaking, Our AI agent fills out the necessary paperwork to document this call. Lastly, if we say a picture is worth a thousand words, the caller would take a picture or video to showcase the situation, and our computer vision AI would better understand and independently verify the nature of the call. This solution was unique and very well received by our listeners. We are confident that after we win this opportunity, similar opportunities will present itself not only in other cities, but in any business, that deals with forms and paperwork, and obviously as well as anything to do with customer service, like airports and restaurants. On a final note, we'd like to begin letting you know about the new market, which will be a Q3, Q4 story, is Remark AI entering the Middle East, in particular with Saudi Arabia. As it appears, this is a special opportunity to take part in the rapid transformation of the Saudi's economy and national infrastructure. Unless you've been hiding under a rock, Saudi is spending hundreds of billions of dollars to transform the economy into one that is not reliant solely on oil. We have been approached by several groups that are involved in this transformation who want our expertise in handling large-scale construction projects like in China and bring it back to the Kingdom of Saudi Arabia. We are very excited about the opportunity, as it is unprecedented. And also, we are confident we are one of the very few that can provide such solutions. These include managing a workforce that will grow from a current number of 50,000 workers to 400,000 workers by the end of the year, using AI and LiDAR jointly for construction planning, or having construction run 24-7 autonomously and in the dark to save power. This is a once in a lifetime opportunity for Walmart, and we intend to open an office sometime in 2023 in Riyadh to handle these opportunities. In conclusion, I'd like to emphasize that our business model is built upon annual multi-year recurring subscription revenue that provides a total turnkey AI-powered platform for our customers and partners. Our technology has been proven by our partners and clients to be robust and flexible at the same time. As we set a solid footing to the various markets we have mentioned, our continuous focus is on the mutual goals of positive cash flow generation and growth and believe that this quarter has set us on the trajectory to reach our goals by the end of the fiscal year.