Remark Holdings, Inc. (MARK) is a diversified global technology business with leading artificial intelligence (AI) and data-analytics solutions. The company's primary focus is on promoting and facilitating the safety of its customers and their customers through its Smart Safety Platform (SSP), a leading software solution for using computer vision to detect persons, objects, and behavior in video feeds.

Business Overview

Remark generates revenue by using its proprietary data and AI software platform to deliver AI-based computer vision products, computing devices, and software-as-a-service solutions for businesses in various industries. The company continues to partner with top universities on research projects targeting algorithm, artificial neural network, and computing architectures, which it believes will keep it among the leaders in technology development.

Remark's SSP, having won numerous industry and government benchmark tests for accuracy and speed, is a key offering that integrates with each customer's IT infrastructure, including, in many cases, cameras already in place at the customer's location(s). When necessary, Remark also sells and deploys hardware to create or supplement the customer's monitoring capabilities, such as its Smart Sentry units, which incorporate the SSP in modern IT architectural concepts, including edge computing and micro-service architectures.

Remark customizes and sells its innovative AI-based computer vision products and solutions, including the SSP, to customers in the retail, construction, public safety, workplace safety, and public sector markets. The company has also developed versions of its solutions for application in the transportation and energy markets.

Financials

For the fiscal year ended December 31, 2023, Remark reported annual revenue of $4,402,000, a net loss of $29,147,000, annual operating cash flow of -$10,455,000, and annual free cash flow of -$10,506,000.

In the first quarter of 2024, the company's revenue totaled $387,000, reflecting a decrease from the $826,000 recorded during the same quarter of 2023. The revenue recognized during the first quarter of 2024 resulted from cash collections on certain projects completed during 2023, for which the agreement with the customer did not, at the time, meet the requirement for revenue recognition on an accrual basis. Remark expects to record the remaining amount related to such projects as revenue in future periods.

The company's operating loss for the first quarter of 2024 was $3,696,000, an increase from the $3,043,000 operating loss recorded in the same period of 2023. This increase was primarily due to a $600,000 rise in business development expenses, partially offset by a $200,000 decrease in franchise taxes and other smaller decreases in general and administrative expenses.

Remark reported a net loss of $13,791,000, or $0.40 per diluted share, in the first quarter of 2024, compared to a net loss of $8,162,000, or $0.63 per diluted share, in the same period of 2023. The increase in net loss was mainly attributable to a $5.6 million rise in finance costs related to the establishment and measurement of obligations to issue common stock, partially offset by a $600,000 decrease in interest expense.

Geographical and Segmental Performance

Remark's revenue is currently concentrated in China, with additional revenue from sales in the U.S. and the U.K. During the first quarter of 2024, the company's revenue from China was $387,000, while revenue from the U.S. and the U.K. was negligible.

The company's revenue is primarily generated from its AI-based products and services segment, which accounted for 100% of total revenue in the first quarter of 2024, down from 87% in the same period of 2023. The decrease in the contribution from the AI-based products and services segment was due to the company's decision to reduce staff in China, which prevented it from completing new projects during the quarter, although Remark expects to be able to complete new projects in China in the future.

Liquidity

As of March 31, 2024, Remark had a cash balance of $239,000, compared to $145,000 as of December 31, 2023. The company used $3,378,000 of cash in operating activities during the first quarter of 2024.

Remark's history of recurring operating losses, working capital deficiencies, and negative cash flows from operating activities give rise to substantial doubt regarding its ability to continue as a going concern. The company intends to fund its future operations and meet its financial obligations through revenue growth from its AI offerings, as well as through sales of its thermal-imaging products. However, Remark cannot provide assurance that revenue, income, and cash flows generated from its businesses will be sufficient to sustain its operations in the twelve months following the filing of its Q1 2024 Form 10-Q.

As a result, Remark is actively evaluating strategic alternatives, including debt and equity financings. Conditions in the debt and equity markets, as well as the volatility of investor sentiment regarding macroeconomic and microeconomic conditions, will play primary roles in determining whether the company can successfully obtain additional capital.

Risks and Challenges

Remark faces several risks and challenges, including the lingering effects of the COVID-19 pandemic in China, regulatory issues, competition, financial markets, and other general business conditions. The company's operations have historically used more cash than they have provided, and its history of recurring operating losses and working capital deficiencies give rise to substantial doubt regarding its ability to continue as a going concern.

Additionally, Remark's revenue is currently concentrated in China, and the rising political tensions between the U.S. and China have negatively impacted the company's ability to complete projects in China. To mitigate this risk, Remark has been responding by looking for opportunities to expand its business in the Asia-Pacific region outside of China, as well as by spending increasing amounts of effort developing business opportunities in the United States, the U.K., and in Central and South America.

Outlook

Remark has not provided any specific financial guidance or outlook for the remainder of fiscal year 2024. However, the company has stated that it is focused on executing the Clark County School District project and winning several other opportunities outside of China that it believes it is very close to securing.

The company has also highlighted its partnership with Microsoft, where it will be using Microsoft's sales team to deliver its computer vision AI solutions to Microsoft's customers. Remark expects the strong interest it initially received from Microsoft's customers to be cemented once the technical migration process is concluded.

Additionally, Remark expects to announce another Fortune 500 partner in the next quarter or so, which will also sell the company's solutions across its respective sales teams. The company has already received very strong interest from the partner's employees, who see Remark's products as something they can sell successfully.

Conclusion

Remark Holdings, Inc. is navigating a challenging environment, with the lingering effects of the COVID-19 pandemic in China and rising political tensions between the U.S. and China negatively impacting its ability to complete projects in China. However, the company is actively working to diversify its geographic footprint and expand its business opportunities outside of China, including in the U.S., the U.K., and Central and South America.

Remark's innovative AI-based computer vision products and solutions, including its Smart Safety Platform, have garnered significant interest from industry leaders such as NVIDIA and Oracle, who have partnered with the company to showcase its capabilities. The company's focus on developing multimodal AI solutions that can interact with the physical world positions it well to capitalize on the growing demand for AI-powered technologies that can solve real-world problems.

While Remark faces substantial doubt regarding its ability to continue as a going concern due to its history of operating losses and negative cash flows, the company is actively exploring strategic alternatives, including debt and equity financings, to fund its future operations and meet its financial obligations. Investors will want to closely monitor the company's progress in executing its growth strategy and securing additional capital to support its long-term success.