Welcome to the Remark Holdings' Third Quarter 2020 Preliminary Revenue Conference Call. My name is Shirley. I will be the operator for today’s call and will handle the question-and-answer session. As a reminder, this conference is being recorded. Now, I’d like to turn the call over to Brian Harvey, Director of Capital Markets and Investor Relations.

Please go ahead..

Thank you, Shirley. Good afternoon, everybody and welcome to Remark Holdings third quarter 2020 preliminary revenue conference call. I am Brian Harvey, Senior Vice President of Capital Markets and Investor Relations for Remark. On the call with me this afternoon is Kai-Shing Tao, Remark’s Chairman and Chief Executive Officer. In just a moment, Mr.

Tao will provide an update on our businesses and I will provide information on our preliminary revenue. Following those 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 maybe 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 full filings with the SEC. I would now like to turn the call over to Remark’s Chairman and Chief Executive Officer, Mr. Tao so he can provide additional color on Remark’s businesses and recent developments.

Shing?.

Good afternoon. We are pleased to update you on third quarter results. Globally, we've been dealing with COVID for 11 months. It's been a challenging time and our thoughts and prayers are with those families that have been affected. Our thermal scanning solution have been a great tool for organizations to better deal with this pandemic.

We are proud of our team's tireless work to make sure our partners get the best monitoring products as soon as possible. There are three major factors to our strong Q3 performance, China's economy has come back with strong demand for our AI platform. We expect our Remark AI's China's business to be profitable within the next six months.

Our global pipeline has dramatically expanded in the last six months. And unlike other companies, Remark AI is a true AI platform, not just the point solution that we built from the ground up and owned in its entirety. In this case, we do not just provide superior thermal-imaging. Temperature detection is the tip of the spear.

We are seeing customer adding on additional services. And now it's become a land and expand strategy which will increase our ARPU or average revenue per user and LTV or lifetime value. In China, we recognized in Q3, 2020, roughly US$2 million. We had a sequential 100% growth from Q2, 2020 and approximately 300% growth year-over-year.

We are expecting another 100% sequential growth in Q4 by doubling our revenue in Q3. We expect to achieve profitability in our China business sometime within the next six months. The majority of our revenue came from our execution of contracts signed with China Mobile for their smart stores.

Thanks for their smart retail outlets and schools for smart school systems. Due to the improved cash flow situation, we were able to execute several projects that were deferred from year 2019. As I said in the past, our pipeline is tremendous.

It is very strong because of our ability to combine our industry leading technology with specific commercial experience for various industries. Here are some highlights for Q3 and beyond. China Mobile smart store project Phase 1 was expected to complete in 2020. However, due to the COVID pandemic the completion of Phase 1 has been postponed to 2021.

Our effort of system development for Phase 1 has been completed by Q2 this year. In Phase 1 three systems, queue management system, smart kiosk system and smart customer flow traffic analysis system will be deployed over 18,000 stores. By Q3 2020, the queue management system has already been deployed to over 2,000 stores in 10 provinces.

In the third quarter, we also announced our Phase 2 win with China Mobile. The Phase 2 includes smart employee management system and AI store patrolling system. And in Q3, we completed and released the edge computing AI boxes for China Mobile stores.

This AI box connects to the surveillance cameras and provides VIP recognition, employee behavior management, customer behavior analysis and hazard prevention. The system has been tested in China Mobile's Hebei stores, and is expected to deploy Phase 2 software to China Mobile stores in a large scale in the next coming quarters.

We expect our revenue to grow more significantly, as a number of the Phase 2 that we've won were delayed over the last year will commence in early 2021. Smart retail stores for bank, because of our success with China Mobile's retail business, we've developed and launched a parallel smart retail store system for banks.

To take the opportunity, overall, there are over 20,000 retail bank locations going through smart store upgrade every year since 2018. $2 billion annually, which is roughly 100,000 per store has been earmarked for smart store upgrades and Remark AI is positioned very well to capture a good share of it.

To put things in perspective, there are about 220,000 locations in total across China. Our platform solutions our AI customer flow traffic analysis system, targeted advertisement system, and smart store IoT device management system. The system has already been deployed to over 80 retail bank locations for Bank of China.

We are expecting over 120 more locations to use our system in Q4. Two new customers have signed up in Q4 as well, the Construction Bank of China and the Agricultural Bank of China. The retail branches for bank is a tremendous opportunity for Remark.

Smart community in Q3 2020, we've completed our first smart community product is deployed to over 100 residential complexes, a contract signed with BRC International, a large publicly listed company.

This deal has won a strong credibility in the smart community market and we are happy to announce our win with contract with China Mobile's smart community division, which has an initial contract value of US$15 million in 2021. We have already commenced our deployment in Q4 in the Sichuan province and will recognize revenue accordingly.

Our Remark AI smart community platform includes facial ID-based resident management system, AI parking system, surveillance and safety system and visitor access system. There are over 10,000 residential complexes in Sichuan alone and with the wave of AI upgrades in China, we are looking at an overall TAM of a US$70 billion market for smart community.

Smart school system, we continue to develop AI products for kindergarten elementary schools based on our strategic investments in safe campus and healthy student growth. We have improved our facial recognition time attendance system, epidemic prevention system and smart energy saving system.

We recently released our abnormal behavior detection system for the schools in Q3. There are over 120 schools who are using our systems by the end of Q3. We are looking to expand our sales channels and entering schools from various provinces with over 160,000 schools in major cities, this will be our target number for the coming year.

Our goal for Q4 and beyond is simply to execute on our existing contracts and win new one. Our technology is first grade and our customers recognize that which is why we will continue to expand and achieve our growth objectives to establishing partnership with strong channel partners.

Other areas that we look to extend our Remark AI platform in China are in the smart kitchen and smart factory and office verticals. We will release PI accordingly when the full scope of the projects are final.

The U.S., we launched our Remark AI biosafety solutions at the end of March there was a knee jerk reaction to buying anything thermal that further slowed down as reopenings were delayed and companies began taking a holistic look at health security and establishing safety protocol. Health security is now tantamount and it's important as cybersecurity.

As we all know, COVID safety is more than just user screen. We believe this benefits us greatly in the long run, as they're not looking just for thermal solutions, but an end-to-end biosafety platform solution.

Customers are looking for facial recognition, contact tracing, PPE protocols, testing, QR scanning and temperature reading as a platform, not point solution where they do not have to manage 10 different vendors. We are one of the few groups that are capable in providing this comprehensive platform.

We continue to sign deals with new customers and expand our offerings with existing customers.

UMC, hospital in Nevada will start off as an initial thermal temperature check has now expanded to providing a before arrival process of establishing a health questionnaire and then creating a digital path to an on arrival process which includes fever screen, maps detection, daily pass update, to site modeling which includes contact tracing, restricted area access track violation, cleanup, protocol tracking, and finally enforcement, which includes automated guidelines, and real-time rule based alerts.

Overall, this does not only provide enhanced safety protocols, this reduces significant operational expenses and liability, which is what UMC other hospitals and medical clinics, and frankly, any business are looking for in the new norm.

We've also recently completed our initial deal with one of the largest gaming company where we've expanded to over 40 of their offices around the world. When it comes to what's going in the United States a great example of what is happening in the market can be found in our recently announced deal.

This opportunity was originally contacted in April and May, once they realized they weren't going to fully reopen their offices for some time, they put off their purchasing decisions, choosing instead to purchase just a few units for a month long proof-of-concept at just one location.

Now that they've established safety protocols in place, they have came back to us to purchase for all of their 40 worldwide locations. Once companies figure out the return to work policy, we feel will be in a great shape as we have many proof-of-concepts underway with large enterprises.

We are continuing to sign large channel partnerships around the world. One of the largest travel services company in North America using this as a case study. This company has over 50,000 hotels on its platform. In order to be part of that platform, they have to be Sharecare certified and we would be part of the toolbox that each hotel [will back].

This process is expected to be finished by Q1 of 2022. So we are getting ready to meet this demand. And finally with Sharecare. Since I'm on the Sharecare Board, I'm limited as to how much detail I can provide on the monetization plan. What I will say is public telemedicine stocks has performed way above market two comps are Livongo and Teladoc.

The strength of these two companies has validated Sharecare strategy of platform over point solution. Livongo will sell to Teladoc for approximately 80.5 billion, Amwell, American Well, recently went public at a 3 billion plus valuation is now roughly double that in market cap.

These data points indicate a strong future for Sharecare which is performing at a level equal to both these companies. The IPO and spec market continues to be strong, and we are looking to take advantage of this window.

The plans of the use of these proceeds are three ways number one, bulletproof our balance sheet, two, provide the growth capital to handle our pipelines as we have mentioned, and three a buyback to lessen the pain that we've experienced over the last few years building our platform.

Timing is always hard to pin down and we're cautiously optimistic to see a monetization event within the next few months. Remark Holdings is finally at a place where we first laid out our vision. We built a defensive mode with our data and technology.

We proved the commercial applications of it by signing world class blue chip companies around the world. Our pipeline is very deep, and it continues to only get deeper. And now we have the balance sheet to support our growth and any other options.

Brian?.

Thank you, Shing. The company's financial statements for the three and nine months ended September 30, 2020 are not yet complete. Accordingly, the company is presenting the following preliminary estimates.

Due to the timing of these estimates the company has not completed its customary financial closings and review procedures and as a result, the estimates are subject to change. I’ll now provide a brief overview of the preliminary revenue range for our third quarter ended September 30, 2020.

Revenue for the third quarter of 2020 is expected to be in a range of $2.5 million to $2.7 million up from $700,000 during the third quarter of 2019, an overall more than tripling of revenue.

Revenue from our China business specifically, is expected to sequentially double to $2.2 million, compared with $1 million in our second quarter and nearly quadrupled compared with our third quarter in 2019.

As China emerged from COVID-19 quarantines in the second quarter, our personnel in China were able to resume rollouts, and project testing and customization work on projects including China Mobile, banks and school installation.

Moving forward, we expect revenue from China to double to over $4 million in our fourth quarter, and show continued significant growth again in our first quarter. Revenue from our U.S. based biosafety business is projected between $0.3 million and $0.5 million.

Our thermal-imaging products were delivered to casinos, hotels, medical centers, office buildings, and other industries throughout the United States. Finally, as you know, we are asking for an increase in our authorized share, we will have our special adjourn meeting, special meeting in adjournment resume on Wednesday.

And I'd like to take this opportunity to again remind people why we're asking for the authorized shares. The reasons are very simple we may need the shares for strategic partnerships.

Many of you know several years ago, we did a strategic partnership with CP Group, a large Asian conglomerate that is using our systems and helping to sell our systems overseas. They purchased nearly 1 million shares. Other strategic partnerships contemplated may require for shares for which we don't currently have the authorization.

Second is acquisition. If a timely acquisition became available to us, we would want to act quickly. Without having the authorized shares available, we might miss out. There is nothing in the pipeline right now, but that can change quickly. And as I noted, we most need flexibility.

Our source of liquidity having the availability under our prior authorization allowed us to issue those shares, which allowed us to pay off our debt to NGG, which unencumbered Sharecare thereby allowing us to hopefully realize its full value.

It also allowed us to begin funding our working capital in order to meet the China Mobile contract that we're beginning to execute on. If the increase is not passed, our liquidity could be impacted going forward. And we may have to contemplate other sources of capital when it comes to new projects, and investing in our business.

New hires and employee retention on a much smaller basis shares issued via RSUs and options are necessary to attract talent. As part of the compensation package, we generally prefer to keep base salaries low and incentivize with stock.

This also puts employees working toward the same goals as our shareholders not having more authorized shares could severely handcuff our options going forward. Shirley, we'd now like to open the conference call to questions. We encourage callers with questions to queue up as soon as possible so that there will be minimal lag time between each caller.

Shirley could you please instruct the callers how to queue up?.

[Operator Instructions] The first question comes from Darren Aftahi, ROTH Capital Partners. Please go ahead..

First, could you talk a little bit about the China business so - I appreciate your business doubled and your expenses diving to another doubling - at least doubling in the fourth quarter.

There is some language in the release that says the China Mobile you're in 200 stores - Hebei province, and that's going to 5,000 by the end of the year? I think its 25 fold increase so as to maybe 24, could you just help me logistically understand how feasible that is, how much of that work is done halfway through the quarter and then what that kind of looks like post 4Q?.

Sure, so this is Brian. We are currently installed in over 2,000 for our queue management system. And that's what's going to 5,000 by year-end. The kiosk system we installed our first 200 recently, and that program will become - completed in our fiscal 2021.

So it should read that there are 2,000 stores have the queue management software going to 5,000 and it's currently in 200 kiosk - smart kiosk..

Two different products..

But it’s all part of Phase 1..

It's all part of Phase 1..

So your visibility and confidence in the doubling like I guess with Hebei halfway through the quarter is what?.

It’s very good, very strong..

Got it. And then I think I heard you say, growth in Q1, in relation to the China business.

So does that mean growth over the $4 million or better number in the fourth quarter?.

Yes..

Okay. And then if I'm doing the math, right, it looks like your preliminary implied U.S. business kind of fell quarter-on-quarter, I appreciate there may have been some knee jerk business on the U.S. side such as COVID. But can you kind of help me understand what the pipeline looks like for the U.S. business.

And what types of companies are looking at this - at multi various platform as opposed to partnership?.

Yes, so I would say we are very well representative of all those different in smart store industries from the hospitality and travel sector, to the sports sector to the industrial sector. And one thing you realize is when first COVID hit, the fever detection, which represents 80% of the symptoms for COVID.

It was exactly what people were looking for as a as a quick way to figure out, who can come in or not.

Now six months later, the customers simply want more and that really comes to our benefit, because they're not just looking at temperature testing, they're looking at how do we integrate the test results? How do we make sure that the people that are in the building know and are able to follow the protocol.

Now we're in a new environment, where all these different protocols that are being put in, you have to hire a lot of people to be able to keep track of all of this, because you will get fined - very in a punitive way. Say for example with the [Raiders], they lost their draft pick, and they got fined a lot for not following some of the protocol.

So, we are finding that a lot of different kinds of approaches that can you provide this platform strategy, that includes not just the temperature checking, but the testing, the compliance with the PPE, the compliance with how you keep the records. And do it in a way where you can lower our operational costs, and also protect us from the liability.

So this is something that is the common denominator across all industries. And certainly with the announcement of these - we're very hopeful that the vaccines will prove out to be what they are.

But the demand for our products will only increase with that because people now look at health security, as important as cybersecurity so all these measures need to be placed. We're very well positioned to take advantage of that.

A lot of that comes from the last six months where we have proved the most difficult of tying all these different - these centers establishing who we are and doing it in a contactless way. And so, we're very excited on what's coming for us over the next, I'd say three to six months in the U.S..

So maybe if I could just indulge a little bit 2021 assuming we don't have any sort of anomalous event next year, is your mix of business still going to be very much skewed towards China just given kind of contracts and then what's actually being installed today?.

Yes, I mean there's no question. I mean, it doesn't matter what business you're in, I think in the world China, just because of the amount of people the numbers are just massive. The bad news is that it’s a - there is a lot of sales cycle but we've gone through that.

And we've gone through the long sales cycle, we've proven our technology works, we've proven that we've been able to deploy, fast and according to the schedule. And so for right now, it's a very blocking and tackling kind of methodology. As U.S.

we’re obviously a very strong market, but I think we're still trying to figure out what the direction is over here. In China, the directions been set, divisions been set, the budgets been set and now - we're trying to move as fast to capture, that market share.

Two of the areas that we bought out outside of China Mobile is as it relates to the banks, right, there are 20,000 branches or bank retail that are being upgraded every year, roughly 100,000 per store. And that works out to be a $2 billion annual AI IT upgrade cycle.

There are about 200,000 plus banks throughout the country, they're not going to upgrade them all at once, but it becomes a very stable business for us. And we are very well positioned because of the success that we've had with China Mobile. And I mentioned about the smart community same thing. In China, everything works as a five year plan right.

There are over 160,000 smart communities in China, and they're going through a five year upgraded plan, where they earmark $70 billion to this upgrade. Now that sounds like a big number, but when you split it across 160,000 smart communities, it works out to be under or right around 400,000 U.S. per smart community okay.

So that's something that we certainly feel that even with an external shock, it's not going to shake things up. And right now, because we have proven ourselves with not just the largest retail operator in China Mobile in China, but also now we've been able to integrate our solutions.

We're one of the largest real estate and smart community developers in BRC International. So we are very well positioned there as well..

So it is awesome for me, when can data final financials and I think it's been over - two years now that a CFO I am just kind of curious why there's no hiring the CFO, and what's kind of delay that being form the numbers being up?.

I can address the financials, they are scheduled to be out within a week by next Monday, the 23rd we will file..

And then as it relates to the CFO, we are always looking for a CFO. So that's someone that we will look to bring on when the right candidate is found..

Our next question comes from [indiscernible]. Please go ahead..

Just a couple of quick questions.

First of all, do you foresee your business improving as far as the thermal AI side do you feel like most people in this industry at this point have picked their scanning board or do you feel like there's still a lot room in that sector?.

I can't speak for the other businesses but - or for the other competitors for us, we certainly feel we're only in the first inning. I think we've made it very clear that temperature scanning is really just a small part of what we do.

Every casino because they're dealing with so many points of entry, so many different customers that are coming in and out, so many back of the house employees that come through there are a lot of requirements, that just being a one-trick pony in doing temperature detection, can't solve right.

So we've always said that the temperature detection for us is the tip of the spear. And when we go in after we get our foot in the door, we are able to sell additional services to them. It could be PPE detection, it could be people counting, it could be - being able to index any type of violent behavior.

You probably read in Vegas, there has been some of the highest number of violent acts right on the Las Vegas strip. But there hasn't been a way to document them, to track the people down. We have a solution for that.

So we certainly feel that our initial partner in Las Vegas, who we consider take security as the highest level used our solution and used it because we have the ability to expand our platform.

We believe that the other casinos, not just in Vegas, but around the world will take that lead and that certainly a market that we see as very attractive for us in the next few months..

I noticed that the majority of sports things that you're working with everything seems to be in or around your area, which is obviously the best place to start.

But you get to feel that you're spreading out further than that right now at least in talks with anybody?.

Absolutely, Vegas obviously, because they're less than 10 minutes from our office is the natural example. If you can't win your backyard, then how are you expected to expand anywhere else. But we have relationships really across the U.S. with - I would say the majority of the sports teams we have very strong relationship with the league.

But let's be realistic too. A lot of these stadiums and teams aren't ready to fully rollout until there's better clarity on when they can bring the audience back, right being at 20% or 10% capacity is not something that where it's not going to be the spark.

But we are - certainly as we mentioned in the call, very well positioned to do that, as soon as things begin to loosen up..

And one final question and just in regards going back to the CFO question is one of the reasons that's holding you back right now, because you guys don't have the authorized shares to really offer much of an incentive to pick somebody up, is that one of the issues then?.

I think that's part of it, that's certainly part of it. I think we have certain qualities in the CFO that we're looking for, given our presence globally and the state of where our company is and in terms of its growth trajectory and the strategic opportunities. The other aspect is exactly what you mentioned.

In general - the basis for the company are low, and we incentivize through equity comm. And we don't have that available right now. I think some of the candidates that we've talked to want to wait till we get that approved before we take the next step..

Thank you. There are no further questions at this time. Mr. Tao, I'd like to turn the conference back to you for any additional or closing remarks..

Thank you. We just want to leave with the key takeaway that it is finally a new day for Remark AI. We've narrowed our focused to become the only true publicly listed [indiscernible] AI company. The demand for AI is super strong and runway wise we will be profitable in China by the end of Q2. Our pipeline is really strong.

All of our long cycle sales work has paid off and 2021 will be a strong year. Thank you..

This concludes today's call. Thank you for your participation. You may now disconnect..