SG Blocks, Inc. (NASDAQ:SGBX) Q3 2023 Earnings Call Transcript

SG Blocks, Inc. (NASDAQ:SGBX) Q3 2023 Earnings Call Transcript November 14, 2023

SG Blocks, Inc. beats earnings expectations. Reported EPS is $-0.22471, expectations were $-0.36.

Operator: Greetings, and welcome to the Safe & Green Holdings Third Quarter 2023 Business Update Conference Call. At this time, all participants are in listen-only mode and the floor will be open for questions after the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ted Ayvas, Investor Relations. You may begin.

Ted Ayvas: Good afternoon, and thank you for joining Safe & Green’s third quarter 2023 conference call and business update. On the call with us today is Paul Galvin, Chairperson and Chief Executive Officer of Safe & Green Holdings, Inc. and Tricia Kaelin, Chief Financial Officer of Safe & Green Holdings, Inc. Earlier today, the company announced its operating results for the quarter ended September 30, 2023. The press release is posted on the company’s website www.safeandgreenholdings.com. In addition, the company has filed its quarterly report on Form 10-Q with the US Securities and Exchange Commission, which will be accessible on the company’s website as well as the SEC’s website at www.sec.gov. If you have any questions after the call, I would like to arrange a one-on-one discussion with Mr. Galvin following the call.

Please contact Crescendo Communications at 212-671-1020. Before I turn the call over to Paul, please remember that various remarks about future expectations, plans and prospects made on today’s call constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Safe & Green cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including risks described in the company’s filings with the SEC. These forward-looking statements are subject to a number of risks and uncertainties, which are described in the company’s filings with the SEC. Any forward-looking statements made on this conference call speak only as of today’s date, Tuesday, November 14, 2023.

An aerial view of a major construction project, revealing the massive scale of the company’s infrastructure construction.

Safe & Green does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. With that being said, I am now pleased to introduce Paul Galvin, Chairperson and CEO of Safe & Green. Paul?

Paul Galvin: Thanks Ted. Good afternoon. Thank you to everyone for joining us today. I would like to begin by extending our sincere thanks to our investors for your continued commitment to and support of our vision. We are focused on creating long-term value for our shareholders and are clearly executing on our strategy. During the third quarter of 2023, we experienced a 70% year-over-year increase in manufacturing for construction revenue, building on our recent momentum. We also celebrated a significant milestone event for Safe & Green Holdings as we successfully spun-off the company’s real estate development subsidiary, SG DevCo, into an independent publicly traded company on NASDAQ under the symbol SGD. This significant achievement marks the successful conclusion of a two-year journey.

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Q&A Session

Our success was the fruit of continued dedication and tireless efforts of our entire team. Following the spin-off, Safe & Green Holdings retained a substantial 70% interest in SG DevCo, with the balance of 30% going to you, our loyal shareholders. This is particularly noteworthy considering SG DevCo’s $74 million third party fairness opinion. It’s also important to note that we consolidate the financials of SG Devco as the 70% owner of this business. Furthermore, SG DevCo maintains a shared services agreement with Safe & Green Holdings. Under this agreement, Safe & Green Holdings offers base services to SG DevCo for which it receives monthly compensation. We anticipate ongoing and significant synergies with SG DevCo as it executes on plans to commence development of projects in the pipeline, which are currently valued at more than $800 million and are expected to drive further manufacturing growth for SG Echo.

Additionally, our enthusiasm for the potential growth and future opportunities for both SG Holdings and SG DevCo are numerous. SG Holdings goal is to develop 10,000 units within the next seven years and reaching the goal, SG Holdings is projected to utilize almost the entirety of our manufacturing capacity. While acknowledging that market conditions may fluctuate, SG Holdings estimates that the returns from all the projects at this time will exceed $200 million over the lifetime of the projects. With the expansion of current client relationships and the acquisition of new projects, including intercompany projects, we anticipate the necessity for multiple factory campuses and additional manufacturing capacity. As a result, we are actively expanding the production capabilities of the company’s manufacturing subsidiary, SG Echo, in order to support this growth.

Moreover, SG Holdings is integrating state-of-the-art technologies and refining our processes to boost efficiency throughout all of our manufacturing facilities. Our strategic focus is on fine-tuning production processes, minimizing waste and increasing overall productivity. In 2024, our plan is to shift a portion of our business from lower-priced high-volume projects with a higher price point and lower volume. As a result of this pivot and strategy, we expect to see an improvement in cash flow, most notably first quarter 2024. The Waldron facility located in Durant, Oklahoma is now up and running and provides the company with an additional 58,000 square feet of manufacturing space. In fact, we believe that the Waldron facility has the potential to generate up to $25 million in additional annualized revenue for SG Echo over the next 12 months.

In addition, the McLean manufacturing facility, our third production facility has transitioned into the design fees. Once completed, this facility will provide the company with 120,000 square feet of additional manufacturing space. Furthermore, the planning for our manufacturing facility in St. Marys, Georgia is progressing smoothly. Once completed, this facility will serve the areas of Cumberland, Island, Georgia and Florida. Once all of our manufacturing facilities are operational, it is projected that our collective manufacturing space will encompass a sizable 1.1 million square feet. This extensive capacity will be instrumental in efficiently servicing the broadening spectrum of projects that the company is undertaking. Additionally, expanding our building capacity demonstrates our commitment to growth, as well as our ability to scale up operations to meet the increasing demands of our diverse project portfolio.

Moreover, our enhanced capacity better positions the company to deliver on a larger scale, as we seek to strengthen and broaden our business footprint in all 50 states. We are also excited to share that SG Echo was recently awarded a multimillion dollar contract to supply an additional modular units to a long-standing private infrastructure solutions client, highlighting the quality of our work and ability to generate strong repeat business. The company was recently selected by the Tunnels to Towers Foundation to construct a traveling modular home, the home called the Comfort Home Show model is designed to showcase the foundation’s homeless veteran program as a result of the success of the Comfort Home Show model, the company will be partnering with Impact Housing to construct three additional modular Comfort Homes for the Tunnels to Towers Foundation in Houston, Texas.

Additionally, the company announced the launch of the CORNERSTONE Charitable Foundation, a 501(c)(3) organization focused on providing services around the world to services will initially include affordable housing, health care and well-being services and locations. The provision of clean, portable water and education, we plan to leverage the relationship with CORNERSTONE by providing cost-effective modular solutions manufactured by SG Echo. Notably, a first project we are partnering with CORNERSTONE to construct a vocational schoolhouse in Cape Coast, Ghana as the part of Ghana’s Tomorrow project. This relationship demonstrates the power of corporate and charitable partnerships to impact the future of communities worldwide. We are also excited to share the rebranding and rapid expansion of Safe & Green Medical Corporation, which is now known as WELLglobal Health.

Our healthcare services, products and facilities offerings are revolutionizing the way preventative care, chronic condition management and educational accessed and experienced. Our state-of-the-art pre-constructed modular eco-friendly wellness suites offer employers, health systems, communities and beyond a comprehensive and personalized solution to the barriers that prevent people from staying healthy, leveraging our health experience and modular capabilities, our goal is to rapidly deploy our suites everywhere they are needed, led by Delphine O’Rourke, an industry leader in health law expert and the new President and CEO of WELLglobal Health, we provide an easily accessible, trusted and comprehensive solution for preventative health and ongoing health and wellness.