Safe & Green Holdings Corp (SGBX) 2020 Q2 法說會逐字稿

Good day, and welcome to SG Blocks Second 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 Gerald Sheeran, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon. Thank you all for joining us for SG Blocks Second Quarter 2020 Earnings Call. Your host today is Paul, Mr. Paul Galvin, Chief Executive Officer.

A press release detailing these results was issued this afternoon just after the market closed and is available on the company's website, sgblocks.com.

Before I turn the call over to Paul, please remember that certain statements contained in this release 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 believe, may, estimate, continue, anticipate, intend, should, plan, expect, 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 Securities and Exchange Commission, which are available at www.sec.gov. You should not rely upon forward-looking statements as prediction. 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 at www.sgblocks.com.

With that, I will now turn the call over to our Chief Executive Officer, Paul Galvin, for his prepared comments. Paul, please go ahead.

Thank you, Gerald, and welcome to the SG Blocks Second Quarter 2020 Financial Results Conference Call. We were hard at work in the second quarter, executing on projects already under contract, while also pursuing a number of new business development opportunities and expanding the application of our containerized solutions to the COVID-19 diagnostics market. We are materially moving our business forward, setting the stage for what we expect to be a strong second half of 2020.

Healthcare. In the healthcare vertical, we executed a nonexclusive distribution agreement with OSANG Healthcare of South Korea, who is a global manufacturer and distributor of medical-grade diagnostic tests and equipment including a 3-gene PCR COVID-19 test. Since that time, SG Blocks has accomplished the following: one, completed U.S. customs import license and FDA registration process; two, hired 3 staff consultants to [self-service] our COVID-19 testing solutions; three, established cold storage supply chain; four, executed multiple reseller and fee agreements; five, created with Grimshaw Architects a series of medical testing and laboratory services known as the D-Tec series; six, focused our business development efforts on all levels of government, medical and academic institutions as well as private employers.

Residential. Our residential vertical operates on a royalty model, which was licensed last year. We are happy to report the following progress: One, Monticello Mews received its final site plan approval subsequent to Q2 2020 ending and site work has commenced. Recall, the project is expected to yield 302 units of workforce housing over 6 buildings and 3 phases. SG Blocks anticipates a multimillion-dollar royalty upon completion of the project. Two, work has resumed on the 55 concrete shells in Guayama, which had been halted due to the COVID pandemic. Three, we have entered into an agreement subsequent to Q2 2020 for the completion of 40 office boxes to Puerto Rico for the provision of functional office space, which is in demand. This project is subject to royalties and our license agreement. The Ranchbox prototype is nearing completion and it is expected to be widely marketed domestically. We expect to see exponential growth in our royalty revenue over the next 4 quarters once completed.

Commercial. In our commercial vertical, we executed an A&E design contract in Q2 2020 and subsequently were awarded a construction contract for approximately $4 million to manufacture a boutique mixed-use hospitality project with [GATES Construction.] The project is located in the scenic Florida Everglades and will yield 24 hospitality units and a dining component. The location and use of the product are ideal for the clientele and its challenges. Manufacturing is expected to commence in Q3 2020 and be completed in Q1 2021. This contract alone represents a potential 300% increase in gross revenue over the trailing 4 quarters.

In other commercial news, we are happy to report the following progress and new business subsequent to Q2 2020: One, executed purchase orders for a third-party delivery for 2 experiential pop-up containers to the University of West Virginia; two, the previously announced Arizona Investissements MoLiving hospitality project is expected to have its prototype completed in Q3; three, we executed a design contract for a restaurant expansion in Georgia; four, our Planet Smoothie project has reached its final construction phase, pending its shipment to its final destination in Djibouti, Africa; five, the previously announced Verizon store was completed in Denver.

Other. The company continues to see talent in both business development and supply chain functions, we continue to explore synergistic uses and partners for the use of prefabricated modules for the delivery of housing, products and services.

Ms. Maggie Coleman, a veteran finance and real estate industry professional, joined our Board of Directors and will be a member of both the Audit and Compensation committees. SG Blocks and Grimshaw announced the joint venture for the design-build services for the global delivery of modular education facilities. Further, SG Blocks now has access to Grimshaw's international network of manufacturers, fabricators, project managers and installers.

Business update. Revenue in the second quarter of 2020 was approximately $629,000 compared to approximately $728,000 in the second quarter of 2019. The decrease of approximately $99,000 or approximately 14% was mainly driven by a decline of roughly 404,000 and 72,000 in retail and office customers as well as shifting to a royalty-based model, which was offset by an increase of revenue of approximately $300,000, $57,000 and $41,000 in other, medical and hospitality customers.

Gross profit in the second quarter was approximately $374,000 compared to approximately $267,000 in the quarter a year ago. Gross profit margin as a percentage of revenue increased to approximately 60% in the second quarter of 2020 as compared to approximately 37% in the second quarter of 2019.

Operating expenses in the second quarter of 2020 were approximately $1.21 million down modestly compared to $1.24 million in the year a quarter ago. The decrease was largely driven by a reduction in our operating expenses related to payroll and related expenses of approximately $253,000 and a decrease of approximately $53,000 in marketing and business development expenses in the second quarter of 2020, which was partially offset by an increase of approximately $260,000 in general and administrative expenses, driven mostly higher by legal fees and some consulting expenses.

Our net loss was approximately $838,000 in the second quarter of 2020 compared to a net loss of approximately $972,000 in the second quarter of 2019. Looking at the balance sheet, we had cash and cash equivalents of $16.1 million as of June 30, which compares to approximately $1.6 million at the end of 2019. During the second quarter, we completed 2 public offerings, one that resulted in aggregate net proceeds of approximately $1.5 million and a subsequent offering that resulted in aggregate net proceeds of approximately $15.6 million, including the exercise of the over-allotment and after deducting underwriting discounts, commissions and other expenses.

We believe we are sufficiently capitalized to support near-term working capital needs for our day-to-day operations as we move towards being cash flow positive by year-end. We have worked feverishly during 2020 to successfully advance projects such as Monticello Mews, expand our product offerings in the medical and educational space, and build an ecosystem for the sales and service of COVID-19 diagnostic testing. We look forward to a productive second half and beyond.

The launch of new product and partnerships, the signing of new contracts, and the execution of initial orders in the first half of 2020 should be setting the stage for a strong second half.

Thank you for joining us today. If you have any specific questions or would like to speak with me or our IR team, you can e-mail us at sgbx@haydenir.com or call the SG Blocks hotline number on our website, and we will arrange for a call. We look forward to speaking with you again as we continue to make progress throughout the year. Operator?

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.