Singing Machine Explores New Markets Amid Q2 2024 Earnings Report

Earnings call: Singing Machine steers towards automotive, TV markets By Investing.com

Singing Machine (NASDAQ: SMDL), a leader in consumer karaoke products, has recently revealed during its second quarter 2024 earnings call a strategic pivot towards the automotive and connected TV sectors. This shift comes as the company announced the acquisition of SemiCab, an AI-powered freight transportation software company, and the integration of karaoke microphones into vehicles, with Tesla (NASDAQ:TSLA) introducing the feature in its North American models. Despite a decrease in net sales and gross profit, Singing Machine is optimistic about transforming its business model into a more technology-driven, asset-light, and higher-margin entity. Key Takeaways Company Outlook Bearish Highlights Bullish Highlights Misses Q&A Highlights Singing Machine's strategic shift towards integrated technology solutions in the automotive and connected TV industries represents a significant pivot from its traditional karaoke business. By leveraging partnerships and innovative AI technology, the company is positioning itself to tap into new markets with high growth potential. While financial results have shown some setbacks, the company's proactive measures to streamline its product offerings and improve its balance sheet demonstrate a commitment to long-term strategy and shareholder value. As Singing Machine continues to evolve, stakeholders and industry watchers will be keenly observing how these new ventures unfold. InvestingPro Insights Singing Machine's recent strategic pivot towards technology-driven sectors is a bold move that aims to redefine the company's market position. Here are some key insights based on the latest data from InvestingPro that could further inform stakeholders about the company's financial health and market performance: InvestingPro Tips for Singing Machine highlight the company's financial state and market performance: 1. Singing Machine holds more cash than debt on its balance sheet, which could provide the financial flexibility needed to navigate its strategic pivot and invest in new technology-driven initiatives. 2. The company's valuation implies a poor free cash flow yield, suggesting that investors should be mindful of the company's ability to generate cash from its operations as it transitions into new market segments. For those interested in a deeper analysis, InvestingPro offers additional tips on Singing Machine, which can be found at https://www.investing.com/pro/SMDL. These tips may provide further guidance on the company's financial status and future prospects in light of its recent strategic decisions. Full transcript - Singing Machine Company Inc (MICS) Q2 2024: Operator: Good afternoon, everyone, and welcome to Singing Machine Second Quarter 2024 Financial Results Earnings Call. My name is Savannah, and I will be your operator. As a reminder, today's call is being recorded. We have a brief safe harbor and then we'll get started. This call contains forward-looking statements under U.S. Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we have filed with the Securities and Exchange Commission, including the cautionary statement included in our current and periodic filings. I would like to now turn the call over to Gary Atkinson, company's CEO. Please go ahead. Gary Atkinson: Thank you. Good afternoon, ladies and gentlemen. I want to start off by thanking everyone for taking the time to listen in and participate today on our second quarter 2024 earnings call. I'm joined by Richard Perez, company CFO; Bernardo Melo, Chief Revenue Officer; and Vivek Sehgal, SemiCab's Chief Product Officer. This past quarter was highly unusual for the Singing Machine. Normally, we use the second quarter to finalize buying commitments with our retail partners, coordinate upcoming product manufacturing for the holiday season and planning to ensure retail shelves are fully stocked with Karaoke products for the holiday season. This past quarter, we were busy with all of these normal activities. But on top of that, we were deeply entrenched in two new very exciting projects that I'm pleased to discuss on today's earnings call. First, as recently announced, we closed on the acquisition of an AI-powered freight transportation software company called SemiCab which has the potential to disrupt the global logistics industry. We spent most of the quarter conducting due diligence and negotiating legal structure to perform the acquisition, which closed as an all-stock deal. After we discussed our second quarter financial results, I'm going to ask Vivek Sehgal, our Chief Product Officer at SemiCab to share a brief update on this acquisition from his perspective. Second, we spent much of the quarter deep in progress to advance our automotive initiative for our microphone business. We are very optimistic on the potential for this business and it is rapidly becoming a central focus for growth within the Karaoke category. Lastly, we are also finalizing our corporate rebranding and hope to share it with all of you shortly. As a company, we have successfully shifted from a single line of business to now a holding company model with the responsibility of managing, funding and growing to very different businesses. As a result, we intend to share a new vision and direction for the company to get back to growth and creating value. Before we discuss these other initiatives, I would like to ask our Chief Financial Officer, Richard Perez, to walk us through the details of our results for operations for the second quarter. Go ahead, Rich. Richard Perez: Thank you, Gary. I appreciate everyone for taking the time out of their busy schedules to listen in today. I'm going to walk through the specifics of our results of operations and try to add a little color and insight into how our business is evolving in the near term from my perspective. Net sales for the three months ended June 30, 2024, decreased to approximately $2,440,000 million from approximately $2,625,000, representing a decrease of approximately $185,000 as compared to the three months ended June 30, 2023. The 7% decrease was primarily due to lower overall sell-through results during the past holiday season, mostly with our largest customer Walmart (NYSE:WMT), which, in turn, diminished inventory restocking requirements during the first six months of the calendar year, which is historically off peak shipping season. Retail, particularly traditional brick-and-mortar retail sales have been challenging for almost two years. We have experienced this consistently across all of our major retail relationships and has challenged us to be extremely focused on product mix, product placement and leveraging shelf space to optimize every opportunity to sell efficiently at scale with these best-in-class retailers. Gross profit for the three months ended June 30, 2024 decreased to approximately $324,000 from approximately $529,000, representing a decrease of approximately $205,000, 38.8% and as compared to the three months ended June 30, 2023. Gross margins for the three months ended June 30, 2024, or 13.3% as compared to 20.2% for the three months ended June 30, 2023. Approximately $260,000 of the decrease in gross profit was primarily due to increased sales in excess inventory, which yielded significantly lower margin than current models sold and was offset by a decrease in expenses of approximately $57,000 associated with the miscellaneous logistics costs related to the timing of receipt of new goods. Our focus here has been to aggressively clear older, slower moving inventory to optimize our working capital. We were very successful in converting a meaningful component of our older inventory to cash for other purposes, and that has been a focus in the early third quarter as we look to clear virtually all our stagnant inventory during the current retail buying season. During the three months ended June 30, 2024, total operating expenses increased to approximately $6,478,000 million compared to approximately $2,960,000 during the three months ended June 30, 2023. This represents an increase in total operating expenses of approximately $3,518,000 million from the three months ended June 30, 2023. The increase in operating expenses can be somewhat misleading. Of the overall increase, the vast majority was due to a non-cash write-off of impaired operating lease assets of approximately $3,878,000 million related to the hospitality lease we exited in New York City. Excluding this one-time event, we actually saw all other operating expenses decreased. In fact, we saw a decrease in seasonal debt reserves of approximately $156,000 a decrease in logistics costs of approximately $124,000 associated with the closing of the warehouse operation and outsourcing and logistics to a third-party logistics company acceleration of depreciation expense of approximately $130,000 recognized in the prior year on impaired fixed assets associated with the closing of the warehouse. Our focus has been and continues to be on running a very tight discretionary operating budget. The effect of these results yielded a net loss for the quarter of $6,119,000 million or a loss of $0.95 per share for the second quarter of 2024. This is compared to a loss of $2,460,000 million or a loss of $0.64 per share for the same period in 2023. In summary, sales were very much in line with our expectations. Our efforts to closely manage costs were very positive. We improved our balance sheet dramatically, clearing almost $7 million in short-term liabilities. We are now in our normal busy season period and we are very focused on rebuilding liquidity as we push out our seasonal sales orders. With this, I will turn the call over to our Chief Revenue Officer, Bernardo Melo. Bernardo Melo: Thanks Richard. I appreciate. Thanks for turning over the call. Thank you, everybody, for listening today. I just wanted to go through some of the highlights coming up with the holiday season. As Richard has mentioned, there has been some redefining of shelf space at retail. Some of our major partners are looking to consolidate some of the shelf space. Fortunately, for us, we are still players with each of those retailers. But we -- towards the end of my conversation, I'll highlight some of the changes that we're making internally to capitalize on some of the retail changes. But for us, moving forward, we are -- as I mentioned before in previous calls, we are looking to continue to grow our WiFi enabled models, our digital offerings, which have immediate back-end revenue through our app and our partnership with Stingray Music. This year, we are introducing a brand-new WiFi model, which we will find at Sam's Club. They partnered with us in the electronic department, Normally, we were in the toy department. We're still in the toy department with two different SKUs, but now we are also entering the electronic department at a higher price point with a WiFi offering. This model is brand new. It's going to be directly tied in with our app. We've also included other music services as well with Apple (NASDAQ:AAPL) Music, Spotify (NYSE:SPOT), Pandora (OTC:PANDY) and Amazon (NASDAQ:AMZN) Prime along with YouTube, making the item that much more attractive to consumers. Now they're able to interact with our product, with our digital product app. And also if they have their subscription already currently, they're also able to interact with that as well. Costco (NASDAQ:COST) is carrying it for the second year and then we're also deploying it to the rest of com, whether it's target.com, Amazon, Best Buy (NYSE:BBY) and then our partners in Canada with Best Buy, Walmart and others and we're also rolling this out to Costco U.K., Costco Australia. So our offering for the WiFi model is definitely expanding, and we're looking for that to be the future going forward. For our traditional model, do you still see them in most retailers, you still have section in Walmart, where you will find about four feet of space with product that's continuing through the holidays. The season, Sam's Club is also carrying some of our traditional, not going away is becoming a more promotional, more aggressive price points, but that's still going to continue during this holiday season. We also are continuing our foray into the direct-to-consumer model. We just launched -- we just recently launched our TikTok store shop with four concentrated items in there that has gone very well so far. We're starting to allocate some of our marketing dollars more towards the TikTok shop and also with the meta platforms, resulting in higher sales in those platforms and also online in our own singingmachine.com. We also successfully launched our Sesame Street Karaoke plus line. That's going to be launching with Amazon and all the dot com. You could go online now and see them. We have three items coming out, Elmo, Abby and Cookie Monster under that line, and we'll be looking to expand it in 2025. And then finally, one of the things I want to emphasize is moving forward, we've identified that retail shelf is always a challenge. We want to create -- we want to reduce the number of offerings that we're going to be doing. So come 2025, we're going to be introducing mostly strictly WiFi enabled models. Those have been working very well for us. We've been receiving a lot of good feedback for us from consumers on those models. And with our partnership with Stingray, we're going to be launching some new technologies that I'm sure Gary will get into in the near future. But we will be definitely aligned with that strategy moving forward. So with that being said, Gary, I'll turn it back over to you. Gary Atkinson: Perfect. Thanks, Bernardo. That's actually a perfect segue into the next part of the call, where I want to focus on some of the new emerging automotive and connected TV opportunities that we have within Singing Machine. So as many of you may not know, there is a rapidly growing interest in bringing Karaoke microphone devices to the in-car entertainment offering. So we had previously debuted this technology at the consumer electronics show earlier this year, and we did see tremendous interest from many major OEM automotive brands for this type of a microphone integration. And I'll remind everyone, Singing Machine was the first company to bring Karaoke microphones to the car. This is through our successful Karaoke collaboration that we launched back in 2017. And as further proof of the market demand for Karaoke microphones in the car, earlier this month, Tesla just announced that they are introducing Karaoke microphones to all of their Tesla models in the North American market. And I think as most people see as Tesla moves, the industry tends to follow and through our strategic relationship with the Stingray Group, we are now at the forefront of partnering with many major automotive brands that are seeking to bring Karaoke mics into the car embedded directly into the in-vehicle infotainment system, which is where they're currently now accessing Stingray's Karaoke content services. So we see the connected microphone as a quickly growing segment, it's nice because it doesn't cannibalize our existing retail business and it takes advantage of the growing demand to provide different forms of entertainment within the car. Secondly, for the TV market, OEMs have been actively seeking to grow their TV app services offerings and to aggregate and unify multiple devices throughout the house into one single touch point. So for Karaoke, this means the opportunity to take advantage of the big screen TV and the sound systems that most people have in their homes and converting them into a fully featured Karaoke experience. Integral to this entire experience is the Karaoke microphone. So moving forward, we see our business model shifting rapidly more towards integrated microphone devices as opposed to being so heavily reliant on standalone Karaoke systems. We're excited about this shift because we believe we can transform our legacy business into a more technology-driven predictable year-round business. This new model is very asset light, very human capital light but yields much higher margins. This should enable us to drive costs down throughout our legacy Karaoke business, while boosting growth and bottom line profitability. So at this point of the call, I would like to introduce Vivek Sehgal, SemiCab's Chief Product Officer. Vivek is one of the two key visionaries, along with Ajesh Kapoor its Founder and President, together were instrumental in identifying the opportunity in creating a core technology that has become SemiCab's artificial intelligence-driven platform. At this time, I'd like to turn the call over to Vivek. Vivek Sehgal: Thank you, Gary. I appreciate the opportunity to speak with everyone today. I want to take a minute and share why we started SemiCab. The transportation industry is very fragmented and pretty slow in adopting technology to solve with efficiency challenges. On average, one in every three miles run is empty. That creates unnecessary costs and carbon emissions that the whole industry has to bear. At SemiCab, we are tackling this inefficiency heads on. We are an award-winning technology company and we are solving freight at scale using dynamic AI technology that optimizes transportation on demand and in real time. Next, I want to share a little on the rationale adjacent I had for pursuing the transaction that led to our joining the Singing Machine team in early July. For Ajesh and myself, we have worked together for many years, developing critical software for some of the largest players in the logistics space. In 2018, we launched SemiCab to address the inefficiencies that we saw going on addressed for many years in the logistics industry in general. From 2018 to late 2021, we devoted most of our resource to building the technology and getting early versions of our solutions into live pilot environments, where we could test our models and gain critical empirical data as well. Our models were very encouraging and client adoption begin to ramp up in the U.S. after COVID. During one of the industry events that we were attending in India, we were unexpectedly presented an opportunity to help launch the National Digital Freight Exchange in India. This was in my mind a once in a lifetime opportunity, roughly 35 out of the Fortune 1,000 global industry leaders came together, pooling almost $1.5 billion worth in shipping spend annually into one common network of data. [Sam] was involved from day one. And now we are an exclusive partner for this organization. We launched a pilot in India that went extremely well, beginning in the second quarter of 2023. And we quickly realized that the scale of this opportunity was huge. We knew that there was almost no easy way for us to financially support our financial growth expanding into India. As a U.S. based startup, adjacent I explored many possible avenues. We talked to the VCs. We saw the SPAC market improved and the process for the reverse merger is very expensive, time-consuming and uncertain. The opportunity to seamlessly join a NASDAQ listed company and gain access to the efficient capital, as we execute our business model, just made tremendous sense. Today, we are 100% focused on moving forward. we see excellent growth opportunities in both the U.S. and the India markets. Our clients are eager to see us expand our relationships, and we anticipate strong growth. We are also being asked to expand our service model into additional geographies, including the Middle East, North Africa, East Asia. Our growth opportunities are exciting and we believe SemiCab has the great potential to grow for many years. Both Ajesh and I are pleased to be a part of the Single Machine team as it rebrands and expand its business model. We look forward to sharing periodic updates as we focus on driving growth within this part of the company's future growth. Gary, back to you. Gary Atkinson: Perfect. Thank you, Vivek. I appreciate the updates on that. So in closing, I just wanted to address, I think what is most likely the most common question that I get from investors since we announced the SemiCab acquisition back in July. And the number one question I've been receiving is, why would a Karaoke company buy an AI software company? And I've heard it time and time again, people say, well, there's no synergies there. And so my response is relatively simple. I see my job is to create shareholder value. And as a CEO, I need to be creative. I need to uncover value and I need to look for ways to grow the business. And I think for a lot of our long-time shareholders for the last few years, I think you've all seen, we've seen that the legacy Karaoke business has watched its retail presence come under a significant amount of pressure. And I don't see these challenges going away any time in the short-term. As a result, we are actively reinventing ourselves and our core business. We're pivoting into new markets that integrate Karaoke into the automotive space and into the smart TV category, which requires a lot more innovative technology and fortunately has much deeper moats around both of those businesses. But with that being said, SemiCab has presented a very compelling opportunity to potentially disrupts almost $1 trillion global freight industry. and I'll touch on something Vivek said earlier. Today, traditional freight transportation and in particular, digital freight brokers, they operate in a broken industry that is highly siloed and very inefficient where, on average, one out of every three miles that a truck is on the road, it's empty. And this massive inefficiency leads to annually over $900 billion in wasted freight expenses. Over 140 billion empty miles that a truck is on the road leading to increased road congestion and unnecessary CO2 emissions. SemiCab has the technology to solve that inefficiency in the market. And they've shown us that they have successfully attained 90% efficiency, which is to say they have shown that they can reduce the number of empty miles from one out of every three miles empty to only one out of every 10 miles act. So as we embark to change the company's narrative and to tell this story through a broader audience, we see SemiCab as having an opportunity to create much higher floor value for our company very quickly and at levels that are meaningfully higher than where we are today. As such, we felt compelled to add SemiCab into our corporate portfolio and we will continue to openly evaluate opportunities to grow the business moving forward. I do understand and realize that this is not a standard approach, particularly in the small-cap investment space. I believe that with the general headwinds that are facing small companies today, taking a bold innovative approach in the face of diversity should hopefully give us a better chance to unlock value for everyone. So I thank everybody for your time today. We look forward to providing updates soon on the progress of both business segments. I want to thank everybody for your time and interest today. That concludes my prepared statements. I'll turn it back over to the moderator. Operator:

The Singing Machine Company, Inc. (MICS) Q2 2024 Earnings Call Transcript

Gary Atkinson - Chief Executive Officer Richard Perez - Chief Financial Officer Bernardo Melo - Chief Revenue Officer Vivek Sehgal - Chief Product Officer, SemiCab Good afternoon, everyone, and welcome to Singing Machine Second Quarter 2024 Financial Results Earnings Call. My name is Savannah, and I will be your operator. As a reminder, today's call is being recorded. We have a brief safe harbor and then we'll get started. This call contains forward-looking statements under U.S. Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we have filed with the Securities and Exchange Commission, including the cautionary statement included in our current and periodic filings. I would like to now turn the call over to Gary Atkinson, company's CEO. Please go ahead. Gary Atkinson Thank you. Good afternoon, ladies and gentlemen. I want to start off by thanking everyone for taking the time to listen in and participate today on our second quarter 2024 earnings call. I'm joined by Richard Perez, company CFO; Bernardo Melo, Chief Revenue Officer; and Vivek Sehgal, SemiCab's Chief Product Officer. This past quarter was highly unusual for the Singing Machine. Normally, we use the second quarter to finalize buying commitments with our retail partners, coordinate upcoming product manufacturing for the holiday season and planning to ensure retail shelves are fully stocked with Karaoke products for the holiday season. This past quarter, we were busy with all of these normal activities. But on top of that, we were deeply entrenched in two new very exciting projects that I'm pleased to discuss on today's earnings call. First, as recently announced, we closed on the acquisition of an AI-powered freight transportation software company called SemiCab which has the potential to disrupt the global logistics industry. We spent most of the quarter conducting due diligence and negotiating legal structure to perform the acquisition, which closed as an all-stock deal. After we discussed our second quarter financial results, I'm going to ask Vivek Sehgal, our Chief Product Officer at SemiCab to share a brief update on this acquisition from his perspective. Second, we spent much of the quarter deep in progress to advance our automotive initiative for our microphone business. We are very optimistic on the potential for this business and it is rapidly becoming a central focus for growth within the Karaoke category. Lastly, we are also finalizing our corporate rebranding and hope to share it with all of you shortly. As a company, we have successfully shifted from a single line of business to now a holding company model with the responsibility of managing, funding and growing to very different businesses. As a result, we intend to share a new vision and direction for the company to get back to growth and creating value. Before we discuss these other initiatives, I would like to ask our Chief Financial Officer, Richard Perez, to walk us through the details of our results for operations for the second quarter. Go ahead, Rich. Richard Perez Thank you, Gary. I appreciate everyone for taking the time out of their busy schedules to listen in today. I'm going to walk through the specifics of our results of operations and try to add a little color and insight into how our business is evolving in the near term from my perspective. Net sales for the three months ended June 30, 2024, decreased to approximately $2,440,000 million from approximately $2,625,000, representing a decrease of approximately $185,000 as compared to the three months ended June 30, 2023. The 7% decrease was primarily due to lower overall sell-through results during the past holiday season, mostly with our largest customer Walmart, which, in turn, diminished inventory restocking requirements during the first six months of the calendar year, which is historically off peak shipping season. Retail, particularly traditional brick-and-mortar retail sales have been challenging for almost two years. We have experienced this consistently across all of our major retail relationships and has challenged us to be extremely focused on product mix, product placement and leveraging shelf space to optimize every opportunity to sell efficiently at scale with these best-in-class retailers. Gross profit for the three months ended June 30, 2024 decreased to approximately $324,000 from approximately $529,000, representing a decrease of approximately $205,000, 38.8% and as compared to the three months ended June 30, 2023. Gross margins for the three months ended June 30, 2024, or 13.3% as compared to 20.2% for the three months ended June 30, 2023. Approximately $260,000 of the decrease in gross profit was primarily due to increased sales in excess inventory, which yielded significantly lower margin than current models sold and was offset by a decrease in expenses of approximately $57,000 associated with the miscellaneous logistics costs related to the timing of receipt of new goods. Our focus here has been to aggressively clear older, slower moving inventory to optimize our working capital. We were very successful in converting a meaningful component of our older inventory to cash for other purposes, and that has been a focus in the early third quarter as we look to clear virtually all our stagnant inventory during the current retail buying season. During the three months ended June 30, 2024, total operating expenses increased to approximately $6,478,000 million compared to approximately $2,960,000 during the three months ended June 30, 2023. This represents an increase in total operating expenses of approximately $3,518,000 million from the three months ended June 30, 2023. The increase in operating expenses can be somewhat misleading. Of the overall increase, the vast majority was due to a non-cash write-off of impaired operating lease assets of approximately $3,878,000 million related to the hospitality lease we exited in New York City. Excluding this one-time event, we actually saw all other operating expenses decreased. In fact, we saw a decrease in seasonal debt reserves of approximately $156,000 a decrease in logistics costs of approximately $124,000 associated with the closing of the warehouse operation and outsourcing and logistics to a third-party logistics company acceleration of depreciation expense of approximately $130,000 recognized in the prior year on impaired fixed assets associated with the closing of the warehouse. Our focus has been and continues to be on running a very tight discretionary operating budget. The effect of these results yielded a net loss for the quarter of $6,119,000 million or a loss of $0.95 per share for the second quarter of 2024. This is compared to a loss of $2,460,000 million or a loss of $0.64 per share for the same period in 2023. In summary, sales were very much in line with our expectations. Our efforts to closely manage costs were very positive. We improved our balance sheet dramatically, clearing almost $7 million in short-term liabilities. We are now in our normal busy season period and we are very focused on rebuilding liquidity as we push out our seasonal sales orders. With this, I will turn the call over to our Chief Revenue Officer, Bernardo Melo. Bernardo Melo Thanks Richard. I appreciate. Thanks for turning over the call. Thank you, everybody, for listening today. I just wanted to go through some of the highlights coming up with the holiday season. As Richard has mentioned, there has been some redefining of shelf space at retail. Some of our major partners are looking to consolidate some of the shelf space. Fortunately, for us, we are still players with each of those retailers. But we -- towards the end of my conversation, I'll highlight some of the changes that we're making internally to capitalize on some of the retail changes. But for us, moving forward, we are -- as I mentioned before in previous calls, we are looking to continue to grow our WiFi enabled models, our digital offerings, which have immediate back-end revenue through our app and our partnership with Stingray Music. This year, we are introducing a brand-new WiFi model, which we will find at Sam's Club. They partnered with us in the electronic department, Normally, we were in the toy department. We're still in the toy department with two different SKUs, but now we are also entering the electronic department at a higher price point with a WiFi offering. This model is brand new. It's going to be directly tied in with our app. We've also included other music services as well with Apple Music, Spotify, Pandora and Amazon Prime along with YouTube, making the item that much more attractive to consumers. Now they're able to interact with our product, with our digital product app. And also if they have their subscription already currently, they're also able to interact with that as well. Costco is carrying it for the second year and then we're also deploying it to the rest of com, whether it's target.com, Amazon, Best Buy and then our partners in Canada with Best Buy, Walmart and others and we're also rolling this out to Costco U.K., Costco Australia. So our offering for the WiFi model is definitely expanding, and we're looking for that to be the future going forward. For our traditional model, do you still see them in most retailers, you still have section in Walmart, where you will find about four feet of space with product that's continuing through the holidays. The season, Sam's Club is also carrying some of our traditional, not going away is becoming a more promotional, more aggressive price points, but that's still going to continue during this holiday season. We also are continuing our foray into the direct-to-consumer model. We just launched -- we just recently launched our TikTok store shop with four concentrated items in there that has gone very well so far. We're starting to allocate some of our marketing dollars more towards the TikTok shop and also with the meta platforms, resulting in higher sales in those platforms and also online in our own singingmachine.com. We also successfully launched our Sesame Street Karaoke plus line. That's going to be launching with Amazon and all the dot com. You could go online now and see them. We have three items coming out, Elmo, Abby and Cookie Monster under that line, and we'll be looking to expand it in 2025. And then finally, one of the things I want to emphasize is moving forward, we've identified that retail shelf is always a challenge. We want to create -- we want to reduce the number of offerings that we're going to be doing. So come 2025, we're going to be introducing mostly strictly WiFi enabled models. Those have been working very well for us. We've been receiving a lot of good feedback for us from consumers on those models. And with our partnership with Stingray, we're going to be launching some new technologies that I'm sure Gary will get into in the near future. But we will be definitely aligned with that strategy moving forward. So with that being said, Gary, I'll turn it back over to you. Gary Atkinson Perfect. Thanks, Bernardo. That's actually a perfect segue into the next part of the call, where I want to focus on some of the new emerging automotive and connected TV opportunities that we have within Singing Machine. So as many of you may not know, there is a rapidly growing interest in bringing Karaoke microphone devices to the in-car entertainment offering. So we had previously debuted this technology at the consumer electronics show earlier this year, and we did see tremendous interest from many major OEM automotive brands for this type of a microphone integration. And I'll remind everyone, Singing Machine was the first company to bring Karaoke microphones to the car. This is through our successful Karaoke collaboration that we launched back in 2017. And as further proof of the market demand for Karaoke microphones in the car, earlier this month, Tesla just announced that they are introducing Karaoke microphones to all of their Tesla models in the North American market. And I think as most people see as Tesla moves, the industry tends to follow and through our strategic relationship with the Stingray Group, we are now at the forefront of partnering with many major automotive brands that are seeking to bring Karaoke mics into the car embedded directly into the in-vehicle infotainment system, which is where they're currently now accessing Stingray's Karaoke content services. So we see the connected microphone as a quickly growing segment, it's nice because it doesn't cannibalize our existing retail business and it takes advantage of the growing demand to provide different forms of entertainment within the car. Secondly, for the TV market, OEMs have been actively seeking to grow their TV app services offerings and to aggregate and unify multiple devices throughout the house into one single touch point. So for Karaoke, this means the opportunity to take advantage of the big screen TV and the sound systems that most people have in their homes and converting them into a fully featured Karaoke experience. Integral to this entire experience is the Karaoke microphone. So moving forward, we see our business model shifting rapidly more towards integrated microphone devices as opposed to being so heavily reliant on standalone Karaoke systems. We're excited about this shift because we believe we can transform our legacy business into a more technology-driven predictable year-round business. This new model is very asset light, very human capital light but yields much higher margins. This should enable us to drive costs down throughout our legacy Karaoke business, while boosting growth and bottom line profitability. So at this point of the call, I would like to introduce Vivek Sehgal, SemiCab's Chief Product Officer. Vivek is one of the two key visionaries, along with Ajesh Kapoor its Founder and President, together were instrumental in identifying the opportunity in creating a core technology that has become SemiCab's artificial intelligence-driven platform. Thank you, Gary. I appreciate the opportunity to speak with everyone today. I want to take a minute and share why we started SemiCab. The transportation industry is very fragmented and pretty slow in adopting technology to solve with efficiency challenges. On average, one in every three miles run is empty. That creates unnecessary costs and carbon emissions that the whole industry has to bear. At SemiCab, we are tackling this inefficiency heads on. We are an award-winning technology company and we are solving freight at scale using dynamic AI technology that optimizes transportation on demand and in real time. Next, I want to share a little on the rationale adjacent I had for pursuing the transaction that led to our joining the Singing Machine team in early July. For Ajesh and myself, we have worked together for many years, developing critical software for some of the largest players in the logistics space. In 2018, we launched SemiCab to address the inefficiencies that we saw going on addressed for many years in the logistics industry in general. From 2018 to late 2021, we devoted most of our resource to building the technology and getting early versions of our solutions into live pilot environments, where we could test our models and gain critical empirical data as well. Our models were very encouraging and client adoption begin to ramp up in the U.S. after COVID. During one of the industry events that we were attending in India, we were unexpectedly presented an opportunity to help launch the National Digital Freight Exchange in India. This was in my mind a once in a lifetime opportunity, roughly 35 out of the Fortune 1,000 global industry leaders came together, pooling almost $1.5 billion worth in shipping spend annually into one common network of data. [Sam] was involved from day one. And now we are an exclusive partner for this organization. We launched a pilot in India that went extremely well, beginning in the second quarter of 2023. And we quickly realized that the scale of this opportunity was huge. We knew that there was almost no easy way for us to financially support our financial growth expanding into India. As a U.S. based startup, adjacent I explored many possible avenues. We talked to the VCs. We saw the SPAC market improved and the process for the reverse merger is very expensive, time-consuming and uncertain. The opportunity to seamlessly join a NASDAQ listed company and gain access to the efficient capital, as we execute our business model, just made tremendous sense. Today, we are 100% focused on moving forward. we see excellent growth opportunities in both the U.S. and the India markets. Our clients are eager to see us expand our relationships, and we anticipate strong growth. We are also being asked to expand our service model into additional geographies, including the Middle East, North Africa, East Asia. Our growth opportunities are exciting and we believe SemiCab has the great potential to grow for many years. Both Ajesh and I are pleased to be a part of the Single Machine team as it rebrands and expand its business model. We look forward to sharing periodic updates as we focus on driving growth within this part of the company's future growth. Perfect. Thank you, Vivek. I appreciate the updates on that. So in closing, I just wanted to address, I think what is most likely the most common question that I get from investors since we announced the SemiCab acquisition back in July. And the number one question I've been receiving is, why would a Karaoke company buy an AI software company? And I've heard it time and time again, people say, well, there's no synergies there. And so my response is relatively simple. I see my job is to create shareholder value. And as a CEO, I need to be creative. I need to uncover value and I need to look for ways to grow the business. And I think for a lot of our long-time shareholders for the last few years, I think you've all seen, we've seen that the legacy Karaoke business has watched its retail presence come under a significant amount of pressure. And I don't see these challenges going away any time in the short-term. As a result, we are actively reinventing ourselves and our core business. We're pivoting into new markets that integrate Karaoke into the automotive space and into the smart TV category, which requires a lot more innovative technology and fortunately has much deeper moats around both of those businesses. But with that being said, SemiCab has presented a very compelling opportunity to potentially disrupts almost $1 trillion global freight industry. and I'll touch on something Vivek said earlier. Today, traditional freight transportation and in particular, digital freight brokers, they operate in a broken industry that is highly siloed and very inefficient where, on average, one out of every three miles that a truck is on the road, it's empty. And this massive inefficiency leads to annually over $900 billion in wasted freight expenses. Over 140 billion empty miles that a truck is on the road leading to increased road congestion and unnecessary CO2 emissions. SemiCab has the technology to solve that inefficiency in the market. And they've shown us that they have successfully attained 90% efficiency, which is to say they have shown that they can reduce the number of empty miles from one out of every three miles empty to only one out of every 10 miles act. So as we embark to change the company's narrative and to tell this story through a broader audience, we see SemiCab as having an opportunity to create much higher floor value for our company very quickly and at levels that are meaningfully higher than where we are today. As such, we felt compelled to add SemiCab into our corporate portfolio and we will continue to openly evaluate opportunities to grow the business moving forward. I do understand and realize that this is not a standard approach, particularly in the small-cap investment space. I believe that with the general headwinds that are facing small companies today, taking a bold innovative approach in the face of diversity should hopefully give us a better chance to unlock value for everyone. So I thank everybody for your time today. We look forward to providing updates soon on the progress of both business segments. I want to thank everybody for your time and interest today. That concludes my prepared statements.

Sidus Space, Inc. (SIDU) Q2 2024 Earnings Call Transcript

Bill White - Chief Financial Officer Carol Craig - Chairman and Chief Executive Officer Greetings and welcome to the Sidus Space Second Quarter 2024 Results and Business Update. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Bill White, the CFO. Thank you. You may begin. Bill White Good evening, everyone, and thank you for joining us for Sidus Space's second quarter 2024 earnings conference call. Joining us today from the company is Carol Craig, our Chairman and Chief Executive Officer and myself, Bill White, Chief Financial Officer. During today's call, we make certain forward-looking statements. These statements are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements made on this call. These factors include our ability to estimate operational expenses and liquidity needs, customer demand, supply chain delays, including launch providers, and extended sales cycles. For more information about these risks and uncertainties, please refer to the risk factors in the company's filings with the Securities and Exchange Commission, each of which can be found on our website www.sidusspace.com. Listeners are cautioned not to put any undue reliance on forward-looking statements, and the company specifically disclaims any obligations to update the forward-looking statements that may be discussed during this call. At this time, I'd like to turn the call over to Carol Craig. Carol, please go ahead. Carol Craig Thank you, Bill, and welcome, everyone. For those of you who may be new to our company and our mission, Sidus Space is a provider of comprehensive space infrastructure solutions that include space-based data-as-a-service on our proprietary on-orbit satellite platform. We are U.S.-founded and based in Cape Canaveral, Florida, near Kennedy Space Center, where we operate from a 35,000-square-foot manufacturing facility. We support space manufacturing for other companies while also managing our expanding constellation focused on AI-enabled data-as-a-service. Our Mission Control Center is located in Merritt Island, Florida, also part of the space coast. As the space economy evolves from a niche sector to a mainstream industry, it's generating value across various fields and addressing global challenges such as military support, space exploration, and climate change. The impact of space in the satellite industry is becoming increasingly recognized, driving a growing demand for space-derived data and solutions. What sets us apart is our holistic approach to addressing our clients' most pressing challenges. We offer cost-effective solutions with deep expertise across the entire space lifecycle, from hardware manufacturing, to space-based status delivery, and mission planning and operations. Unlike other constellation operators who focus on a single business line, such as specific earth observation sensors, or particular customer segments like the Department of Defense, we have the benefit of optionality. We're not dependent on a single line of business or customer. This diversity mitigates risks associated with external factors like macroeconomic shifts or technological disruptions. Our flexibility allows us to adapt quickly to market changes, supporting growth across all our business lines. We're currently generating revenue and have been for well over a decade and are growing our pipeline across all our businesses. The hard work of the last couple of years has led us into a period of tremendous activity and excitement for Sidus Space. In March, we achieved a significant milestone with our first launch success of our LizzieSat line. Our technology is now proven, patented, and validated, and we're moving forward, executing our vision, and expanding our full-stack space business. We had an outstanding start to 2024 and I'm pleased to report that operationally and technically we've had another milestone quarter as we continue the positive momentum from LizzieSat-1 successful deployment via SpaceX Transporter 10 rideshare mission. LizzieSat-1 has performed very well in its first five months in orbit, meeting mission objectives and activating sensors. Notably, we believe LizzieSat-1 is the first of its kind hybrid 3D printed, AI enhanced multi-mission satellite and remains unique in its technology and multipurpose capabilities. It lays a solid foundation for future growth as we continue with plans to expand our constellation. LizzieSat-2 and 3 are in final stages of production and as of today, everything is on track and moving according to the latest schedule, which is dependent on launch dates. We are on target for two launches in the next six to nine months with the first currently manifested for the fourth quarter of this year with SpaceX. Of course, launch schedule is subject to many factors, including several outside of our control. In the space industry, delays are common and do not necessarily indicate issues. Some delays are completely out of our control, like launch provider schedule changes. As we continue to build and launch our constellation, we expect to make changes to schedules, launches and technologies as driven by market and customer needs. Sometimes a business case supports a strategic schedule change, like an opportunity to integrate an advanced technology or customer payload. As a reminder, our satellites have an expected lifespan of about five years and consideration is always given to maximize return on investment and drive shareholder value for the life of the satellite. Weighing in around 225 pounds, LizzieSat is a more advanced and versatile satellite compared to typical CubeSat's, which are of smaller size and weight. Our larger size LizzieSat supports a range of missions and applications, allowing for simultaneous multi-sensor data collection. This design optimizes payload capacity and mission flexibility, supporting various customers and industries with a single cost effective satellite. Our focus on diversity from the start has been integral to our strategy. Looking back on what we've accomplished since the start of Q2, there are a lot of firsts for Sidus, our customers and space in general. In addition to launching and deploying the first 3D printed AI enhanced multi-mission satellite, this past quarter we successfully completed the mission contracted by NASA for an on orbit demonstration of an autonomous systems hardware software payload developed at NASA Stennis. This marks the first time NASA Stennis has ever flown a hardware software payload into space recognized as a historic milestone by the NASA Stennis Center Director. We were contracted by NASA to not only integrate and supply the technology and software, but to handle launch and satellite activation and onboard data collection. Another first relates to our high performance artificial intelligence delivery platform, FeatherEdge. AI and Space simplified data analysis by running algorithms directly on our satellites, reducing identification time from hours to seconds. The LizzieSat-1 mission demonstrated FeatherEdge's ability to upload new algorithms post-launch, run a machine vision algorithm on the hardware accelerator capable of processing data 300 times faster than a CPU and to downlink health and status data to our Sidus Mission Control Center in Maryland, Florida. Our Google-powered AI processor sets the groundwork for substantial upgrades on future launches, which is expected to include NVIDIA powered AI accelerators with 25 times more computing power than our previous version of FeatherEdge, resulting in what we believe will be the highest performance edge computing capability on orbit. The term edge computing is often used to describe a distributed computing system where data processing occurs close to where the data is generated. This reduces the time to receive data and allows for near real-time data analysis, which is essential to providing the building blocks for data center-scale computing on orbit. So what does all that mean? Well, one, Sidus can successfully run high-performance computers in space. These computers can be scaled and swapped incredibly fast on the order of weeks, not years, to adapt to customer or market demands for hardware. Two, we have a system flexible enough to support new customer missions post-launch through software and algorithm updates, which allows Sidus to generate additional revenue on LizzieSat's that have already been launched. And three, the FeatherEdge technology is now providing traction in growth markets such as rapid fire detection. We demonstrated AI enhanced identification of fires on orbit using Sidus developed algorithms. Unlike traditional methods which rely on infrared sensors to collect data and downlink it to the ground for processing, our FeatherEdge solution supports advanced algorithms trained on representative imagery to deliver market-leading accuracy and reliability in thermal data acquisition and analysis. A significance is that our algorithm was 98% accurate and took 5 milliseconds to process the image. Our full stack approach to space-based services, vertically integrating, manufacturing, and operation of all spacecraft systems, including artificial intelligence, enables us to provide what we believe is the most competitive space-based computing solution on the market. As we've always said, we're not only focused on lower earth orbit, but also the Moon, Mars, and beyond. The Moon provides an opportunity to build an infrastructure that enables human permanence on the Moon and a transition to commercial operations past lower Earth orbit and onto more distant destinations. Our research and development team has been working on expanding our offerings to include geostationary and lunar satellites. Over the next several months, we expect to see a ramp-up in our support of cist-owner and lunar needs. We have previously announced that we are part of NASA's Lunar Terrain Vehicle Services Award as a partner to Intuitive Machines, which involves heavier cargo delivery and moon surface systems development and operations. This contract represents the first phase of developing a crewed rover for human exploration of the Moon's surface. In addition to supporting other partners with Lunar solutions, we've also designed a version of LizzieSat to meet the needs of lunar missions and the needs of our expanding customer base. So what does our future look like? Well, to begin with, interest in our satellite manufacturing, data offerings, and long-term partnerships continues to grow, especially following our successful launch. And our revenue pipeline supports a strong growth outlook. Our proven ability to design, build, launch, and operate 120 kilogram satellites is the obvious catalyst to the growth of our pipeline. Over the last few months, we've submitted a range of proposals and responses to solicitations to government and commercial customers. These proposals are under evaluation, and we expect to receive the results of contract decisions in the next coming weeks and months. We continue to grow our backlog and contract values and currently have approximately $100 million in our pipeline. We have over 30 active customers in multiple divisions, several of whom are long-term, recurring customers, and we continue to add new customers as we add more capabilities and services. Additionally, I'm excited as we look to advance discussions with new strategic partners, especially our global partners. In the second quarter, we signed an MOU with NamaSys Bahrain with plans to establish Sidus Arabia, a joint venture headquartered in Saudi Arabia, to develop a satellite manufacturing facility and pursue joint initiatives. This partnership represents a framework that we will look to replicate in other global areas, seeking remote sensing capabilities for environmental and security solutions. As we continue to update our satellite designs with the latest technologies, we're also growing our own space product division. As a vertically integrated satellite manufacturer, we have the advantage of being able to design and build our own subsystem solutions for the space ecosystem if it makes economic sense. This drives our cost advantage and our flexible approach to manufacturing. Over the last six months, we invested in our next generation satellite design, which includes more powerful technological solutions including a VPX open architecture system with simplified assembly and integration, reduced mass and better performance. The VPX system is just one of our solutions that we've designed in our manufacturing as we grow our product lines. Other products include flight software, a satellite onboard computer, space rated graphics processing unit, and an LVDS cross point switch card that extends and expands payload capacity. Offering a diversity of products and services that includes our constellations and service offering along with our in-house manufactured, owned, and operated constellations spreads CapEx and research and development across multiple customers. We also have flexibility due to our baseline approach to vertical integration that facilitates the use of the Sidus baseline bus design to customize mission solutions from LEO to Fifth Lunar in a cost-effective and timely manner. We anticipate continued growth in our pipeline and backlog with increased revenue recognition expected as our constellation expands. We've signed contracts for data and we expect additional data contracts over the life of the satellite. Our initial focus with LS1 was to fulfill primary mission objectives for customers, improve out our technology and business model, followed by expansion of our data offerings. As we look at our financial results and projections, it's important to describe the diversity in our business model as it relates to types of contracts and margins and year-over-year comparisons. Our manufacturing and satellite contracts take varying forms, firm fixed price, time material, and milestone or progress payments. This results in inconsistent or lumpy revenue recognition quarter-over-quarter. Our contracts are made up of a mix of material and labor expenses, and those expenses can occur at different times over the life of a contract. Because of this, quarterly comparisons are not necessarily indicative of expected annual results. We look at our revenue projections and gross margins on a year-over-year basis and expect that 2024 will demonstrate the importance of annual vice-quarterly comparisons. And now I'll hand the call over to Bill to discuss our financial highlights. Bill White Thank you, Carol. It's a pleasure to be here today to discuss our second quarter 2024 financial results. As Carol mentioned, successfully launching LizzieSat into orbit was a major achievement for the company and a key milestone in our strategy to drive Sidus towards higher revenues and improved margins. As with any first-time endeavor, we learned valuable lessons from the successful launch and deployment of our initial satellite. These insights have been applied to our current satellites in production, including LizzieSat-2, which is scheduled for launch later this year. We are eager to see the advancements and improvements once these satellites are in orbit. As technology continues to evolve rapidly, we are committed to enhancing our own capabilities to expand our customer base and optimize our data revenue streams as part of our growing business portfolio. In addition to technology, we have invested in the growth of our company through capital expenditures on satellites, research and development, and the implementation of a robust ERP system. Now on to our second quarter 2024 financial results. Total revenue for the three months ended June 30, 2024 was just under $1 million, a decrease of approximately $440,000 compared to total revenue for the three months ended June 30, 2023. This decrease was primarily driven by the timing of fixed price milestone contracts, fewer satellite-related revenue payments in the first-half of 2024, and delayed timing of expected contract awards, including those tied to related party contracts. Cost of revenue increased 105% for the three months ended June 30, 2024, to approximately $1.8 million, as compared to $860,000 for the three months ended June 30, 2023. The increase was primarily driven by our mix of contracts with higher material expenses, vice labor, shifts and milestone payments for our higher margin satellite-related businesses and higher depreciation costs associated with the monthly depreciation of our first satellite asset deployed March 2024. Appreciation will continue to impact cost of revenue until we can generate a higher volume of satellite and data-related revenues, which have higher margins to offset the related depreciation expense. Our gross profit for the quarter ended June 30, 2024, decreased approximately $1.35 million, resulting in a net loss of approximately $841,000, compared to a gross profit of approximately $508,000 for the three months ended June 30, 2023. Gross profit margin was negative 91% for the second quarter 2024, as compared to a positive 37% for the second quarter 2023. Again, this was driven by the timing of satellite-related payments and fixed price milestone contracts in the first-half of 2024, and higher costs related to the depreciation of our first satellite asset. SG&A expenses for the first quarter, June 30, 2024, totaled approximately $3.1 million, as compared to $3.6 million for the same period last year. The $500,000 decrease was primarily due to a reduction in payroll and related expenses directly related to building our satellites, which are moved to fixed assets. D&O insurance expense and marketing and investor relation expenses also decreased. To provide investors with additional information in connection with our results as determined in accordance with GAAP, we also include in our 2023 Form 10-K non-GAAP measures to determine our adjusted EBITDA. We use adjusted EBITDA to evaluate our operating performance and make strategic decisions about the company's future direction. Adjusted EBITDA loss, a non-GAAP measure for the three months ended June 30, 2024, totaled $3.2 million, as compared to an adjusted EBITDA loss of $2.8 million for the same period last year. Total non-GAAP adjustments for interest expense, depreciation and amortization, acquisition deal costs, severance costs, capital markets and advisory fees, equity-based compensation and warrant costs are provided in the reconciliation table listed in our second quarter 2024 earnings PR release earlier today. Net loss for the three months into June 30, 2024 was $4.1 million, as compared to a net loss of $3.5 million for the same period last year. Turning to the balance sheet, as of June 30, 2024, the company had cash of $1.4 million, as compared to $1.2 million at December 31, 2023. As we continue to manage our cash flow conservatively, we will prioritize the strategic use of our cash resources to pay down debt and fund our upcoming satellite builds, which are crucial for driving revenue and overall growth and profitability. We will also continue to identify additional opportunities to reduce expenses and increase efficiencies within our business. Thank you, Bill. With over five months of LizzieSat operating in orbit, Sidus Space is entering an exciting phase of growth as we continue to execute our strategic priorities. Our 3D-printed AI-enhanced LizzieSat are central to our future high-margin data-to-service business model designed to integrate multiple technologies. These satellites enable simultaneous data collection that can support industries such as agriculture, maritime, oil and gas, among others. We're committed to expanding further into these sectors to generate additional revenue, ultimately increasing value for our shareholders. Our next two satellites are in advanced stages of production and are scheduled for launch within the next six to nine months. We are diligently executing our plan to build a unique multi-mission constellation. And the proactive steps we took early on, such as securing a multi-launch agreement with SpaceX and purchasing subsystems with long lead times, are enabling us to deliver a steady cadence of launches to meet the customer demand that we promised. The success we've already achieved with our very first satellite has strengthened the confidence of our team, industry partners, current potential customers, and shareholders alike. I want to express my sincere gratitude to all our shareholders for your continued support of Sidus. Whether you've been with us from the beginning or have recently joined, you are an integral part of our journey as we create unprecedented access to space. I remain fully committed to restoring shareholder value and am optimistic about the higher revenue streams we anticipate from our satellite manufacturing and our space data as a service constellation. Thank you to everyone for joining us today for Sidus Space's second quarter 2024 earnings conference call. I will now ask the operator to close the line. This concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation.

Remark Holdings, Inc. (MARK) Q2 2024 Earnings Call Transcript

Fay Tian - VP of IR Kai-Shing Tao - Chairman and CEO Todd Brown - Vice President of Finance Good day, and welcome to the Remark Holdings Second Quarter 2024 Financial Results Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the call over to Fay Tian. Please go ahead. Fay Tian Thank you, Nick. Good afternoon, everyone, and welcome to Remark Holdings' second quarter 2021 financial results conference call. I am Fay Tian, Vice President of Investor Relations for remarks. On the call with me this afternoon is Kai-Shing Tao, Remark's Chairman and Chief Executive Officer; and Mr. Todd Brown, Vice President of Finance. In just a moment, Mr. Tao will provide an update on our businesses and Mr. Brown will recap our second quarter 2024 financial results. Following these remarks, we'll 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 full in its filings with the SEC. I will now turn the call over to Remark's Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional information to Remark's businesses and recent developments. Thank you. It's been no secret about our intention to transition our revenue base from Asia to the U.S., especially due to the political conflicts between the U.S. and China. While it's taken us some time to do so, as most government contracts do, we are proud to see the successful fruits of our labor begin to show with our recent contract win with the Clark County School District, which is the fifth largest school district in the United States. Our recent contract win for implementing weapon detection technology in the Clark County School District is a significant milestone that will likely lead to a multitude of future opportunities, both within Clark County and other school districts of similar size. We are optimistic that the contract value will meet or exceed its proposed $45 million value over nine years, as we expand and introduce the value added functionality of our smart safety platform. By successfully deploying weapon detection technology in a large school district, Remark AI demonstrates its capabilities, building trust with potential clients. The Clark County School District serves as a high-profile reference enabling Remark AI to showcase its expertise and technology in a large real-world setting. This contract win attracts attention from other educational institutions law enforcement agencies and government organizations, potentially leading to new partnerships. Remark AI can leverage this success to enter adjacent markets such as other school districts and educational institutions, public venues, government facilities and buildings and private enterprises. Remark AI can offer complementary solutions like facial recognition, fight detection, unattended object detection and advanced analytics to existing and new clients. We have already started our POC with one of the largest subway systems in the U.S. and we look forward to updating you on our progress. Other highlights for Remark AI this past quarter. We showcased our AI fire and smoke -- our AI fire and smoke smart city and smart agent solutions at the New York City Smart City Expo in conjunction with Oracle and NVIDIA. The success and uniqueness of our AI products has led to additional POCs to help the top 100 U.S. cities turn into modern 21st century smart city. We completed the at the headquarters train station for one of the largest European railway systems with over 600 stations, deploying our AI-powered passenger counting fair evasion, fire and smoke detection and unattended baggage detection. The success of this POC has led to current contract negotiations to close the deal in the second half of 2024. Another highlight is that we have completed a successful POC for the migrant centers in one of the largest sanctuary cities in the U.S., where we deployed our AI powered facial recognition, fight warnings fire and smoke detection as well as weapons detection modules. The success of this POC has led to preparations to deploy our technology across multiple city agencies as we negotiate to close a contract also for the second half of 2024. As far as the new platform and product introductions, going into the second half of 2024, we are introducing our Remark Fast AI Training platform. Fast AI is a SaaS product that can train and tune up general and specific computer vision models. For example, fire and smoke detection, unattended bags, unauthorized personnel and vehicles. As a SaaS platform, it provides AI training infrastructures, i.e., GPU optimization, GPU resource management, Tensor Flow framework, Clip framework and SAM framework, to ease the training and testing of computer vision and multi-mobile models. It also offers the zero-shot sample annotation which can annotate training samples by AI itself without a large amount of human labeling. Fast AI license is a permanent license and a fixed cost for individual AI models, with training, testing, hardware provided in the cloud. There is no extra cost for AI model retraining, upgrades or tune-ups for customization. The IP of the training data and the train tune models belongs to our customers. Why do we think this is a winning proposition in the U.S? I'm sure you have read about how our businesses are looking for smaller models, ones that solve real business problems with precision, while those large language models solve creativity problems with bearable errors, variable errors for them, but unbearable for business solutions. Let alone the cost, data privacy and IP problems that are unsolvable yet with large language models like ChatGPT. During the second quarter, we've continued our alignment with both the Microsoft and Oracle sales team. Remark AI completed its migration to the Microsoft Azure platform, preparing Remark's smart safety platform, otherwise known as the SSP, to be marketplace ready, allowing Microsoft's global sales force to begin selling Remark's SSP across multiple industry verticals and through established systems integrators. Integrating with leading cloud providers like Microsoft Azure and Oracle Cloud is crucial for success, especially as we are now able to tap into their vast customer base and expand our market presence. Our focus with Microsoft Azure marketplace is simple and straightforward. Based upon our mutual analysis of the potential for Microsoft and Remark to jointly capture $400 million of business together in the next five years. We've committed to consume $80 million of services on the Azure platform, which incentivizes Microsoft's sales force to evangelize and widely deploy our AI products. We are conducting regular teaching sessions to their sales force by specific industry expertise. Microsoft sales force has tracked and paid commission based upon how much Remark's software is consumed and plus by the annual recurring revenue SaaS model. With Oracle, we'll be one of the companies featured in the Oracle AI pavilion along in partnership with NVIDIA at the upcoming Oracle CloudWorld taking place in our town of Las Vegas in early September as one of Oracle's key innovation partners. This will be the second event we'll be presenting together. The first happened this past May at the New York City Smart City Expo in conjunction with Oracle and NVIDIA, highlighting the broad capabilities of our AI smart city platform. As we go into the last couple of quarters of the year, we are excited to bring Remark AI into the hotel hospitality industry. In the near future, we will announce our partnership with a global hotel hospitality brand that combines music, art and culture, as its preferred vendor on all AI related initiatives. This strategic partnership aims to revolutionize the guest experience and operational efficiency across its properties worldwide. Remark AI will provide its innovative AI powered solutions to enhance various aspects of the hotel operations, including: one, personalized guest services -- experiences through AI-driven recommendations and tailored services; two, intelligent chat bots for seamless guest interactions and support; three, predictive analytics for optimized room allocation, pricing and revenue management; and four, automated workflows and process optimization for improved operational efficiency. Remark AI's proprietary AI platform will be integrated with its existing systems to provide a unified and intuitive interface for staff and guests alike. The partnership will also facilitate the development of new AI powered application and services, further solidifying their position -- further solidifying our position as a pioneer in the hospitality sector. Todd? Todd Brown Thank you, Shing, and thank you to everybody for joining us on today's call. As we have previously noted, we have been working to expand our business in the U.S. And during the second quarter of 2024, we were able to complete the first Clark County School District project which resulted in $3.7 million of revenue for the second quarter of 2024. As Shing noted earlier, this has already led to an additional order and other opportunities for us in the U.S. Our operating loss of $3.2 million during the second quarter of 2024, reflected a decrease of about $0.8 million from an operating loss of $4 million during the second quarter of 2023. During that second quarter of 2023, we had recorded an impairment of approximately $0.4 million related to certain prepaid expense amounts that were deemed unrecoverable. The absence of any impairments during the second quarter of 2024, and contributed to the decrease in operating loss as did the $0.2 million decrease in payroll-related expenses reported as part of tech. For the second quarter of 2024, we are reporting a net loss of $5.3 million or $0.12 per diluted share compared to a net loss of $5.9 million or $0.42 per diluted share during the same quarter of 2023. Interest expense during the second quarter of 2024 did not significantly change from the amount that we reported during the same period of 2023, while finance costs also remained relatively flat. Finance cost is related to the establishment of and remeasurement of our obligations to issue common stock, which arise as a result of our transactions with Ionic Ventures LLC, which consists of draws on an equity line of credit. At June 30, 2024, our cash balance totaled was $0.4 million, which compares to a cash balance of $0.1 million on December 31, 2023. We used $6.1 million of cash and operating activities during this second quarter of 2024. Lastly, in August of 2024, we were able to resolve all outstanding events of default regarding our debt agreement with Mudrick Capital Management by entering into an agreement with Mudrick to exchange the existing non-convertible notes we had issued to them for convertible debentures. And with that, I will turn the call over to the moderator to begin the question-and-answer portion of this call. Thank you, Nick. Thank you, everyone for participating in Remark Holdings' second quarter 2024 fiscal financial results conference call. A replay will be available in approximately 4 hours through the same link issued in our August 19's press release. Have a good afternoon. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.