Safe & Green Holdings Corp (SGBX) 2020 Q4 法說會逐字稿

Good day, and welcome to SG Blocks Fourth Quarter and Full Year 2020 Earnings Conference Call and Webcast. Today's conference call is being recorded. At this time, I would like to turn the conference over to Mr. Stephen Swett of Investor Relations. Thank you, sir. You may begin.

Good afternoon. Thank you all for joining us for our fourth quarter and full year 2020 earnings call. With me today is Paul Galvin, Chief Executive Officer, SG Blocks; and Gerald Sheeran, acting Chief Financial Officer. The press release detailing our results was issued this afternoon just after the market close and is available on the company's website at www.sgblocks.com.

Before I turn the call over to Paul, please remember that certain statements made during this presentation are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding the company's future operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements.

In some cases, forward-looking statements can be identified by terminologies such as believes, may, estimates, continue, anticipates, intends, should, plan, expects, predict, potential or the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

These forward-looking statements are subject to a number of risks and uncertainties and assumptions described, including those set forth in our filings with the SEC, which are available on our website at www.sgblocks.com. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Finally, this conference call is being webcast. The webcast is available in the Investor Relations section of our website.

Now I'll turn the call over to Paul.

Thank you, Steve. Let me begin with an apology for the delay in reporting. We pride ourselves on being on time every time with our filings. The last time we needed an extension to file our annual report was literally 22 years ago in 1999. It was unavoidable this quarter, and we have implemented a plan that includes additional resources and redundancy to allow us to report on time regardless of any staff illnesses and other items we may encounter.

Now to the news. SG Blocks had a record-breaking fourth quarter 2020 as well as a record-breaking year in 2020. Our fourth quarter gross revenue was approximately $7,350,000, which would be 20x greater than the revenue we produced in the fourth quarter last year as well as the third quarter of 2020. In fact, our fourth quarter revenue was greater than the prior 8 quarters combined, though these results reflect our efforts from that period.

Our team is talented, hard-working and tireless. Today's results are the products of the seeds planted and harvested during the past 18 months when we put our heads down and work collectively to turn around the company's trajectory. We thank our staff, consultants, attorneys, partners and board for the focus, effort and the support of our mission. It is also worth remembering that we have worked diligently to maintain a clean cap table structure. And because of this priority, SG Blocks can report today that we continue to have no debt and a float of approximately 7.2 million shares.

SGBX, with the support of ThinkEquity, a division of Fordham Financial Management, capitalized the company in Q2 2020, with an offering of 6 million shares of our common stock at a price of $2.50 per share. We intend to continue to use these funds to execute and grow our thriving business. Since then, the company has successfully executed 2 strategies to raise capital without issuing additional shares. Subsequently to the year-end, our [Cat] subsidiary sublease the testing site to a government entity. And also, we applied for and were approved for an Oklahoma salary rebate of 5% from the Oklahoma Quality Jobs program. We anticipate $750,000 to $1 million from these strategies in 2021. We will now break down the activity in our sectors for the period.

Manufacturing. We acquired our factory, SG Echo on September 23, 2020, and have been implementing best practices in organizing a going forward work plan under newly hired Chief Operating Officer, Bill Rogers. SG Blocks has executed its option to acquire the 19 acre Echo site, which is scheduled to close in Q2 2021. This will allow us to add 6 new manufacturing buildings, totaling an additional 175,000 square feet to meet growing demand.

SG Home has been launched from SG Echo, and we now offer 4 housing prototypes with access to financing for qualified buyers. These homes will also be used in the projects developed by our SG Development Company, which we formed earlier this year. We expect to have a robust update on SG DevCo shortly, which would bring most exciting news. Management at the factory is supported by a well-skilled and industrious labor force, which is helping SG Blocks to reach new heights.

At this time, our labor force on the factory floor has almost tripled since the September acquisition in order to meet demand. We believe our decision to provide health care to SG Echo employees is helping us to attract and retain best-in-class skilled labor. We do not anticipate any labor force shortages as we grow our facilities. We are thrilled with our decision to establish our manufacturing presence in the great state of Oklahoma.

Medical testing. Since the pandemic, SGBX has implemented a massive and sustained effort to assist and deploy our technology. The results include SGBX through subsidiary clarity mobile venture continues to provide much-needed high-quality points of care, COVID-19 testing at LAX Airport. Today, we believe this could be the only active CLIA lab on-site at an international airport in the U.S. SGBX continues to operate in Wayne County, Michigan and its relationship with Memorial Healthcare, to provide COVID-19 testing to at-risk population in the general public.

Additionally, through our Cat subsidiary, we have and are awaiting the results of multiple RFPs and proposals for point-of-care testing programs. Please note, all operating expenses for Cat are paid from the sublease revenue, still allowing for a profit thereafter. The COVID-19 pandemic has further reinforced our confidence that our team is able to pivot opportunistically within the health care space as needed for various ongoing testing and vaccinations, which will not end with COVID-19. Our ambition in the medical vertical does not stop with COVID testing. We are designing and preparing multiple specialty modules. We believe we'll meet urgent demands and community health, expect more to come on these activities later in the year.

SG Development Company. SG Development Corp. is a wholly owned subsidiary of SGBX and was formed in Q1 2021 with the express purpose of real property development, utilizing the technologies of SGBX. To further clarify, SG DevCo will be a co-developer and owner of real estate development projects that deliver apartments and homes for sale. The site selected represents the best of all the great sites that we see through our website and broader ecosystem. The homes and apartments will be manufactured by SG Echo so that the project is fully integrated into the SGBX ecosystem. Many of the projects will utilize the products designed and manufactured through SG Home to reduce design costs, which savings can be passed on to buyers.

SG DevCo has announced a 225 apartment unit project, known as Lago Vista, on Lake Travis in Booming, Austin, Texas. The land closing is scheduled for Q2 2021, and the estimated manufacturing revenue from this project alone, SG Echo, is approximately $30 million over 36 months. Our profit share from sales is anticipated in the range of $5 million to $7 million over the period the units are sold. Each project will have a third-party real estate investor and day-to-day manager so that we do not need to finance projects nor be distracted from our pursuit of manufacturing excellence. Expect further SG DevCo updates forthcoming.

SG Blocks Commercial. SG Blocks has 21 projects in our backlog, representing $25.1 million in sales. Of note, we have a design and delivery contract with the BLINK to deploy their proprietary charging technology. We are designing SG Blocks branded infrastructure modules to host the equipment of others. We anticipate going to market in Q3 with this product. We are actively targeting the QSR community, military bases and government contracts.

We are also investing significant time into relationship building with the native American communities in Oklahoma and New Mexico, who have great vision for their communities and with whom it would be an honor to work. Of note, direct factory leads since acquiring SG Echo have been steady and qualified, which has been a pleasant surprise. Again, we believe this is in response to the approach we have taken with the community.

Now I will hand it over to Gerald.

Thank you, Paul. Beginning with the income statement. For the fourth quarter 2020, we reported revenue of approximately $7.4 million compared to approximately $337,000 for the fourth quarter of 2019. This increase was driven by approximately $2.7 million in construction revenue and approximately $4.2 million increase in medical revenue. For the full year 2020, we reported revenue of approximately $8.8 million compared to approximately $3 million for 2019. This increase was driven primarily by an approximately $4.2 million increase in medical revenue and approximately $1.3 million increase in construction revenue.

Gross profit in the fourth quarter of 2020 was approximately $1.6 million compared to a gross profit of approximately $48,000 in the year ago quarter. The gross profit margin in the fourth quarter of 2020 was approximately 21.8%. For the full year 2020, gross profit was approximately $2.2 million compared to a gross profit of approximately $677,000 in the prior year. The gross profit margin for 2020 was approximately 25.4%.

Operating expenses in the fourth quarter of 2020 were approximately $3.1 million compared to approximately $4 million in the year ago quarter. The decrease was primarily driven by goodwill impairment charge taken in the fourth quarter 2019 of approximately $2.9 million that did not reoccur in 2020, partially offset by an increase in payroll expense of approximately $1.1 million and G&A expenses of approximately $700,000. For the full year 2020, operating expenses were approximately $6.8 million compared to approximately $7.4 million in 2019.

The decrease was primarily driven by the goodwill impairment charge taken in 2019, that I just mentioned, of approximately $2.9 million, partially offset by increases in payroll expense of approximately $600,000 due to noncash stock compensation expense and onboarding costs for the new employees of the SG Echo plant. And higher G&A expenses related to legal fees of approximately $500,000 consulting fees of $520,000 and post-acquisition expense costs of $500,000 related to the SG Echo and Clarity Mobile venture.

For the fourth quarter of 2020, our net loss attributed to common shareholders was approximately $1.6 million or negative $0.19 per share compared to a net loss of approximately $4.1 million or negative $8.83 per share in the fourth quarter of 2019. For the full year 2020, our net loss attributed to common shareholders was approximately $4.7 million or negative $0.79 per share compared to a net loss of approximately $6.9 million or negative $22.85 per share in 2019. Adjusted EBITDA loss for the fourth quarter of 2020 was approximately $698,000 compared to a loss of $720,000 in the same quarter last year. For 2020, adjusted EBITDA loss was approximately $2.8 million compared to a loss of $2.9 million in 2019.

Turning to the balance sheet. At December 31, 2020, we had total assets of $26.9 million compared to $6.6 million at December 31, 2019. We had cash and cash equivalents of approximately $13 million as of December 31, 2020, which compares to approximately $1.6 million at December 31, 2019. At this time, as Paul noted, we had a strong and flexible capital structure with no debt, and we believe we are capitalized to support our near-term working capital requirements.

Now I will turn the call back to Paul for closing comments.

Thank you, Gerald. In summary, we had a record 2020 and a very engaged first quarter, with no intention of surrendering our hard-fought momentum. At this time, we are not providing new revenue guidance for 2021, although it is our intention to do so later this year. We do not anticipate that we will need to raise operating moneys. We need to execute and continue to effectively grow SG DevCo, which represents one of the company's major verticals into the future.

SG Blocks is committed to hard work and excellence. And we want nothing more than to deliver results for our valued shareholders. We appreciate our shareholders and investors who have a multiple of choices for their time, their capital and their attention. We express our appreciation by working tirelessly each day and every day to maximize what we believe is a golden opportunity for SG Blocks.

2020 was a year unlike any other in American history. The pandemic has left an indelible mark on the country sold and, in particular, our ailing economy. Many of us have had loved ones pass away or suffer from COVID-19. We have all seen businesses that we support before the close and made good people be out of work due to no fault of their own. We emphasize with everyone who has been impacted so drastically.

This also makes us uniquely grateful for the success and growth we achieved during these most difficult times. We thank you for your time today. And wish you a good night.

Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.