Guardforce AI Co., Limited Q4 FY2024 earnings call

• 2024 was transformational with operational consolidation, AI innovation, and interest revenue mix. - Retail became a top client segment, surpassing historical banking clients, with over 25,000 retail stores globally. - Strong balance sheet with approximately $23.4 million in cash, cash equivalents, and restricted cash. - Advanced Robots-As-A-Service model in Asia-Pacific region and launched DVGO, an AI-powered travel planning agent. - Upgraded GFAI AI Intelligent Cloud Platform focusing on deep user intent modeling, simulate coordination among specialized AI agents, transparent feedback loop, and scalable multi-lingual architecture. - Focus on human-centered AI, with AI agents aimed at enhancing productivity and helping users make decisions rooted in personal relevance. - Plan for 2025 includes scaling AI solutions, trusting secure logistics operations, expanding in retail and travel, and extending smart solutions globally.

Secure Logistics business revenue in 2024 was $32.4 million, an increase of $544,000 or 1.7% compared to 2023's $31.9 million. Retail-focused services like GDM had year-over-year growth of $1.1 million or 39.5%, driven by strong demand from chain retailers. CIP NANDV business saw a notable increase of 351,000 or 3.0%. Cost of sales decreased from $30.9 million in 2023 to $30.1 million in 2024, a decrease of nearly $799,000. Gross profit increased by $866,000 or 16.1% to $6.3 million year-over-year. Net loss from continuing operations narrowed to negative $5.9 million, a year-over-year reduction of 80.1%. Operating expenses decreased significantly, especially selling, distribution, and administrative expenses which fell by 20.7% or $2.6 million. R&D investment in 2024 was around $591,000, a 2.5 times increase from the prior year's $170,000.

• Focus on scaling what built, including secure logistics operations, expanding retail and travel, and R&D in AI. - Vision is AI empowering people, not replacing them. - DVGO is a key strategic investment to advance AI agent development, expected to become a major contributor to revenue over time, shifting the business model to a tech platform-based one with higher margins. - Build stronger sales and operations team to support growth in AI agent platform.

• Forward-looking statements are subject to risks and uncertainties as per Safe Harbor Statement, with actual results possibly differing from anticipations. Risks are more fully described in public filings with the U.S. Securities and Exchange Commission.

Q: How are our revenues currently split among core business lines, and which segments do you expect to drive growth over the next 24 months?

A: Our business remains the primary driver of revenue and cash flow, accounting for over 80% of total income. Over the next 12 to 24 months, key focus is expanding the agent platform starting from DVGO, moving into verticals like travel, retail, and education, with plans to build a stronger sales and operations team.

Q: How does DVGO's revenue will impact the current revenue mix and the profit margin?

A: DVGO will contribute a small but growing portion of overall revenue, helping diversify income to more recurring AI-powered streams. Initially margins lower due to upfront AI development and customer acquisition costs, but as it scales, high margin software-driven aspects will boost profit margin.

Q: Are you able to provide more frequent or segmented financial disclosures to allow for better performance assessment across business lines?

A: At this time, no plans to change frequency of financial disclosures, but encourage visiting website and social media for updates.

Q: Given the recurring capital expenditures and ongoing net losses, what specific steps are being taken to reduce cash burn?

A: In 2024, increased revenue, achieved healthier gross margin, tightened cost structure. Gross profit margin reached historical high of 17%. Optimized business mix, reduced direct labor costs, and AI-focused transition reduced reliance on legacy robotics. Net loss narrowed by 80% to $5.9 million, adjusted EBITDA improved. Focus on improving business efficiency, managing expenses, and driving profitable growth.

Q: What is the core differentiation of the DVGO AI agent compared to existing Travel AI assistants in the market?

A: DVGO is user-centric, starts with user's intent and purpose, builds personalized path, uses dialogue-driven approach to guide smarter decision-making, unlike traditional platforms that focus on product selling and leave decision-making to users.

Q: What IP does GuardForce AI currently own or license, and how is it being protected to maintain a technological edge?

A: Focus on owning and licensing technology. Core systems include advanced agent coordination, decision optimization frameworks, and personalized user experiences. Licenses selected AI foundation models and open-source components under proper agreement. Protect IP through treating critical technologies as trade secrets, marginalizing systems, separating licensed and built components, and continuously exploring ways to protect innovation.