Safe & Green Holdings Corp (SGBX) 2020 Q1 法說會逐字稿

Good day, and welcome to the SG Blocks First Quarter 2020 Earnings Conference Call and Webcast.

Today's call is being recorded.

At this time, I'd like to turn the conference over to James Carbonara of Hayden IR.

Please go ahead.

Thank you, and good afternoon.

Thank you all for joining us for SG Blocks' First Quarter 2020 Earnings Call.

Your host today is Mr. Paul Galvin, Chief Executive Officer.

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

Before I turn the call over to management, 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 projections 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 at sgblocks.com.

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

Paul, please go ahead.

Thank you, James, and welcome to the SG Blocks' First Quarter 2020 Financial Results Conference Call.

SG Blocks had a most productive first quarter of 2020, accelerating the repositioning of the company, expanding our products and addressable markets and executing a distribution agreement with South Korean medical giant, Osang Healthcare, for the distribution of their stellar diagnostic products, including its PCR GeneFinder COVID-19 test.

Additionally, subsequent to the quarter, SG Blocks completed a $15 million public offering of 6 million shares of common stock, before deducting underwriter discounts and commissions and other expenses related to the offering, putting the company on firm footing and allowing it to attract and engage the type of talent needed to maximize our potential as a company.

We are happy to report progress across our platform but, in particular, some noteworthy updates.

One, Monticello Mews, the 302-unit, 6-story apartment complex being delivered by licensee, SG Residential, is set to break ground during this quarter.

This culminates the lengthy preconstruction process and commences the company's royalty stream.

As importantly, we have established the processes and systems for other large multifamily projects.

Two, there has been significant progress in Puerto Rico for the company.

When the lockdown is lifted, SG Residential will commence the completion of 55 concrete shells, which are subject to the company's royalty licensee agreements.

SG Residential's first newbuild project will be 128 3-bedroom homes in Guayama, Puerto Rico.

Our licensee is bringing to market in Puerto Rico a new product subject to royalty payment, the Office Box.

This single-container solution is designed to allow businesses and entrepreneurs to have access to functional workspace, which is in high demand.

Three, the company commenced construction on 2 mobile medical testing units for a point-of-care medical provider.

SG Blocks believes it has products that can help support not only the immediate response to the COVID-19 pandemic, but that we also can help shape the reimagining of our health care infrastructure, which has been devastated and exposed during this outbreak.

We have positioned the company to participate both on the construction side but also integrating the deployment of well-established medical tests into our revenue streams.

This is a strategy we hope to implement in other addressable markets.

Subsequent to the end of the first quarter, we significantly expanded our presence in the health care vertical.

Most recently, we signed a distribution agreement with Osang Healthcare, a South Korean-based global manufacturer and distributor of medical-grade diagnostic tests and equipment, for the rights to sell, market and distribute Osang's COVID-19 test kits.

Osang's test kits have been used by leading emergency services and frontline hospitals during the height of the COVID-19 epidemic in Europe and is becoming rapidly accepted in the U.S.

The test's ease-of-use, accuracy and ability to work on low-cost analyzers make it ideally suited for the deployment with our container-based structures to create modular turnkey pop-up clinics and testing centers.

The clinics and testing centers can be deployed quickly to hospitals and other points-of-care locations that meet clinicians' and patient needs where they are.

As a follow-on, we expect to use Osang's other point-of-care tests, including glucose, cholesterol and other molecular tests to offer a complete doc-in-a-box (sic) [lab-in-a-box] testing capability and further expand our presence in the health care vertical.

Prior to the distribution agreement with Osang, we also signed a memorandum of understanding with Transcend Onsite Care, a provider of on-site point-of-contact medical care.

Delivering quality health care and testing requires point-of-care solutions, which reduce traditional barriers to accessing medical care.

Subsequent to the end of the quarter, we signed a design contract for an eco-sheet mixed-use hospitality project south of Miami, which includes residences, a lodge and a restaurant.

The parties are engaged in contract negotiations for the manufacturing phase, which is anticipated to commence in Q3 2020.

Our backlog in commercial business was $17.5 million at the end of the first quarter of 2020.

On the residential side of our business, we continue to target this important market with an offering based on a royalty model, which we transitioned to last year.

As you may recall, we signed our first residential agreement under the royalty model for the Monticello project, a 302-unit multifamily housing project in New York.

The project is going to be completed in 3 phases, with SG Blocks entitled to a 5% royalty fee.

The preconstruction phase is nearing completion and the project remains on schedule for a Q2 2020 groundbreaking.

In Puerto Rico, we closed a licensed residential agreement last year for a housing project created to address the crisis following Hurricane Maria in 2017.

Since the signing, land has been acquired for the development site and work has progressed on 55 concrete shells.

And the construction of 128 3-bedroom and 2-bathroom homes are on the horizon.

The work on the concrete shells will resume when the lockdown is lifted.

During the first quarter, SG Residential launched a new container-based project, Ranchbox, which offers homebuyers and outdoor enthusiasts turnkey solutions for temporary and long-term living that are durable, affordable and easily deployed in remote locations.

Subsequent to the end of the quarter, SG Residential launched a new product, Office Box, a containerized office solution initially designed to help the people of Puerto Rico get back to work.

We completed our first shipment this month and the prototype is being constructed locally.

Revenue in the first quarter of 2020 was approximately $199,000 compared to approximately $337,000 in the prior fourth quarter of 2019.

The decrease was primarily due to a decline in the revenue in all the majority of all customer types as well as the company moving forward to its newly established royalty business model.

Gross profits in the first quarter of 2020 was approximately $46,000 compared to approximately $48,000 in the prior quarter.

Operating expenses in the first quarter of 2020 were approximately $795,000 compared to approximately $4 million in the prior quarter.

The fourth quarter of 2019 included a noncash goodwill impairment loss of approximately $2.9 million.

Absent this loss, operating expenses were down 28% sequentially.

The decrease was largely driven by a reduction in our operating expenses related to payroll and related expenses of approximately $290,000 in the first quarter of 2020.

Loss from operations was approximately $749,000 for the first quarter of 2020 compared to a loss of approximately $4 million in the fourth quarter of 2019.

Without the impairment charge, the loss from operations for the fourth quarter of 2019 would have been approximately $1 million.

Looking at the balance sheet, we had cash and cash equivalents of approximately $399,000 as of March 31, 2020, which compares to approximately $1.6 million at the end of 2019.

Subsequent to the end of the quarter, the company completed an April public offering that resulted in aggregate net proceeds of approximately $1.5 million and a May public offering that resulted in aggregate net proceeds of approximately $13.475 million after deducting underwriting discounts, commissions and other expenses related to both offerings.

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.

It has been a most exciting few quarters for SG Blocks, during which time we launched our first license deal in the residential sector, and we'll see a Q2 groundbreaking in Monticello.

We restored the company's NASDAQ minimum price compliance, helped launch our residential efforts in Puerto Rico with our approved technology and entered into a historic distribution agreement with Osang Healthcare.

We are now focused on growing our business, executing on orders, launching new products and partnerships and ultimately delivering maximum value to our shareholders.

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'll arrange a call.

We look forward to speaking with you again as we continue to make progress throughout the year.

Operator?

The conference has now concluded.

Thank you for attending today's presentation.

You may now disconnect.