Safe & Green Holdings Corp (SGBX) 2020 Q3 法說會逐字稿

Good day, and welcome to SNG (sic) [SG] Blocks Third Quarter 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 Stephen Swett, Investor Relations.

Please go ahead.

Good afternoon.

Thank you all for joining us for our third quarter 2020 earnings conference call.

With me today is Paul Galvin, Chief Executive Officer, SG Blocks; and Gerald Sheeran, Acting Chief Financial Officer of SG Blocks.

Press release detailing our results was issued this afternoon just after 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, 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 on the Investor Relations section on our website.

Now I'll turn the call over to Paul.

Thank you, Steve, and welcome to the SG Blocks Third Quarter 2020 Financial Results Conference Call.

The third quarter was a game-changing quarter for SG Blocks, during which we accelerated our business on every front.

We made progress and announced significant activity in all of our verticals and built on the momentum we reported in the first half of the year.

As we execute in the coming quarters, we believe our results will demonstrate the bottom line benefit of our accomplishments so far this year, setting the stage for sustained growth in the fourth quarter and into 2021.

But before I touch on recent activity and results of the quarter, we have many new investors, and I think it's important to step back and provide a quick overview of SG Blocks, who we are, what we do and how we are positioned as the greenest alternative for almost any project that utilizes space.

SG Blocks is the premier innovator and designer of some of the world's most iconic container-based structure.

Simply put, we repurpose shipping containers into vibrant and creative new space that can be used for any real estate use, housing, health care, office, education, retail, lodging and so on.

The SG stands for safe and green.

Safe because we use maritime-grade shipping containers that are durable and highly resistant to man-made or natural disaster, and green because transforming these containers into usable structure is extremely environmentally friendly due to how they are built, where they are built, the low levels of energy needed to repurpose them and the speed with which they can be deployed.

By using SG Blocks, our customers eliminate the need for a less efficient, highly wasteful and environmentally threatening ground up new construction.

In our early days, we had to prove out the power of our unique concept.

We began by building single site stores and pop-up shops for retailers such as Puma and Starbucks.

We also built individual homes and then designed larger scale infrastructure projects for retail, government and defense customers.

As we continue to successfully demonstrate the efficiency of our products and our design and construction processes, we attracted more customers, and our project scope expanded and evolved.

We perfected the process to engineer, produce and deliver incredibly safe, strong and green structures, while individually designing the right box for each specific use.

We developed relationships with renowned architects and design teams, world-class developers and builders and major real estate owners, both public and private.

And we began pursuing larger customers and projects, which offer the potential for recurring revenue streams through project sales, fees and royalties.

At the same time, the importance of environmental and social responsibility in the investing world, ESG, took off.

The principles of ESG are not new to SG Blocks.

They are ingrained in our DNA.

In fact, in 2017, we were the first company to get a recycled material, our humble shipping container, approved for the purposes of construction by the ICC.

Today, we offer a product that is literally conceived off and designed for an increasingly green world, and we are truly in the right place at the right time.

2020 has been a year like no other, with unprecedented health-related and economic challenges across the globe.

But for SG Blocks, it has been a year of tremendous opportunity, and we are thriving.

Turning to recent activity.

The second and third quarters represent a seminal turnaround and expansion for the company.

Despite the challenges of the COVID-19 pandemic, SG Blocks worked diligently to advance several significant programs through concept, into design and planning and on to manufacturing and delivery.

From our pipeline of projects, we believe that the revenue booked in the third quarter 2020 is just the tip of the iceberg, which we expect to show in coming quarters as these projects mature.

Further, as we sit here today, our company benefits from a strong, clean and flexible balance sheet with no debt and no significant encumbrances, which should allow a significant portion of our growth to truly flow to the bottom line for our shareholders.

These outcomes would not be possible without the tireless efforts of our staff, partners, outside consultants and Board.

We thank everyone for their hard work and dedication during difficult conditions.

Now beginning with our health care vertical.

SG Blocks and its management team had an extensive history in the design, construction and operation of medical buildings and clinics.

When the COVID-19 pandemic hit the U.S., we were ready, willing and able to compete for business with our quick-to-deliver solutions.

The outcomes from these efforts include: on April 30, we entered into a preferred distribution agreement with Osang Healthcare of South Korea.

Osang produce an excellent 3 gene PCR test for COVID-19 with high levels of efficiency and resiliency, which we believe was deployable via container-based modules.

By May 28, SG Blocks announced the partnership with world-renowned architectural giant, Grimshaw, to design and produce solutions for extracting, testing and lab services related to COVID-19.

On August 27, SG Blocks entered the growing and lucrative CLIA lab market by forming a joint venture with established lab professionals from Boca Raton, Clarity Lab Solutions.

On September 23, in a substantial vertical integration, SG Blocks acquired the assets of modular factory, ECHO DCL.

The company also has the right of first refusal to acquire the factory building and 19-acre parcel located in Durant, Oklahoma.

This is where the majority of medical structures will be built.

And this acquisition represents a significant step in vertical integration, which brings in-house our largest source of cost of goods sold, and leads to better efficiency.

On September 25, SG Blocks announced it would partner with LAWA to establish an operational COVID D-Tec lab at LAX Airport, and our pace of activity has continued into the fourth quarter.

On October 19, SG Blocks and Osang Healthcare announced a managed COVID test supply agreement and purchase order for 2 million COVID PCR tests being stored in Southern California.

On October 30, SG Blocks and Grimshaw announced the D-Tec product was selected by CBS' coveted New York by Design competition, commencing in November 2020.

On November 16, SG Blocks subsidiary, Clarity Mobile Venture, announced it had been selected as a trusted testing partner, approved by the state of Hawaii for their comprehensive travel testing program to and from California.

Also, we have received many inquiries from stakeholders for an update on our LAX project.

The project's communications belong to the airport for security and other reasons, hence, our silence and respect for their needs.

However, on November 17, we were pleased to announce that Clarity Mobile Venture began providing services at LAWA, inside 3 terminals, and LAWA announced that D-Tec will be available in the first week of December when the site prep is finished.

And today, we are pleased to announce that we have been selected by Memorial Healthcare in Wayne County, Michigan, to provide full service, modular testing and lab facility network aimed at reducing the spread of COVID-19.

The labs operated by SG Blocks' newest joint venture, Clarity Modular Venture, will be used to test residents for COVID-19 using the Osang GeneFinder test, which is able to deliver medical-grade results in approximately 3 hours.

Under the contract, Wayne County will provide a capital grant of $2.7 million to SG Blocks to deliver 4 D-Tec 1 units, an essential scalable D-Tec 5 hub.

The D-Tec 1 units will be deployed throughout this county and will provide sample extraction and lab services, with the capacity to process up to 7,000 tests per day in a single 8-hour shift.

In addition, the labs will be able to provide vaccination services at the appropriate time.

Beyond these very exciting projects that we have announced, SG Block and its partners remain extremely active in conversations with school systems, airports, the cruise industry and employers regarding our highly efficient PCR test and mobile lab.

But this only captures events unfolding in the medical vertical of SG Blocks.

We also pressed the head on business and other sectors.

Those results include, but are not limited to, the following.

We executed a contract for approximately $4 million for a hospitality project in the Everglades, anticipated to be completed by second quarter 2021; we executed a contract for approximately $2.9 million for a series of buildings in New Mexico, which will be substantially complete in calendar year 2020; commencement of the site work by SG Residential on Monticello Mews, which is 6 buildings and 300 units of workforce housing under license agreement in the Catskills, New York.

We are nearing completion of the exciting Mo Living prototype in the vertical of mobile hospitality.

And also, SG Blocks announced an agreement with BLINK for the design and delivery of unique electrical vehicle charging solutions.

This year has been very hard on so many.

There has been illness, isolation, other challenges for too many families.

It has been difficult for us all to see people we care about being laid off and established businesses closing.

Many people are unsettled and rightfully so.

At SG Blocks, we are most grateful for the condition of our company and its employees.

We were capitalized in May, and that has allowed us, for the first time, to patiently execute a business strategy and to exploit longer-term and recurring sales opportunities because of it.

We again want to thank our shareholder partners for their patience and support.

During shareholder meetings, we often heard we needed to diversify our revenue.

We have done so and will now earn revenue from design, ESR sales, container sales, manufacturing, testing and lab services.

The testing and lab revenue are recurring, which is profile changing for our company.

We continue to surround ourselves with great partners and affiliates, who share our belief in the power of our collective ideas.

Containers allow you to bring your technology, goods and services to distinct geographic points of care and service in a unique way.

There is no shortage of ideas, but we continue to believe in our medical applications, which we hope will include Vaccination-as-a-Service in the near future.

And we continue to invest time on EV solutions as well as potentially parking solutions.

However, for the next 3 quarters, we are absolutely focused on execution on our designs, plans and permits, on deploying all D-Tec units as quickly and efficiently as possible, and the professional delivery of sample collection, testing and reporting services for those whose lives we are entrusted with.

We believe that the potential revenue for SG Blocks in the fourth quarter and beyond is substantially different and higher than previously.

Tests and service pricing vary per site and based upon what services we are providing.

Our PCR solutions range in price from $50 to $120 per test in most cases.

And we have several proprietary methods of increasing capacity when circumstances warranted.

Before I hand this over to Gerald, I would like to thank our shareholders and all stakeholders.

There are opportunities competing for time and money, and we are most grateful for your interest in SG Blocks and our story.

You can always count on our 100% commitment to work.

Now I'll hand it over to Gerald.

Thank you, Paul.

Beginning with the income statement.

For the third quarter of 2020, we reported revenue of approximately $575,000 compared to approximately $184,000 for the third quarter of 2019.

This increase was driven by approximately $306,000 increase in construction revenue and approximately $86,000 increase in engineering service revenue.

Gross profit in the third quarter of 2020 was approximately $194,000 compared to a gross loss of approximately $182,000 in the year ago quarter.

The gross profit margin in the third quarter of 2020 was approximately 34%.

Operating expenses in the third quarter of 2020 was approximately $1.72 million compared to approximately $1.09 million in the year ago quarter.

The increase was primarily driven by higher payroll and related expenses and higher G&A expenses related to legal and consulting expenses, partially offset by lower marketing and business development expense.

For the third quarter of 2020, our net loss was approximately $1.48 million or negative $0.17 per share compared to a net loss of approximately $1.33 million or negative $4.66 per share in the third quarter of 2019.

Adjusted EBITDA loss for the third quarter of 2020 was approximately $1.02 million compared to a loss of $1.09 million in the same quarter of last year.

Turning to the balance sheet.

At September 30, 2020, we had a total assets of $26.3 million compared to $6.6 million at December 31, 2019.

We had cash and cash equivalents of approximately $13 million as of September 30, 2020, which compares to approximately $1.6 million at December 31, 2019.

At this time, as Paul noted, we have a strong and flexible capital structure with no debt, and we believe we're significantly capitalized to support our near-term working capital requirements.

As a final note, if you have any questions or would like to speak with me or our Investor Relations team, you can e-mail us at investors@sgblocks.com.

Thank you for joining us today, and we look forward to speaking with you again next quarter.

This concludes today's teleconference.

You may disconnect your line at this time.

Thank you for your participation.