Remark Holdings Inc (MARK) 2015 Q4 法說會逐字稿

Good day and welcome to this Remark Media fourth-quarter and year-end 2015 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.

Thanks, Shannon, and thank you all for joining us today for the Remark Media fourth-quarter and full-year 2015 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 Remark Media's website 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.

It's now my pleasure to turn call over to CEO Shing Tao. Please go ahead, sir.

Thank you all for joining us today. 2015 was a transformative year for Remark Media, as demonstrated by our year-over-year top-line growth. We evolved from a digital media content company managing a portfolio of domain, to a digital media technology company with a powerful proprietary technology platform.

During this transition we have been leveraging our expert knowledge of one of the most powerful and influential demographics, the Millennial. With a continued focus on the 18- to 34-year-old demographic, our proprietary digital media technology platform provides us with a unique opportunity to enhance user engagement and brand awareness on a global scale. I will review this in more detail shortly.

For those of you new to Remark Media, we are a digital media technology company with assets representing multiple content verticals including travel, entertainment, personal finance, and lifestyle. We are focused on Millennials, which is perhaps the most sought-after demographic in the world.

In 2015, Millennials became the largest demographic of the American workforce. Their purchasing power of approximately $600 billion per year is expected to grow to $1.4 trillion by the year 2020. As a result, Millennials represent a highly-lucrative demographic and we believe our portfolio of brands and our unique technology platform are extremely well-positioned to capitalize on this opportunity.

At the core of our Company is KanKan. KanKan is our proprietary data intelligence platform that aggregates social media across the world's largest platforms including Facebook, Twitter, Instagram, WeChat, weibo, and others. We believe this aggregation platform is an industry first.

Many of you may have seen our press release this morning announcing the launch of KanKan 2.0. With KanKan social media platform, it shows the users the best posts in the social space, whether it's food they are craving, the travel destinations they are planning, the exercises they are performing, and many more.

It enables users to find friends, connect, and post across all major social media platforms with a single touch of a button. It provides math-based social media posts based on location, time, relevancy, and preference, and it supports access into a friend's circles across social networks.

In addition to providing a vastly more dynamic and comprehensive social media platform, KanKan allows us to amass data from over 1.3 billion socially-active users globally. This information provides a significant advantage in enhancing user engagement and brand awareness across all of our digital media properties. In fact, to support our future revenue growth, we expect to leverage our database to attract retailers and advertisers who could benefit from the predictive analytics and location-based services we provide.

To date, we have amassed close to 2 petabytes of valuable data. And to put that in perspective, 1 petabyte represents approximately 1 million movies.

Vegas.com represents a strong example of how this data enhances our vertical. As Vegas.com has been around since 1995, we have amassed over 20 years of user data. However, this data is limited only to users who have transacted through Vegas.com.

With the KanKan data intelligence platform, we can now expand our circle and target people who haven't even visited Vegas.com. We are able to track people who are in Vegas this second, tourists that visited Vegas dating back three years, and those who plan to travel to Las Vegas. KanKan exponentially increases the number of people we can target.

Supporting the growth and evolution of KanKan is our relationship with Alibaba, which we announced via press release before market this morning. By virtue of this relationship, we have been granted a dedicated line to bypass the great firewall that exists between the US and China, enabling us to support the user experience across geographies and track user data.

In addition, Alibaba has granted us access to the data of all transactions made through Alibaba, primarily through Taobao, Tmall, and Alipay. This reflects approximately 400 million users on an annual basis.

In 2016, we expect KanKan's user base to grow even further while we are continuously building out our platform. We believe this will further enhance the data we aggregate and enable us to secure more transformative third-party partnerships in the near future.

As I mentioned before, KanKan provides us with a proprietary digital media technology platform that enables us to enhance user engagement and brand awareness on a global scale across all of our verticals. In our travel and entertainment vertical, we acquired Vegas.com in September of 2015. In addition to being immediately accretive and increasing our scale dramatically, this acquisition enables Remark Media to leverage our unique operating position in Las Vegas to build a significant competitive advantage.

With our senior management team being based in Las Vegas, we believe we have a significantly improved perspective on the business, social, and political activities in our community, which adds to our competitive advantage. Key to our growth plans for Vegas.com is the key user data obtained from our KanKan platform. As I mentioned, the proprietary data obtained from KanKan enables us to exponentially increase the number of people we can target for Vegas.com.

In addition, since acquiring Vegas.com we have begun implementing several technology upgrades, feature enhancements, and operating efficiencies to strengthen this asset. In the fourth quarter, we accelerated the release of product enhancements in the Vegas.com marketplace. As just one example, prior to the close of the transaction October 2015, hotel-shopper conversion was down 10% versus 2014. Conversion for the rest of the quarter improved by 2% year over year and so far in the first quarter of 2016 hotel conversion is up 10%.

We strengthened the advertising business at Vegas.com in the fourth quarter as we saw advertising revenue increase 82% versus the fourth quarter of 2014.

Speaking to operating efficiency, we were able to restructure the management team and reduce payroll and related expenses by over $2.5 million annually. We also improved costs with a number of technology vendors that allow us to save an additional $800,000 annually.

We are making big strides in mobile as we saw transactions in the fourth quarter of 2015 increase by 60% year over year, aided by a 35% increase in conversion. Our intention is to transform Vegas.com from a traveling and ticketing hub into a digital media platform representing the multiple facets of the Las Vegas experience.

Our near-term initiatives include improving content across all capabilities within the site to better appeal to our target Millennial audience, building out a nightclub and entertainment offering to provide visitors with a complete guide to the city. There are also additional opportunities in food, sports, gaming, comedy, dating, and more.

Las Vegas represents many things to many people, but typically, because of the competition here in town, Las Vegas represents the best of class in most verticals. And we see this as an immediate opportunity. Supported by the proprietary information we obtain from our KanKan data intelligence platform, we believe we can enhance the Vegas.com asset by: one, adding strategic partnerships and sponsorships with companies looking for exposure in Las Vegas.

In November of 2015 we launched a partnership with Lyft, the popular ridesharing company, to handle their local marketing efforts. We see this as a first of many opportunities to continue to solidify Vegas.com as the partner of choice in this city.

Two, marketing and growing our advertising platform and, three, developing closer ties in content relevant to major events taking place within Las Vegas. We are excited about the potential of Vegas.com and we look forward to keeping you updated on its growth.

We can also leverage KanKan to derive value from our additional verticals including Bikini.com and IRS.com. In 2012 we acquired a suite of personal finance URLs that includes banks.com and IRS.com to capitalize on the fact that Millennials are the most underserved demographic in the personal finance space. In fact, over 81% of Millennials have at least one form of debt. We have a series of initiatives underway to build out our finance vertical and take advantage of this significant opportunity.

Bikini.com is luxury beach lifestyle site where followers can tap into their inner daydreamer anytime and anywhere. 2015 was a year of growth for the brand, both in terms of content and e-commerce.

As a first step in its media channel strategy, Bikini.com launched video franchises both on its website and social channels. The video franchises deliver content desirable to the brand's core demographic of Millennial women, increasing traffic and engagement. The lifestyle side of Bikini.com improved in content quality and frequency; thereby strengthening the brand's authority in the beach lifestyle space.

The e-commerce site saw increased revenue and higher conversion rates due to improved product mix and brand awareness. For 2016, we will be leveraging Bikini.com's positive brand momentum to further growth and secure additional monetization opportunities on all of its platforms.

Lastly, I wanted to provide a brief update on one of the early foundational assets of Remark, our equity interest in Sharecare. In 2009 Remark Media, along with Dr. Mehmet Oz, the founder of WebMD Jeff Arnold, Oprah Winfrey of Harpo, Discovery Communications, and Sony Television cofounded Sharecare.com.

Sharecare is a health and wellness website that enables visitors to share personalized resources across the website's user base. To date, nearly 40 million people have shared more than 5 billion data points across their health status and habits via Sharecare. This data results in a comprehensive resource for personalized health and wellness information. Our Board representation in Sharecare, along with our minority ownership position in the Company, is expected to provide us with a monetization opportunity.

In summary, we are very excited by our progress in 2015; however, we are confident the best is yet to come. Now I will turn the call to our CFO, Doug Osrow, for a review of our financials. Doug?

Thank you, Shing. Our financial results for the fourth quarter of 2015 compared to the same quarter last year reflect the first full-quarter contribution from the Company's Vegas.com acquisition, which closed on September 24, 2015. Net revenue was $11.8 million compared to $0.2 million. The increase in net revenue is primarily attributable to our acquisition of Vegas.com.

Operating loss was $7.2 million compared to $5.6 million. Net loss was $14.1 million, or $0.72 per diluted share, compared to $5.4 million, or $0.43 per diluted share.

Now for the full-year 2015 compared to the full-year 2014 results. Net revenue was $14.2 million compared to $1.8 million. Net loss was $31.4 million, or $2.06 per diluted share, compared to $1.8 million, or $1.53 per diluted share.

It is important to note that our financial results for the full-year 2015 reflect a full-year's contribution from roomlia, which had a loss of roughly $3 million, and the income contribution from Vegas.com only since the close of acquisition on September 24. At December 31, 2015, cash and cash equivalents were $5.4 million and our restricted cash position was $11.7 million.

And with that I will turn it back to Shing.

Thanks, Doug. Before I turn the call over to take your questions, I'd like to summarize our vision for the Company.

Now that Remark Media is firmly established as a digital media technology company, we can fully realize the opportunity with the highly-lucrative Millennial demographic. KanKan provides us with the data intelligence platform with which to drive user engagement and brand awareness among all of our digital media verticals. It also establishes us with the unique competitive advantage in amassing rich, highly relevant, and broad data for Millennials that is highly sought after by advertisers and retailers.

In 2016, we have the following growth objectives. One, continue fortifying our KanKan asset by building out its user base and enhancing its capabilities to attract even more data. Two, optimize and expand our Vegas.com offering by implementing technology upgrades, improving top-line growth, streamlining costs, and enhancing features and expanding our platform into a digital media one. Three, enhance our finance and lifestyle verticals to increase brand awareness.

We look forward to updating everyone in the next 45 days on our next earnings call on how we are progressing to achieve our goals for 2016. Operator, we are now ready to begin the Q&A.

And before our Q&A, I just want to correct one quick thing. Net loss was $31.4 million, or $2.06 per diluted share, in 2015 compared to $18.2 million, or $1.53 per diluted share, in 2014.

And with that we are happy to take questions.

(Operator Instructions) [John Grimley, TJW Capital].

Hey, guys, thanks for the update. Just could you just go through KanKan a little bit more? Would you consider that an advertising platform or how should we be thinking about that? I'm thinking about it in regards to Facebook.

So advertising is just kind of one piece to it and we have multiple facets to KanKan. The first primary goal is our ability to target, as we said in the previous investment conferences that we built KanKan to be able to target as a laser rather than a shotgun.

So as I use an example with Vegas.com. We feel that not only can we use it to enhance our own business, but we can go to anyone's customer loyalty program and basically exponentially increase the number of people that they target with higher relevancy.

Got it. So just sticking with KanKan, I guess over 21 months or so you've got all this data. How do the other social networks view KanKan from that perspective?

Well, I think, like any new company, they view people -- they never like new people coming into their world. They view everyone as a disruptor. But the way we view it is we're providing a service to them.

For example, there are a number of these US social networks that haven't been able to get their content into China or exposed to Chinese users. We potentially provide an avenue for that. And we're basically allowing where -- I think I've used it as an example before, if you take a look in real estate.

On an empty block, when a restaurant -- when the first restaurant goes there they are very protective who else is on the block. But at the end, as the block attracts more traffic, the rising tide lifts all boats. And that's the way that we've pitched it to the social networks and I think we've gotten some acceptance from them.

Got it. And then the deal with Alibaba, so is it safe to assume that they have integrated that into and the aggregated that into -- the social media content into their product offering? Are they using the information you're giving them? What value do they get out of it?

So I want to just -- John, just to take a step back answering your previous question regarding the social media. I think the other part which I forgot to mention was we're not -- the way I think most other companies that claim to do what we do are dependent on: one, having them as actual users of their particular app, which we're not; and then number two, they're dependent on whether a social network or data servers keeps their API open or closed. And again we're not dependent on that. Now those are two things that really differentiates us and really speaks to the strength of our -- the power of our backend.

As in regards to Alibaba, it's primarily those two edges that got us there. They obviously -- they are a company that have tremendous resources, both financial and human resources, but so far we've been able to crack the code sooner than anybody else has in doing this. They have -- they are calling them the king of data, particularly in China, and I think the fact that they've engaged us to help them make sense of exactly what they are looking at, what they've amassed is super important.

Got it. And then can you just remind me what percentage of Sharecare you guys currently own?

Hey, John, this is Doug. Currently, we own roughly 5% of all shares issued in Sharecare.

Okay, great. Thanks. And then roomlia, what's the plan for roomlia? Is that going to integrate more tightly with Vegas.com? Or along the same lines of that, are you using the KanKan product to improve the operations of Vegas.com or improve the efficiency of Vegas.com?

I will speak to one part from a strategic side and Michael, who runs our Vegas.com asset, can speak to where they will integrate. First part is after the acquisition of roomlia, as you know, we've been running Remark Media basically on a shoestring budget. And so it's never been our strategy, when you look at other privately-funded companies that spend $5 a download, to just go out and acquire downloads without any thought of what the bottom line means.

Michael has created a company in roomlia where they focused on scalability and it took about 18 months to get to the point where we are. It's always been in our business strategy to not only build out what roomlia is, but more importantly, how do we get the demand without paying for it. So there are a number of things that we're working on that we can exist within other different sort of ecosystems, where we're not paying for the demand and more as a partnership. Does that make sense?

And then, Michael, do you want to talk about the roomlia technology and Vegas?

Sure. Thanks, Shing. Thanks for the question, John. So we thought about Shing's point -- when we thought about roomlia, we wanted to build for scale. We knew that we had the opportunity to build something really big and interesting from a hotel distribution perspective, so we spent a lot of time doing a lot of the plumbing that would allow us to do that.

When you think about Vegas.com and the integration of roomlia, what we've been able to do there, first and foremost, obviously integrate the teams to leverage the talent and the technology that we have so that we can take best of class on both brands and see how we can maximize the business.

What I would say from kind of short term to near term, we are spending a lot of our time on the Vegas.com brand, simply because the return on invested time there is just simply so much greater force us in the near and short term. But as we kind of get our arms around Vegas.com and improve the efficiencies, improve the operating metrics of the business, there will be a natural inflection point where we can start to spend more time back on roomlia.

And what I would say there is the database that we have at Vegas.com it's quite sizable and it's interesting. And obviously, they have an intent to travel, so we have a targeted database that we can speak to.

So we're very much in the early days of talking to that database from a roomlia perspective, but we're starting to do that. And as a result of that, we're starting to see some pretty interesting results. We're pleased with the response that we're getting from Vegas.com consumers responding to the roomlia brand.

Then I would say out there on the horizon as we get better at this, certainly what KanKan has leveraged and taking advantage of that as we start to understand the users in the marketplace that have an intent to travel. I think that speaks to the efficiency that Shing is talking about from kind of customer acquisition and the demand and the cost of that. So we certainly intend to leverage that as well.

Got it. Okay, and then just some of the other assets. I know you guys are touching on the more strategic or most important assets, but IRS.com, the finance vertical, Bombo-related stuff, Brazil. What should we be thinking about those?

I know they are much less important. Obviously, Vegas.com is a nice revenue base and KanKan has got a ton of growth potential, but how should we be thinking about those other assets? Or should we even be thinking about those other assets, might be the better way to say it.

The assets that I'd have you focus on of those three assets would be -- this is Doug, by the way, John -- would be IRS.com. The good news is traffic for IRS.com continues to be significant. Been growing the brand, growing the number of users that come to the site every day.

Don't really want to provide guidance as to the results today, but our next call will be in about 45 days and we will definitely provide you with an update on that platform.

Got it. Okay, thanks. Congrats on the progress.

And just as a quick thing, when you mentioned about the -- Doug had mentioned about the Bombo asset, but there are things that -- as we expand our digital media platform there are things that we potentially might use to increase on the content side.

Got it. Okay, great. Thank you.

(Operator Instructions) Ladies and gentlemen, that does conclude today's question-and-answer session. I would like to turn the conference back over to Shing Tao for any closing remarks.

No, I think that's pretty much it. As always, Doug and I are open to questions and please feel free to reach out. Thank you.

Ladies and gentlemen, that does conclude today's conference. We do thank you for your participation. You may now disconnect. Have a great rest of your day.