Remark Holdings Reports Second Quarter 2019 Results

Remark Holdings, Inc. (NASDAQ: MARK), a diversified global technology company with leading artificial intelligence (AI) solutions and digital media properties, reported its financial results for the second quarter ended June 30, 2019.

Management Commentary

“During the second quarter, we continued to broaden our base of contracts and are currently installing our AI solutions in the real estate, pharmacy, and transportation sectors, while working with additional partners to expand upon our retail deployments,” said Kai-Shing Tao, Chairman and Chief Executive Officer of Remark Holdings. “Our focus on our customer’s return on investment is resonating with them, leading to additional organic revenue opportunities, expanding upon their existing large footprints,” Mr. Tao added.  “At the same time we’re continuing to align our cost structure, as we pursue business in a disciplined manner and lay the path to profitable growth.”

Recent Highlights

• Completed the sale of Vegas.com and used proceeds to significantly reduce debt.

• Entered into a “smart-building” partnership agreement with Hanvon Technology Co. Ltd, one of China’s top software companies, to utilize KanKan’s facial-recognition technology to provide entry/exit management at access points in the portfolio buildings of the software company. The partnership has already resulted in deployment at more than 1,000 access points, with plans to continue deployment to more than 10,000 building units by the end of 2019.

• The company’s installation of 5,000 units of its pharmacy-patient terminal system in 2018 led to an additional contract to install 15,000 terminals in pharmacies in additional Chinese cities in 2019.

• Completed the installation of KanKan’s taxi-safety-monitoring system in more than 2,000 taxis in the Chinese city of Xi’an. Remark is pursuing additional business opportunities for the taxi-safety-monitoring system in Guiyang and Chongqing, cities representing a total addressable market of approximately 25,000 vehicles and a revenue opportunity of more than $10 million.

• Sharecare received a strategic investment led by Quest Diagnostics, further highlighting the value Sharecare is creating. Remark owns approximately five percent of Sharecare’s issued stock and continues to explore avenues to optimize the monetization of this asset to best create long-term value for its shareholders. To date, Sharecare has raised in excess of $400 million.

Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

• On May 15, 2019, the company completed the sale of Vegas.com for an aggregate purchase price of $30.0 millionand used the proceeds to significantly reduce its obligations to its lenders. A gain of $6.5 million was recorded in discontinued operations on the sale of the Vegas.com business that formerly comprised Remark’s Travel and Entertainment segment. The results of the formerly-reported Travel and Entertainment segment are now reported as discontinued operations.

• Revenue for the second quarter of 2019 was $2.9 million, down from $3.9 million during the comparable period of last year. Regulatory changes in China’s financial services market caused the company to discontinue its FinTech business in 2018, but the absence of FinTech revenue was partially offset by an increase in revenue from AI projects. Additionally, AI revenue in the second quarter of 2019 was more than double the $1.2 million reported during the second quarter of 2018, and significantly higher than the $0.4 million reported in the first quarter of 2019, representing the completion and passing of several proof-of-concept tests on projects and the beginning of deployment and implementation phases.

• Total cost and expense for the second quarter of 2019 was $5.8 million, a decrease from the $10.6 million reported in the second quarter of 2018. The decrease is primarily attributable to decreases in cost of sales as a result of the discontinuance of FinTech services, in consulting fees due to declining use of external consultants, in payroll and related costs as a result of headcount reductions, and in bad debt expense.

• Operating loss declined to $2.9 million in the second quarter of 2019 from $6.7 million in the second quarter of 2018 commensurate with the cost and expense declines.

• Adjusted EBITDA was ($2.7) million from continuing operations, as compared to ($5.3) million.

• Net loss totaled $2.8 million or ($0.06) per diluted share in the second quarter ended June 30, 2019, compared to net income of $3.4 million, or $0.10 per diluted share in the comparable period of the prior year. The income in the prior year was driven by a $10.1 million gain in the change of the fair value of the warranty liability.

• At June 30, 2019, the cash and cash equivalents balance was $2.1 million, compared to a cash position of $1.4 million at December 31, 2018. Cash increased primarily due to timing of payments related to elements of working capital and the issuance of common stock.

SOURCE Remark Holdings, Inc.