Remark Holdings, Inc.
Q2 2016 Earnings Call Transcript

Published: 12 Aug 2016

[Operator:]

Good day and welcome to the Remark Media Second Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Becky Herrick of LHA. Please go ahead.

[Becky Herrick:]

Thanks, Angela. And thank you all for joining us today for the Remark Media second quarter 2016 financial results conference call. On the call today are Chairman and CEO, Shing Tao; and CFO, Doug Osrow. After the prepared remarks, we will open the call to questions. A webcast replay of today's call will be available at www.RemarkMedia.com for 90 days. Some of the statements made today may be forward-looking statements. These statements involve risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements reflect Remark Media's current views and Remark Media expressly disclaims any obligation to update or revise any forward-looking statements after the date hereof. This disclaimer is only a summary of Remark Media's statutory forward-looking statements disclaimer which is included in its filings with the SEC. Also please note the Company uses financial measures not prepared in accordance with generally accepted accounting principles commonly known as GAAP to monitor the financial performance of operations. Non-GAAP financial measures should be viewed in addition to and not as alternative for the reported financial result as determined in accordance with GAAP. To support the Company's use of adjusted EBITDA later in this call our reconciling table's provided at www.remarkmedia.com, and a similar reconciling table will be included in the Company's Form 10-Q, which will be filed with the SEC tomorrow. It's now my pleasure to turn the call over to CEO, Shing Tao. Please go ahead.

[Kai-Shing Tao:]

Welcome and thank for joining us. We're pleased to report a strong second quarter. Revenue reached $15 million, an exponential increase of over 1,700% from the $821,000 reported in the same quarter last year. This reflects significant growth in our travel vertical due to the acquisition of vegas.com in September of 2015. We are building a formidable set of synergistic assets for our digital media platform that appeal to millennials, generate advertising and transactional revenue while capturing consumer and behavioral data that make us an invaluable partner to our customers. Notably, this quarter, we are excited about our progress in expanding Vegas.com from a traveling and ticketing hub into a digital media platform. In fact, we are affecting this transition by enhancing Vegas.com's appeal to our target demographic

[Douglas Osrow:]

Thank you, Shing. Before reviewing our consolidated financial results, is important to note that our second quarter 2016 financials reflected Vegas.com acquisition, Which closed on September 24, 2015 where's the second quarter 2015 results do not. For the second quarter of 2016 compared to the same period in 2015 net revenue was 15 million compared to 821,000. Gross margin was 12.4 million compared to 739,000. Operating expenses were 15.9 million compared to 3.8 million. Operating loss was 3.5 million compared to 3.1 million. Net loss was 5.4 million or $0.27 per diluted share compared to 3.2 million or $0.23 cents per diluted share. In our travel segment, our adjusted EBITDA was 2.4 million for the second quarter of 2016 which exceeded 10% of net revenue. We expect we will maintain or increase this level through 2016 meeting at 2017 where we will drive significant growth in both our top and bottom line. For the first six months of 2016 compared to the same period of 2015. Net revenue was 29.2 million compared to 1.6 million. Gross margin was 24.3 million compared to 1.5 million. Operating expenses with 32.9 million compared to 7.6 million. Operating loss would be 0.7 million compared to 6 million. Net loss was 7.8 million or $0.39 per diluted share compared to 6.2 million or $0.47 per diluted share. In our travel segment our adjusted EBITDA was 3.1 million for the first six months 2016 which exceeded 10 % of net revenue. At June 30, 2016 cash and cash equivalent to 8 million compared to 5.4 million at December 31, 2015. While our restricted cash position was 11.7 million at both ends. Our combined cash position at June 30, 2016 was 19.7 million compared to 17.1 million at December 31, 2015. Now with that, I'll turn the call back to, Shing.

[Kai-Shing Tao:]

Thanks, Doug. we're excited and encouraged by the progress they're making an accelerate in the modernization of our digital media properties enhancing our appeal to the millennial demographic and ultimately driving long term profitable growth in shareholder value. We remain committed to the following strategic initiatives. First, continue to enhance Vegas.com their technology upgrades, future editions, improving conversion of traffic. Second, continue building out KanKan user base and going our date intelligent platform, enabling us to leverage is valuable data to enhance all of our assets and monetizing the after through sales of the platform. Third, closing the acquisition of China branding group, integrating its assets and beginning to realize synergies. Fourth, enhancing our lifestyle vertical to increase brand awareness, and expand strategic alternatives for the finance vertical. And fifth, we will continue to monitor the market for acquisition candidates that fit within our core focus on the millennial demographic and accelerate our revenue growth. Before we open the call for questions, I just wanted to share that we continue to be active in meeting with investors via roadshows and conferences. We'll be presenting at the Drexel Hamilton Telecom Media and Technology Conference of September 8 in New York City. If you're interested in meeting please contact our investor relations from LHA was contact information is in today's press release. Operator, we are now ready to begin the Q&A session.

[Operator:]

[Operator instruction] And we'll go ahead and take John Tinker with Gabelli.

[John Tinker:]

Several quick question, you mentioned that you're selling million dollar tickets down Vegas. Could you highlight what kind of revenue comes from that? And the kind of ups the sort of substantial market size given, I think you suggested a lot of the tickets are sold physically and as you move people to online it could be a lot more attractive thanks.

[Michael Reichartz:]

Sure, good afternoon, it's Michael here. So if I want to tell you is from a unit basis that sale of show tickets is much more attractive to us than to sell in hotel room. Well we certainly are working hard to improve the amount of hotel rooms we sell just like show tickets, we see better economics currently because we're just we execute better on the show side of our business. As it relates to the delivery of tickets we've always been in a position where of that the tickets have been sold in an online format, what we're seeing is a shift from a desktop to mobile and we think that there are just a number of strategic advantages for us there, while one to booking window obviously up comes closer into event date when the transaction occurred on mobile versus desktop, that that is one factor that plays into our business that we have to monitor closely but the upside of that is consumers are walking around on the strip with their handset and that it is very easy for us to get in front of those consumer. And as we get in front of those consumers and can provide a better experience than offline brick and mortar experts, that's where we think we have a short term and long term strategic advantage, that I think in the coming quarters just accelerate our growth in that business.

[John Tinker:]

Thanks.

[Operator:]

We will now move on to Bes Leski with Leski Investment [ph].

[Unidentified Analyst:]

Yes. I was going to ask one -- I have actually two questions; I'll start with the first. What is your overall strategy to grow the business now that the China branding group acquisition near to close. And will it be organic growth or in organic growth through this acquisition.

[Kai-Shing Tao:]

Yes, so I think you know with the Vegas.com. I know that -- is the answer that is we're going to grow through both organic growth and through acquisition. Now the Vegas.com acquisition that was done as a turnaround situation in a restructuring play, and even over the 10 or so months since we've acquired it, we think the acquisition has been a no home run for Remark Media and we have been able to turn the business around and will continue to now add growth to the business. I know as we look to expand the platform now especially with the impending closing of China branding group, we kind of look what's ahead of us the next year, two or three years. And as we approach different brands that want to touch the millennials which we're so focused on, we view it as kind of a chess game, which we -- as we approach it as a brand, we don't let them have an excuse to go to anyone else. So we kind of look at our portfolio where if we go to a brand, we say, with Vegas.com, now you touch the entire country, all on one street. And then with our CBG assets, clearly that has the expertise and the proven track record of monetizing, creating traffic in, and social awareness in China. With KanKan, with that data platform, we're now able to not just target a person, but the individual and their entire friend circle and do it with the type of granularity I think other platforms don't offer. So what's missing, I think are areas that may be including in terms of a strength in marketing in the U.S., one or number two, something in the offline experiential marketing space as well. So really I think looking outside, when we look at different opportunities, no brand can kind of leave within our grasp.

[Unidentified Analyst:]

Good. Well then, secondly, you mentioned a number of large brand names like Coca Cola and Red Bull being customers of the China Branding Group. And after you integrate the acquisition, how large are the deal opportunities you'll be pursuing for Vegas.com and bikini.com?

[Kai-Shing Tao:]

I think in the past with China Branding Group, when they market to brands, in China they're looking for mid-six-figure numbers. Now with -- once they've joined kind of our family and platform, they have the ability to sell across Vegas.com, sell across Bikini, and now we're looking at seven figures but more -- in single-digit, low single-digit seven figure numbers.

[Unidentified Analyst:]

Thank you.

[Kai-Shing Tao:]

Thank you.

[Operator:]

[Operator Instructions] And we will now move on to Jake Long with Capital Investment.

[Jake Long:]

Hi, good afternoon. Looking at Sharecare's acquisition of Healthways Population Health business, it seems that you've developed the company's potential for monetization possibly. Could you comment on the impact of valuation and on Remark's ownership interest?

[Kai-Shing Tao:]

I can say -- I can't comment on the valuation, because it's part of our agreement with Sharecare, so anything regarding that will have to come from their side. But in terms of what that does for us, in terms of our stake, the deal is very, very -- it's diluted to a very, very small degree.

[Jake Long:]

Understood, thank you. And just as far as the impact -- is there an impact on your balance sheet in any way? Any kind of accounting change we should expect?

[Douglas Osrow:]

This is Doug. No expected accounting change as of yet.

[Jake Long:]

Terrific. Thank you.

[Operator:]

There are no other questions and at this time. I'll turn the call back over to Mr. Kai-Shing Tao for additional closing remarks.

[Kai-Shing Tao:]

I think that's pretty much it. You know, we look forward to meeting any new investors, any potential investors, please contact Doug or myself, and we'll talk to you soon.

[Operator:]

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation.