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Edited Transcript of MARK.OQ earnings conference call or presentation 16-Nov-20 9:30pm GMT

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Q3 2020 Remark Holdings Inc Earnings Call Atlanta Nov 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Remark Holdings Inc earnings conference call or presentation Monday, November 16, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * E. Brian Harvey Remark Holdings, Inc. - SVP of Capital Markets & IR * Kai-Shing Tao Remark Holdings, Inc. - Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * Darren Aftahi ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Remark Holdings Third Quarter 2020 Preliminary Revenue Conference Call. My name is Shelly. I'll 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. -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [2] -------------------------------------------------------------------------------- Thank you, Shelly. Good afternoon, everybody, and welcome to Remark Holdings' Third Quarter 2020 Preliminary Revenue Conference Call. I'm 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 may be 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? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Good afternoon. We are pleased to update you on the 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 3 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 business to be profitable within the next 6 months. Our global pipeline has dramatically expanded in the last 6 months. And unlike other companies, RemarkAI is a true AI platform, not just the point solution that we built from the ground up and own 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 USD 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 6 months. The majority of our revenue came from our execution of contracts signed with China Mobile for their smart stores, banks for their smart retail outlet and schools for smart school system. Due to the improved cash flow situation, we were able to execute several projects that were deferred from year 2019. As I've 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, 3 systems: queue management system; smart kiosk system; and smart customer store traffic analysis system has -- 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 provide VIP recognition, employee behavior management, customer behavior analysis and hazard prevention. The system has been tested in China -- in China Mobile's Hebe 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 faces 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 bank. To paint the opportunity overall, there are over 20,000 retail bank locations going through smart store upgrades every year since 2018. $2 billion annually, which is roughly $100,000 per store, has been earmarked for smart store upgrades and RemarkAI 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, which is -- 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 Agriculture 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 and deployed to over 100 residential complexes, a contract signed with DRC 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 USD 15 million in 2021. We have already commenced our deployment in Q4 in the Sichuan Province and will recognize revenue accordingly. Our RemarkAI 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 USD 70 billion market for smart community. Smart school system. We continued to develop AI products for kindergarten and elementary schools based on our strategic investments in safe campus and healthy student growth. We've 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 years. Our goal for Q4 and beyond is simply to execute on our existing contracts and win new ones. Our technology is first grade, and our customers recognize that. Which is why we will continue to expand and achieve our growth objectives through establishing partnership with strong channel partners. Other areas that will look to extend our RemarkAI platform in China are in the smart kitchen and smart factory and office verticals. We will release PR accordingly when the full scope of the projects are final. The U.S., we launched our RemarkAI 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 its important as cybersecurity. As we all know, COVID safety is more than just fever screen. We believe this benefits us greatly in the long run as they are 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, of Southern Nevada, will start off as an initial thermal temperature check, has now expanded to providing a before-arrival process of establishing a health questionnaires and creating a digital pass to an on-arrival process, which includes fever screen, mask detection, daily path update. To site monitoring, 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 companies, where we've expanded to over 40 of their offices around the world. When it comes to what's going on with the United States, a great example of what is happening in the market can be found in our recent 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 their off-purchasing decisions, choosing a essentially 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 come back to us to purchase for all of their 40 worldwide locations. Once companies figure out their return to work policy, we feel we'll 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 the evocative study. This company has over 50,000 hotels on the 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 needs to adopt. This process is expected to be finished by Q1 or 2022, so we are getting ready to meet this demand. And finally, with Sharecare. So while I am 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 have performed way above market. Two comps are Livongo and Teladoc. The strength of these 2 companies have validated Sharecare strategy as platform over point solution. Livongo will fill to Teladoc for approximately $18.5 billion, Amwell or American Well, recently went public at a $3 billion-plus valuation and is now roughly double that in market cap. These data points will indicate a strong future for Sharecare, which is performing at a level equal to or above these companies. The IPO and spec market continue to be strong, and we are looking to take advantage of this window. The plans for the use of these proceeds come -- are 3 ways: number one, we look through for balance sheet; two, provide the growth capital to handle our pipeline, 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, but we are cautiously optimistic to see a monetization event for the next few months. Remark Holdings is finally at a place where we first laid out our vision. We've built a defensive moat 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 option. Brian? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [4] -------------------------------------------------------------------------------- Thank you, Shing. The company's financial statements for the 3 and 9 months ended September 30, 2020, are not yet complete. Accordingly, the company is presenting the following preliminary estimates. Given 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. The 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 million 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 on $0.3 million and $0.5 million as 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 adjourned meeting, the special meeting adjourning 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 Citic 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'd 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. 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 MGG, which is 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 towards the same goals as our shareholders. Not having more authorized shares could severely hank up our options going forward. Shelly, 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. Shelly, could you please instruct the callers how to queue up? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Darren Aftahi, ROTH Capital Partners. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2] -------------------------------------------------------------------------------- First, could you talk a little bit about the China business. So I appreciate your business doubled when you -- looks like you're guiding to another doubling, at least doubling in the fourth quarter. There's some language in the release that says that China Mobile, you're in 200 stores right now, Hebei Province, and that's going to 5,000 by the end of the year. That's like a 25-fold increase or so, 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? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [3] -------------------------------------------------------------------------------- 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 be completed in our fiscal 2021. So it should read that their 2,000 stores have the queue management software going to 5,000, and it's currently is in 200 kiosks -- smart kiosks. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4] -------------------------------------------------------------------------------- Two different projects? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [5] -------------------------------------------------------------------------------- But it's all part of Phase 1. -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [6] -------------------------------------------------------------------------------- It's all part of our Phase 1. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [7] -------------------------------------------------------------------------------- So your visibility and confidence in the doubling, like, I guess, we see here, halfway through the quarter is, what? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [8] -------------------------------------------------------------------------------- It's very good. Very strong. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [9] -------------------------------------------------------------------------------- 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? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [10] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [11] -------------------------------------------------------------------------------- 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 major business on the U.S. side, its with 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 kind of as Shing said, multi barrier platform as opposed to price solution? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [12] -------------------------------------------------------------------------------- Yes. So I would say we are very well represented in all the different -- in the most of the 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 are looking for as a quick way to figure out who can come in or not. Now 6 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 find very in a punitive way. Say, for example, with the Raiders, they lost the draft pick, and they find a lot for not following some of the protocol. So we are finding that a lot of different things are approaching us that, can you provide this platform strategy that includes not just of the temperature checking, but the testing, the compliance with the PPE, the compliance with how you keep the record 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 are very hopeful that the vaccines will prove up 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 in place. We're very well positioned to take advantage of that. A lot of it comes from the last 6 months where we have proved the most difficult of tying all these different -- these centers are establishing who you 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, 3 to 6 months in the U.S. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [13] -------------------------------------------------------------------------------- So maybe, if I could just indulge a little bit, 2021, assuming we don't have any sort of a non once event next year, is your mix of business still going to be very much skewed towards China, just given kind of the contracts and maybe what's actually being installed today? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [14] -------------------------------------------------------------------------------- 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 -- is there's a long 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. The U.S., well, obviously a very strong market. But I think we're still trying to figure out what the direction is over here. In China, the direction has been set, the vision has been set, the budget has been set. And now -- it's we're trying to move us fast to capture that market share. Two of the areas that we brought out, outside of China Mobile is as it relates to the banks, right? There are thousand branches or bank retail debt 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 200000-plus banks throughout the country. We'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. I talked -- mentioned about the smart community, same thing. In China, everything works as a 5-year plan. Right? There are over 160,000 smart communities in China, and they're going through a 5-year upgraded plan, where they earmarked $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 USD 400,000 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 DRC International. So we are very well positioned there as well. -------------------------------------------------------------------------------- Darren Aftahi, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [15] -------------------------------------------------------------------------------- Great. Last one for me. When can just do the final financials, and I figured its been over, what, 2 years now without a CFO, I'm just kind of curious why there's no hiring of CFO? And what's kind of the way with the -- going -- the numbers being up? -------------------------------------------------------------------------------- E. Brian Harvey, Remark Holdings, Inc. - SVP of Capital Markets & IR [16] -------------------------------------------------------------------------------- I can address the financials. They're scheduled to be out within a week, by next Monday, the 23rd, we will file. -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [17] -------------------------------------------------------------------------------- Okay. 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. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Our next question comes from Ivan [Clever] from [Cliff] Capital. -------------------------------------------------------------------------------- Unidentified Analyst, [19] -------------------------------------------------------------------------------- Just a couple of quick questions. First of all, do you foresee your casino business improving as far as the thermal AI side? Do you feel like most people in this industry at this point have picked their pony? Or do you feel like there's still a lot of room for addressing that sector? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [20] -------------------------------------------------------------------------------- I can't speak for the other businesses, but or for our 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 sphere. 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, you -- there's 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 and be able 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 at the -- 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's certainly a market that we see as a very attractive for us in the next few months. -------------------------------------------------------------------------------- Unidentified Analyst, [21] -------------------------------------------------------------------------------- Okay. I noticed that the majority of four teams that you're working with, everything seems to be in or around your area, which is obviously in the best place to start, but do you guys feel that you're spreading out further than that right now, at least in talks with anybody? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [22] -------------------------------------------------------------------------------- Yes. Absolutely. We -- 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 you expected to expand anywhere else. But we have relationships really across the U.S. which, I would say, the majority of the sports teams. We have very strong relationships with the leagues. But let's be realistic, too. A lot of these stadiums and teams aren't ready to fully roll out 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 very -- certainly, as we mentioned on the call, very well positioned to do that as soon as things begin to loosen up. -------------------------------------------------------------------------------- Unidentified Analyst, [23] -------------------------------------------------------------------------------- Okay. Great. And one final question. Just in regard to 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 at hand? -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [24] -------------------------------------------------------------------------------- I think that's part of it. That's certainly part of it. I think we have certain qualities in a 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 and opportunities. The other aspect is exactly what you mentioned. In general, we -- the basis for the company are low. And we incentivize through equity comp. 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. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- Kai-Shing Tao, Remark Holdings, Inc. - Chairman & CEO [26] -------------------------------------------------------------------------------- Thank you. We just want to leave with the key takeaway that it is finally a new day for RemarkAI. We're now over focused to become the only true publicly listed pure-play AI company. The demand for our AI is super strong. And run rate 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. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- This concludes today's call. Thank you for your participation. You may now disconnect.