Guardforce AI Co., Limited (NASDAQ:GFAI) Q4 2024 Earnings Call Transcript

Guardforce AI Co., Limited (NASDAQ:GFAI) Q4 2024 Earnings Call Transcript April 28, 2025

Operator: Good morning and welcome to Guardforce AI 2024 Year-End Conference Call. Today’s conference is being recorded. Ms. Natalya Rudman of Crescendo Communications, please go ahead.

Natalya Rudman: Thank you Operator and good morning everyone. I would like to thank everyone for joining us today for the Guardforce AI year-end 2024 shareholder update call. Today Guardforce AI’s Chairwoman and Chief Executive Officer, Olivia Wang and Chief Financial Officer, Catherine Zuo; and Lin Jia, President of Guardforce AI will be your presenters on the call. The company issued a press release this morning containing its 2024 fiscal year financial results which is also posted on the company’s website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before we begin I am going to review the company’s Safe Harbor Statement.

The statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events and as such all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Guardforce AI are as such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties which may cause actual results to differ from those anticipated by Guardforce AI at this time.

In addition other risks are more fully described in Guardforce AI’s public filings with the U.S. Securities and Exchange Commission which can be reviewed at www.sec.gov. The company makes no commitment to disclose any revisions to forward-looking statements or any facts, events, or circumstances after the date hereof that bear upon forward-looking statements. With that out of the way I will now turn the call over Chairwoman and CEO, Olivia Wang. Please go ahead Olivia.

Lei Olivia Wang: Thank you, Nat and welcome everyone to today’s earnings call. 2024 was a transformatic year for us, marked by operational consolidation and an interest revenue mix, and a significant strides in AI innovation. I’m pleased to report that we achieved growth across key segments. And, notably, our call business recording its first operating process since IPO, an important milestone following the challenge of the pandemic. We made meaningful progress in shifting our revenues next to world’s higher-margin offerings and today, we sell over 25,000 retail stores globally. Retail is steadily rising to become one of our top clients and segments, the passing of historical banking clients. Back to our strong balance sheets, with approximately $23.4 million in cash, cash equivalents, and restricted cash.

Q&A Session

We are well-sufficient to accelerate our AI solution strategies. On the technology front, we advanced our Robots-As-A-Service model across Asia-Pacific region and launched the DVGO, DeepVoyage Go, our first AI-powered travel planning agent. In parallel we established an orange [ph] team to support the development of — AI agents. Why AI agents? We believe that AI should enhance immense productivity, not just optimize for profit, but for people. In the words saturated with algorithm driven noise, AI agents can cut through the chatter helping users make decisions rooted in personal relevance and value. Why start with travel? Travel is deeply personal, emotionally driven, and a full of decision friction and so it creates lasting memories. Our goal with DVGO is not just for efficiency, but empowerment, bringing clarity, balance, and intake integrates to complex progress.

DVGO is our first consumer-facing application and a proof prompt of our border of AI platform, which is for future expansion into SaaS and the B2B, B2C used cases. Over time, we see opportunities to deploy similar AI agents in retail, education, and other consuming-facing industries. As we look to 2025, our vision is clear. AI should empower people, not replace them. Our focus will be on scaling what we built. Trusting our secure logistics operations, expanding with retail and travel, tinkering [ph] in our AI R&D, and extending our smart solutions globally. With that, I will hand it to Lin, who leads our technology and projects developed. He will walk you through our AI agent strategy in more detail.

Lin Jia: Thank you, Olivia. In 2024, our vision for human-centered AI moved from concept to execution, and certified the launch of DVGO, our intelligent travel assistant that the first realization of our long-term AI agent strategy. We also upgraded our GFAI [ph] AI Intelligent Cloud Platform, transforming it into an AI driven system capable of supporting agent-based HTML key. This upgrade focused on four key pillars. The first, deep user intent modeling, and second, simulate coordination among specialized AI agents. And the third, transparent feedback loop that builds trust, and the last one, a scalable, multi-lingual architecture that learns across users and domains. DVGO solved one of the most complex challenges in travel planning.

Building a complete travel plan that works in real life. It is a task that requires the system to balance a multitude of factors in real time. DVGO uses multi-objective optimization efforts that apply our combination of models to solve the traveling salesman problem, or as you know as the TXT problem. We translate user needs into structured inputs which allow the system to build and optimize travel routes in real time. It adapts to planning needs like budgets, timing, and travel style, and takes into account real-world structures that wider our change of black lanes. DVGO is powered by reinforcement learning model. These models adjusts over time based on how users behave and what happens around them. This combination of models not only solves the TXT problem, but also provides highly-cognized solutions for each user.

With four-year operational experience in robots, we are learning more about what clients actually need. That background also helped us build a routine and shape a clear direction for our products. AI agents like DVGO are built to support real-world decisions. In retail, we can help customers purchase what they truly need, not just what advertise. In education, they can deliver personalized learning instead of generic content. We are working to expand the AI agent tools into more areas where smart decisions really matter. With that, I will now hand over to Catherine who will review our 2024 year-end financials. Thank you.

Yuting Catherine Zuo: Thank you, Lin and good morning, everyone. I will now go through some of our key P&L items and balance sheet items. As previously mentioned by Olivia, we have improved our revenue mix towards a higher margin offerings in 2024. Revenue from our Secure Logistics business for 2024 was at $32.4 million U.S., representing an increase of $544,000 or 1.7% compared to a $31.9 million for 2023. Revenue growth in Thailand was mainly contributed by our retail focused service lines, including our Guardforce Digital Machine, known as the GDM, and our cash in turns at NANDV known as the CIP NANDV. This year, our GDM products experienced remarkable year-over-year growth of $1.1 million or 39.5%, driven by strong demand from chain retailers.

Our CIP NANDV business also saw a notable increase of 351,000 or 3.0%, benefiting from the successful execution of our retail focused strategy. Also, our company wide efforts to prudently and deliberately in expense control process has yielded some very positive results for our company. Despite the increase in revenue, our cost of sales decreased by close to $799,000 from $30.9 million in 2023 to only $30.1 million in 2024. As a result, our gross profits increased by $866,000 or 16.1% to $6.3 million year-over-year. The improvement in gross profit also contributed to our lowest net loss from continuing operations since 2022, which narrowed down to only negative $5.9 million representing a year-over-year reduction of 80.1%. Our operating expense also has marked it a significant year-over-year decrease, particularly due to the reduction in selling, distribution, and administrative expenses, which decreased by 20.7% or $2.6 million from $12.7 million to $10.1 million.

In 2024, our depreciation and amortization expenses declined significantly primarily due to the reduced use of our legacy robotics assets as we’re transitioning towards an AI-centric business model. Additionally, the professional fees decreased compared to the prior year too, as no acquisitions were completed during 2024. As part of our AI-centric business transitions as what Lin has mentioned before, we remain focused on controlling expenses associated with our traditional operations, while strategically increasing investments in the AI-related research and development to support our long-term innovation and growth. In 2024, we have invested around $591,000 in our R&D, representing an increase of approximately 2.5 times compared to last year’s R&D spend of only $170,000.

Throughout the year, our R&D team continued to enhance our AI and robotics solutions platform ICT 3.0, reinforcing our commitment to innovation and ensuring that this platform remains the core platform for our next generation AI solutions. Now, turning to our balance sheet. Our total assets were at $44.7 million as of December 31st, 2024. And this includes a strong cash and cash equivalent, including restricted cash balance of $23.4 million, accounts receivable of $5.9 million, other current and non-current assets of $15.4 million, long-lived assets of $7.8 million. It now comes to liabilities. The total liabilities were $12.7 million as of December 31st, 2024 and this includes our trade payables and other current liabilities of $4.5 million.

Operating lease liabilities of $2.3 million and provision for employee benefits of $5.5 million. This concludes my comments. And now I would like to turn the call back over to Olivia, please.

Lei Olivia Wang: Thank you, Catherine. Nat, would you please lead us through the Q&A discussion?

A – Natalya Rudman: Yes. Thank you, Olivia. In our call announcement press release, we suggested interested parties submit their questions in advance. We’d like to address those questions for you now. Some questions were duplicative, so we did our best to reconcile those where possible. If you have any questions after the call, please feel free to follow up with Investor Relations, and we’ll be sure to respond to you as quickly as possible.

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

Lei Olivia Wang: Thank you, Catherine — no, thank you, Nat, for the question. Our business remains the primary driver of revenue and cash flow, accounting for over 80% of the total income. It also gives us a strategic advantage. With more than 25,000 retail clients, providing a strong foundation to introduce our AI solutions. Over the next 12 to 24 months, our key focus will be expanding our agent platform, starting from the DVGO, and progressively moving into our new verticals, including travel, retail, and education. We expect the DVGO to achieve the progressive adoption milestone that validates the effectiveness of our agent in improving our decision-making and user certification. To support this growth, we are building a stronger sales and operations team to support future growth. Meanwhile, we are also pursuing a strategic executive approach that will complement our core business and AI platform expansion. That’s all. Thank you.

Unidentified Analyst : Thank you. Our next question is, how does DVGO’s revenue will impact the current revenue mix and the profit margin?

Lei Olivia Wang: Yeah, good question. This links together with the first. DVGO actually is one of our key strategic investments and a major step in advancing our AI agent development. In short term, DVGO will contribute a small but growing portion of overall revenue, helping diversifying our income from traditional services to more recurring AI-powered revenue streams. Over time, it’s expected to become a major contributor. Initially, of course, the margins will be lower due to upfront AI development and customer acquisition costs. However, as DVGO scales, the high margin software-driven measure will significantly boost our profit margin, offering higher efficiency and lower incremental costs as we expand the business. Overall, DVGO represents a transformational shift in our business model from series-based to tech platform-based business model, enhancing our valuation and position us for sustainable long-term growth in higher margins and tech-driven future.

Unidentified Analyst : Thank you. Next question is, are you able to provide more frequent or segmented financial disclosures to allow for better performance assessment across business lines?

Yuting Catherine Zuo: Thank you for the question, Nat. So at this time, we do not have plans to change the frequency of our financial disclosures. However, we do encourage you to visit our website and follow our social media channels for the latest news and updates regarding our product, customers, and business activities. Thank you.

Natalya Rudman: Thanks, Catherine.

Unidentified Analyst : Next question is, given the recurring capital expenditures and ongoing net losses, what specific steps are being taken to reduce cash burn?

Yuting Catherine Zuo: Okay. Thank you for the question. That’s a good one. And yes, managing cash flow remains a top priority for us. And in 2024, we made some meaningful progress in reducing our cash burn. And specifically, we steadily increased the revenue while achieving a much healthier gross margin and tightened our cost structure. All of these helped us significantly narrow down our net loss. And our gross profit margin also reached a historical high of 17%, driven by improvements across all of our business segments and supported by company-wide cost management initiatives, including a very successful manpower streaming lining project that substantially reduced direct labor costs for our company. Moreover, in Thailand, our retail-focused strategy improved operational efficiency by allowing us to serve a larger client base without additional dedicated resources.

We also optimized our business mix, expanding high-margin services including GDM and [indiscernible], and reducing exposure to lower-margin services such as ATM. Since this segment represents – our Thailand segment represents 89.2% of the total revenue, these shifts have a very meaningful impact to our overall financial results. Our general security business also remained very stable and achieved a slight gross margin improvement to around 36%, thanks to the disciplined cost control. Additionally, our AI-focused transition, which began in 2023 reduced our reliance on legacy robotics and eliminated redundant costs, further boosting our profitability and positioning us for more cash-efficient growth. So, in 2024, our net loss narrowed down by 80% to $5.9 million, comparing to $29.6 million back in 2023.

Our adjusted EBITDA has also improved year-over-year by approximately 1.1 million, or 61 – over 61%, to only a negative 0.7 million in 2024, compared to a negative 1.8 million in 2023. All of these results further prove that with the steps that I mentioned above, they have helped us slow down the cash burn, and we remain focused on further improving our overall business efficiency, managing expenses, and driving profitable growth. Thank you. That’s all of my answer for that question.

Natalya Rudman: Thank you. Appreciate the answers.

Unidentified Analyst : Our next question is, what is the core differentiation of the DVGO AI agent compared to existing Travel AI assistants in the market?

Lin Jia: Oh, that’s a good question. The DVGO was created to meet the needs of modern travelers seeking an AI assistant that understands their purpose, helps them suggests options, builds plans, and supports them throughout the journey. It acts like a true user-centric agent, thinking from the traveler’s perspective. Unlike traditional travel platforms that focus on selling products, DVGO begins with the user’s intent and purpose, then builds a personalized path to meet their needs. While conventional platforms overwhelm users with information, DVGO uses a dialogue-driven approach to guide smarter decision-making. While traditional tools leave the decision-making entirely to the user, often resulting in fragmented outcomes, DVGO integrates AI to streamline execution and deliver a cohesive experience. In short, I think DVGO shifts the focus from product pushing to purpose-driven planning using AI to empower smarter, more personalized travel decisions. That’s all.

Unidentified Analyst : Thank you. Next question is, what IP does GuardForce AI currently own or license, and how is it being protected to maintain a technological edge?

Lin Jia: Well, certainly, IP is the key asset, and we care about it. At GFAI, we focus on both owning and licensing the technology to strengthen our competitive edge. On our side, we have deployed several core systems that power our AI solutions, including advanced agent coordination, decision optimization frameworks, and personalized user experiences. On the licensed side, we utilize the selected AI foundation models and open-source components under proper agreement to enhance our offerings, ensuring full compliance for commercial use. To protect our technology advantage, we deploy a multi-layered approach. But first, we treat critical technologies as internal trade secrets. And second, we marginalize our systems to limit exposure risks.

And third, we keep a clear separation between what we licensed and what we build ourselves so we can control any risks from third-party components. Additionally, we continuously explore heightened opportunities to protect innovation as our platform evolves. Overall, our IP strategy is designed to ensure long-term value creation, safeguard our technology eyes, and maintain the scalability and trustworthiness of our solutions. That’s all. Thank you.

Natalya Rudman: Thank you so much. That concludes our Q&A. I’ll turn it back over to Olivia for closing remarks. Please go ahead, Olivia.

Lei Olivia Wang: Thank you, Nat and thank you to everyone who joined the call today. It’s efficient. As always, we appreciate the support of all our shareholders and look forward to providing more updates with development efforts. Thank you and take care, everyone.

Operator: Thank you, ladies and gentlemen. This concludes today’s call. You may disconnect your lines at this time, and we thank you for your participation.