Guardforce AI(GFAI) - 2023 Q4 - Annual Report

Executive Summary & Business Highlights Guardforce AI achieved record revenue and gross profit in 2023, expanded its AI solutions and market reach, and plans accelerated robotic/AI transformation for 2024 2023 Performance Overview Guardforce AI achieved record revenue of $36.3 million in 2023, with 43% gross profit growth and a 61.5% reduction in adjusted net loss - Achieved record annual revenue of $36.3 million for the year ended December 31, 2023[1][2] - Gross profit increased 43% over the prior year, reaching $5.4 million[2][6] - Gross profit margin increased from 11.1% in 2022 to 14.9% in 2023[6] - Adjusted net loss narrowed by 61.5% year-over-year[6] - Net loss for 2023 was $29.6 million, compared to $18.6 million for 2022, primarily due to a non-cash impairment impact from obsolete inventory and assets during the business transition to Robots with AI solutions[6] Key Business Milestones (2023) Guardforce AI expanded retail clientele, diversified RaaS solutions with AI, formed strategic partnerships, strengthened Asia Pacific presence, and improved its balance sheet - Expanded clientele within retail and chain stores, with approximately half of the Company's top 15 client base now consisting of retail and chain stores[3] - Extended four important cash management contracts in Thailand, two of which were with large retail clients[3] - Diversified its Robot-as-a-Service (RaaS) solution by enhancing the Guardforce AI Intelligent Cloud Platform (GFAI ICP), incorporating Google Cloud's language service capabilities, and developing three types of AI solutions: AI Assistant, AI Security Agent, and AI Advertising solutions[5] - Formed strategic partnerships with iApp Technology Co., Limited, VRCN Limited, Concorde Security Pte, and China International Travel Service Shenzhen Co., Ltd (Nice Tour) to advance AI capabilities and market reach, particularly in the hospitality industry[5] - Strengthened its presence in the Asia Pacific region, including mainland China, through the acquisition of key assets from Shenzhen Kewei Robot Technology Company Ltd in February 2023[5] - Strengthened its balance sheet by converting $15.9 million of debt and interest into ordinary shares and raised approximately $23.0 million gross proceeds from two public offerings[5] - Ended the year in a strong financial position with approximately $22.0 million in cash and cash equivalents (including restricted cash)[5][6] Strategic Outlook (2024) Guardforce AI plans to accelerate robotic/AI transformation, introduce diverse AI solutions for retail and tourism, expand GDM business, and manage expenses - Primary focus in 2024 will be to accelerate robotic/AI transformation, leveraging the extensive customer base in the traditional security sector and investing in R&D[4] - Plan to introduce a diverse range of AI solutions, with a particular emphasis on AI solutions tailored for the retail and tourism industries, to optimize sales and marketing operations and increase revenues[4] - Foresee significant growth opportunities in the Thailand retail sector for security logistics, driven by an anticipated surge in Chinese tourists[4] - Further develop the high-margin GDM business and aim to expand its reach to additional chain retailers and public transportation authorities[4] - Continue to carefully manage expenses and implement cost reduction strategies, such as process streamlining and resource allocation optimization[4] Financial Performance Guardforce AI reported increased revenue and gross profit in 2023, with a higher IFRS net loss due to impairment, but improved cash flow and strengthened its balance sheet Financial Overview (Summary) Guardforce AI reported $36.3 million revenue, 43% gross profit growth, and a 61.5% reduction in adjusted net loss, despite a higher IFRS net loss due to impairment Financial Highlights | Metric | 2023 (USD) | 2022 (USD) | Change (YoY) | | :-------------------------------- | :----------- | :----------- | :----------- | | Revenue | $36.3 million | $34.0 million | +6.8% | | Gross Profit | $5.4 million | $3.8 million | +43% | | Gross Profit Margin | 14.9% | 11.1% | +3.8 pp | | Adjusted Net Loss (narrowed by) | - | - | 61.5% | | Net Loss | $(29.6) million | $(18.6) million | -59.1% | | Net Loss Per Share | $(4.53) | $(14.97) | +69.7% | | Cash & Cash Equivalents (incl. restricted cash) | $22.0 million | $8.2 million | +168.3% | Consolidated Statements of Profit and Loss Revenue increased to $36.28 million in 2023, but operating loss widened to $(29.30) million due to significant impairment losses during business transition Consolidated Statements of Profit and Loss | Metric | 2023 (USD) | 2022 (USD) | 2021 (USD) | | :------------------------------------------------- | :----------- | :----------- | :----------- | | Revenue | $36,280,502 | $33,965,648 | $34,668,872 | | Cost of sales | $(30,889,226) | $(30,196,382) | $(31,056,994) | | Gross profit | $5,391,276 | $3,769,266 | $3,611,878 | | Operating loss | $(29,302,778) | $(16,826,239) | $(3,752,450) | | Net loss for the year from continuing operations | $(29,623,520) | $(18,603,626) | $(5,531,354) | | Net loss attributable to equity holders of the Company | $(29,571,661) | $(18,564,794) | $(5,481,927) | | Basic and diluted loss per share | $(4.53) | $(14.97) | $(11.90) | Consolidated Balance Sheets Total assets decreased to $45.81 million by year-end 2023, while total liabilities significantly reduced to $20.66 million, leading to a 31.5% increase in total equity Consolidated Balance Sheets | Metric | As of Dec 31, 2023 (USD) | As of Dec 31, 2022 (USD) | Change (YoY) | | :-------------------------------- | :----------------------- | :----------------------- | :----------- | | Total Assets | $45,814,948 | $61,166,974 | -25.1% | | Total Liabilities | $20,662,173 | $42,034,672 | -50.8% | | Total Equity | $25,152,775 | $19,132,302 | +31.5% | | Cash and cash equivalents | $20,235,227 | $6,930,639 | +192.0% | | Inventories | $506,403 | $5,105,770 | -90.1% | | Goodwill | $411,862 | $2,679,445 | -84.6% | Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $(1.19) million, resulting in a $13.81 million net increase in cash and equivalents, ending 2023 with $21.97 million Consolidated Statements of Cash Flows | Cash Flow Activity | 2023 (USD) | 2022 (USD) | 2021 (USD) | | :---------------------------------------- | :----------- | :----------- | :----------- | | Net cash (used in) generated from operating activities | $(1,191,701) | $(19,190,237) | $979,164 | | Net cash used in investing activities | $(2,125,545) | $(9,405,629) | $(5,224,439) | | Net cash generated from financing activities | $17,122,925 | $20,937,985 | $10,653,312 | | Net increase (decrease) in cash and cash equivalents, and restricted cash | $13,805,679 | $(7,657,881) | $6,408,037 | | Cash and cash equivalents, and restricted cash at end of year | $21,973,395 | $8,230,644 | $15,853,811 | - Non-cash investing and financing activities in 2023 included $15.91 million for equity portion of settlement of a third-party borrowing and $1.85 million for equity portion of acquisition of fixed and intangible assets[17] Non-IFRS Financial Measures Guardforce AI uses non-IFRS measures like adjusted EBITDA and adjusted net (loss) income to provide a clearer view of core operating performance, showing significant improvement in adjusted net loss Non-IFRS Measures Explanation Guardforce AI utilizes non-IFRS measures like adjusted EBITDA and non-IFRS adjusted net (loss) income to provide a clearer view of core operating results by excluding non-cash items - Uses non-IFRS adjusted EBITDA and non-IFRS adjusted net (loss) income to supplement IFRS financial statements[18][19] - Adjusted EBITDA represents net (loss) income before finance costs, income tax benefit, depreciation of fixed assets, and amortization of intangible assets[20] - Non-IFRS adjusted net (loss) income further excludes certain non-cash expenses, including stock-based compensation, allowance for and write-off of withholding tax receivables, provision for obsolete inventory, and impairment loss on fixed assets[21] - These measures aim to identify underlying trends, provide useful information about core operating results, and enhance understanding for investors and management[19] Reconciliation of Non-IFRS Measures Non-IFRS adjusted net loss significantly improved to $(1.81) million in 2023 from $(4.71) million in 2022, with non-IFRS loss per share improving to $(0.28) Reconciliation of Non-IFRS Measures | Metric | 2023 (USD) | 2022 (USD) | 2021 (USD) | | :------------------------------------------------- | :----------- | :----------- | :----------- | | Net loss from continuing operations – IFRS | $(29,623,520) | $(18,603,626) | $(5,531,354) | | EBITDA | $(23,292,586) | $(11,348,181) | $(246,737) | | Adjusted net (loss) income (Non-IFRS) | $(1,814,033) | $(4,705,959) | $1,762,962 | | Non-IFRS Basic and diluted (loss) profit per share | $(0.28) | $(3.80) | $3.83 | Company Information & Disclosures Guardforce AI is a global integrated solution provider transitioning to AI, with disclosures on forward-looking statements and investor contact information About Guardforce AI Guardforce AI is a global integrated solution provider transitioning from security to total AI solutions, leveraging extensive experience and expanding its Asia Pacific and U.S. presence - Global integrated solution provider focusing on security solutions (since 1982) and AI & robotic solutions (since 2020)[7] - Transitioning towards becoming a total AI solution provider, leveraging over 41 years of experience in the security industry, an established customer base, and robust sales channels[7] - Firmly rooted in the Asia Pacific region, with an expanding global presence in the U.S.[7] Safe Harbor Statement This document contains forward-looking statements subject to inherent uncertainties and risks, and actual results may differ materially, with no obligation for updates unless legally required - Contains "forward-looking statements" subject to inherent uncertainties, risks, and changes in circumstances[8] - Actual results and financial condition may differ materially from those indicated in the forward-looking statements[8] - The Company undertakes no obligation to publicly update or revise these forward-looking statements, whether because of new information, future events or otherwise, unless required by law[8] Investor Relations Investor relations inquiries can be directed to Crescendo Communications, LLC, and corporate communications to Hu Yu - Investor Relations contacts: David Waldman or Natalya Rudman at Crescendo Communications, LLC (Email: gfai@crescendo-ir.com, Tel: 212-671-1020)[9] - Guardforce AI Corporate Communications contact: Hu Yu (Email: yu.hu@guardforceai.com)[9]