LAS VEGAS,
Aug. 14, 2018
/PRNewswire/ -- Remark Holdings, Inc. (NASDAQ:
MARK), a diversified global technology company
with leading artificial intelligence (AI) solutions and digital
media properties, including Vegas.com,
reported its financial results for the second quarter ended
June 30, 2018.
Management Commentary
"We continue
to make solid progress in signing new AI agreements, and in working
with our clients to begin deploying our AI technology across
multiple sectors in China and
Southeast Asia, while driving
revenue growth at our largest digital media property, Vegas.com,"
said Kai-Shing Tao, Chairman and
Chief Executive Officer of Remark Holdings. "Given the size
and breadth of the AI contracts we've secured and our deployment
efforts underway, we remain well positioned to accelerate our
revenue growth in the months ahead. Our unique market
position is supported by our ability to leverage our advanced AI
technologies to deliver accessible and practical solutions across
the financial, workplace and public safety sectors. Defined
by rapid deployment, low maintenance costs and highly-accurate and
actionable results, our platform applies the power of AI to deliver
simple solutions to complex problems."
KanKan Artificial Intelligence Platform Recent
Operational Highlights
- Continued to work closely with a diverse group of clients
to begin deployment of KanKan's facial recognition and behavior
analysis technologies in multiple venues and added new clients,
including C.P. Lotus Corporation.
- Commenced the roll-out of KanKan Smart Eyes for Retail,
the Company's first SaaS-based AI retail product. Through local
partners, KanKan has secured agreements for the product in more
than 10,000 stores in Shanghai,
China. Designed for small and medium-sized retail
environments, the solution applies advanced computer-vision and
data-analysis technologies to provide store operators with powerful
insights, enabling them to make quicker decisions that better serve
their customers, supporting more informed sales
opportunities.
- KanKan's AI Platform was ranked among the top-ten in a
global study of facial recognition technology providers conducted
by MegaFace, based on the accuracy of KanKan's algorithm in
accurately identifying faces. The results can be accessed
at:
http://megaface.cs.washington.edu/results/facescrub.html
- KanKan's cognitive computing technology has been utilized
to deliver a new search platform for Shanghai Education Resource
Center. The multi-media search platform employs KanKan's AI
technology to accurately search for and retrieve structured
information from a vast universe of unstructured sources, spanning
digital libraries, video-on-demand, live broadcast, digital TV,
video surveillance and Internet advertising. The search platform
represents an innovative solution for the education industry,
fulfilling a need for faster, more convenient and more accurate
access to vast data sources.
- KanKan was chosen by Allinone (AIO), a leading big data
marketing and consulting company serving China's film market, to support the industry's
first and only full-process system covering data analysis,
forecasting and consulting on film performance from pre-release to
post-release across China's
entertainment market. The Company has partnered with AIO to utilize
its KanKan AI technology to support the design and build-out of the
data processing and analytics system. As part of the partnership,
Remark has also invested $1 million
USD (6.6 million RMB) in the
venture and is providing its technology services.
Travel & Entertainment Segment Three-Month
Operational Highlights
- Show ticket volume and conversion of traffic increased
10% and 23%, respectively, during the second quarter of 2018
compared to the same period of 2017.
Three Months Ended June
30: 2018 compared to 2017
- Revenue increased approximately 20% to $20.7 million, compared to $17.3 million. The increase was primarily due to
an increase in the KanKan business and an increase in show ticket
revenue in the Travel & Entertainment segment.
- Total cost and expense was $27.8
million, compared to $21.9
million. The increase was primarily due to an increase in
cost of revenue and payroll costs for the KanKan business and an
increase in paid search costs for the Travel & Entertainment
segment.
- Operating loss was $(7.0)
million, compared to $(4.7)
million due to the increase in total cost and
expense.
- Adjusted EBITDA was $(3.3)
million, compared to $(1.5)
million.
- Net income was $3.4
million, or $0.10 per diluted
share, compared to a net loss of $(4.3)
million or $(0.19) per diluted
share. Net income for the second quarters of 2018 and 2017 included
non-cash gains of $10.1 million and
$1.8 million, respectively, related
to a change in the fair value of the Company's warrant liability,
which occurred due to the decrease in the Company's stock price
during the periods.
- At June 30, 2018, the cash
and cash equivalents balance was $7.0
million, and total restricted cash was $11.7 million, bringing the total combined cash
position to $18.7 million, compared
to a total combined cash position of $34.3
million at December 31, 2017.
Cash decreased primarily due to an increase in total expense as we
grew our operations in China and
engaged in multiple proof-of-concept projects, the timing of
payments related to elements of working capital, and paying
security deposits related to our Travel & Entertainment
business.
2018 Financial Outlook
The Company
provided guidance regarding certain revenue and Adjusted EBITDA
expectations. For the year ending December 31, 2018, management is fine tuning its
outlook to reflect the impact of the lending industry regulatory
audit on its revenue for its FinTech business. The Company
now expects consolidated revenue of approximately $100 million in 2018.
Overall, the Company is pleased with the progress it's
making in deploying its KanKan Artificial Intelligence Platform.
After taking into account the impact of the lending industry
regulatory audit, management now expects KanKan to generate
approximately $25-to-$30 million in gross revenue in 2018. The
Company's forecast is directly supported by the agreements it has
signed in the retail and workplace & public safety sectors and
the actual deployment steps it's currently taking in conjunction
with its clients.
The Company is monitoring the China lending industry to determine any
potential impact on its 2018 revenue forecast. The Company is
working directly with its large banking clients to adjust and scale
its proven AI solution, as well as launch a third product covering
loans for parking spots. As the Company's AI contracts move
to the deployment stage, the Company will begin to record revenue
from both upfront fees and ongoing licensing fees, with each
contract having differing fee arrangements based on the product
deployed.
Remark's Board of Directors continues to look for a new
Chief Financial Officer (CFO). While the search for a
permanent candidate continues, Alison
Davidson, Vice President of Finance, has been appointed to
serve as Interim CFO.
Conference Call Information
Mr. Tao
will hold a conference call today August 14,
2018 at 4:30 p.m. Eastern Time
(1:30 p.m. Pacific Time) to discuss
these financial results. A question and answer session will follow
management's presentation.
Toll-Free Number:
888-599-8686
International Number:
323-994-2093
Conference ID: 2295678
Please call the conference telephone number 10 minutes
prior to the start time. An operator will register your name and
organization.
The conference call will be broadcast simultaneously and
available for replay via the investor section of the Company's
website here.
A replay of the call will be available after 7:30 p.m. Eastern time on the same day through
August 18, 2018.
Toll-Free Replay Number:
844-512-2921
International Replay Number:
412-317-6671
Replay ID: 2295678
About Remark Holdings, Inc.
Remark
Holdings, Inc. (NASDAQ: MARK) delivers an
integrated suite of AI solutions that enable businesses and
organizations to solve problems, reduce risk and deliver positive
outcomes. The company's easy-to-install AI products are being
rolled out in a wide range of applications within the retail,
financial, public safety and workplace arenas. The company
also owns and operates digital media properties that deliver
relevant, dynamic content and ecommerce solutions. The
company is headquartered in Las Vegas,
Nevada, with additional operations in Los Angeles, California and in Beijing, Shanghai, Chengdu and Hangzhou, China. For more information, please
visit the company's website at
www.remarkholdings.com.
Forward-Looking Statements
This
press release may contain forward-looking statements, including
information relating to future events, future financial
performance, strategies, expectations, competitive environment and
regulation. Words such as "may," "should," "could," "would,"
"predicts," "potential," "continue," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates," and similar
expressions, as well as statements in future tense, identify
forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors, including those
discussed in Part I, Item 1A. Risk Factors in Remark Holdings'
Annual Report on Form 10-K and Remark Holdings' other filings with
the SEC. Any forward-looking statements reflect Remark Holdings'
current views with respect to future events, are based on
assumptions and are subject to risks and uncertainties. Given such
uncertainties, you should not place undue reliance on any
forward-looking statements, which represent Remark Holdings'
estimates and assumptions only as of the date hereof. Except as
required by law, Remark Holdings undertakes no obligation to update
or revise publicly any forward-looking statements after the date
hereof, whether as a result of new information, future events or
otherwise.
Company Contact:
Alison
Davidson
Remark Holdings, Inc.
adavidson@remarkholdings.com
702-701-9514
Investor Relations Contact:
Colton Krueger
The Plunkett Group, Inc.
Colton@ThePlunkettGroup.com
210-602-4078
[Tables to follow]
REMARK HOLDINGS, INC. AND
SUBSIDIARIES Condensed Consolidated Balance
Sheets
(dollars in thousands, except per share amounts)
|
|
|
June 30, 2018
|
|
December 31, 2017
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
|
7,008
|
|
|
$
|
22,632
|
|
Restricted
cash
|
9,406
|
|
|
11,670
|
|
Trade accounts
receivable, net
|
6,559
|
|
|
3,673
|
|
Prepaid expense and
other current assets
|
7,330
|
|
|
5,518
|
|
Notes receivable,
current
|
100
|
|
|
290
|
|
Total current
assets
|
30,403
|
|
|
43,783
|
|
Restricted
cash
|
2,250
|
|
|
—
|
|
Notes
receivable
|
—
|
|
|
100
|
|
Property and
equipment, net
|
12,740
|
|
|
13,387
|
|
Investment in
unconsolidated affiliates
|
2,030
|
|
|
1,030
|
|
Intangibles,
net
|
21,237
|
|
|
23,946
|
|
Goodwill
|
20,099
|
|
|
20,099
|
|
Other long-term
assets
|
1,195
|
|
|
1,192
|
|
Total
assets
|
$
|
89,954
|
|
|
$
|
103,537
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
Accounts
payable
|
$
|
23,433
|
|
|
$
|
17,857
|
|
Accrued expense and
other current liabilities
|
14,688
|
|
|
18,795
|
|
Deferred merchant
booking
|
8,989
|
|
|
9,027
|
|
Contract
liability
|
4,623
|
|
|
3,691
|
|
Note
payable
|
3,000
|
|
|
3,000
|
|
Current maturities of
long-term debt, net of unamortized discount and
debt issuance cost at December 31, 2017
|
11,500
|
|
|
38,085
|
|
Total current
liabilities
|
66,233
|
|
|
90,455
|
|
Long-term debt, less
current portion and net of unamortized discount and debt
issuance cost
|
26,578
|
|
|
—
|
|
Warrant
liability
|
10,597
|
|
|
89,169
|
|
Other
liabilities
|
3,548
|
|
|
3,501
|
|
Total
liabilities
|
106,956
|
|
|
183,125
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
Preferred stock,
$0.001 par value; 1,000,000 shares authorized; none
issued
|
—
|
|
|
—
|
|
Common stock, $0.001
par value; 100,000,000 shares authorized; 33,145,199
and 28,406,026 shares issued and outstanding; each at June 30,
2018
and December 31, 2017, respectively
|
33
|
|
|
28
|
|
Additional
paid-in-capital
|
293,164
|
|
|
220,117
|
|
Accumulated other
comprehensive income
|
130
|
|
|
115
|
|
Accumulated
deficit
|
(310,329)
|
|
|
(299,848)
|
|
Total stockholders'
equity (deficit)
|
(17,002)
|
|
|
(79,588)
|
|
Total liabilities and
stockholders' equity
|
$
|
89,954
|
|
|
$
|
103,537
|
|
REMARK HOLDINGS, INC. AND
SUBSIDIARIES Unaudited Condensed Consolidated
Statements of Operations
(dollars in thousands, except per share amounts)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue
|
20,713
|
|
|
17,256
|
|
|
37,437
|
|
|
32,555
|
|
|
|
|
|
|
|
|
|
Cost and
expense
|
|
|
|
|
|
|
|
Cost of revenue
(excluding depreciation and
amortization)
|
6,132
|
|
|
3,965
|
|
|
10,164
|
|
|
6,629
|
|
Sales and
marketing
|
6,776
|
|
|
5,774
|
|
|
13,671
|
|
|
11,649
|
|
Technology and
development
|
843
|
|
|
884
|
|
|
1,745
|
|
|
1,792
|
|
General and
administrative
|
11,180
|
|
|
8,359
|
|
|
34,497
|
|
|
16,685
|
|
Depreciation and
amortization
|
2,746
|
|
|
2,894
|
|
|
5,464
|
|
|
5,755
|
|
Other operating
expense
|
81
|
|
|
57
|
|
|
147
|
|
|
102
|
|
Total cost and
expense
|
27,758
|
|
|
21,933
|
|
|
65,688
|
|
|
42,612
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
(7,045)
|
|
|
(4,677)
|
|
|
(28,251)
|
|
|
(10,057)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
Interest
expense
|
(1,255)
|
|
|
(1,181)
|
|
|
(2,661)
|
|
|
(2,199)
|
|
Other income,
net
|
44
|
|
|
1
|
|
|
55
|
|
|
20
|
|
Change in fair value
of warrant liability
|
10,055
|
|
|
1,760
|
|
|
18,665
|
|
|
8,329
|
|
Other gain
(loss)
|
554
|
|
|
(21)
|
|
|
523
|
|
|
(52)
|
|
Total other income,
net
|
9,398
|
|
|
559
|
|
|
16,582
|
|
|
6,098
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
2,353
|
|
|
(4,118)
|
|
|
(11,669)
|
|
|
(3,959)
|
|
Benefit from
(provision for) income taxes
|
1,026
|
|
|
(190)
|
|
|
995
|
|
|
(374)
|
|
Net income
(loss)
|
3,379
|
|
|
(4,308)
|
|
|
(10,674)
|
|
|
(4,333)
|
|
Other comprehensive
income (loss)
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments
|
(183)
|
|
|
(4)
|
|
|
15
|
|
|
(28)
|
|
Comprehensive income
(loss)
|
3,196
|
|
|
(4,312)
|
|
|
(10,659)
|
|
|
(4,361)
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares outstanding, basic and
diluted
|
32,933
|
|
|
22,637
|
|
|
32,666
|
|
|
22,553
|
|
Net loss per share,
basic and diluted
|
0.10
|
|
|
(0.19)
|
|
|
(0.33)
|
|
|
(0.19)
|
|
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SOURCE Remark Holdings, Inc.