Q4 2019 Earnings Call

Good day, and welcome to S U blox fourth quarter and full year, two dolphin might <unk> earnings conference call and webcast of today's conference call is being recorded.

At this time I would like to partner conference over to James Carbonara Hayden IR.

Please proceed sir.

Thank you and good afternoon.

You all for joining us for S U blox fourth quarter and full year 2019 earnings call.

Your host today, Mr., Paul Gallagher, Chief Executive Officer.

Press release detailing these results was issued this afternoon at four PM Eastern time and is available on the company's website, that's three blocks dotcom.

Before turning the call over to management. Please remember that certain statements contained and that's really or forward looking statements within the meaning of the private Securities Litigation Reform Act with 1995.

All statements other than statements of historical facts contained in this presentation, including statements regarding the company's future operations and financial position.

Rather Gi and plans and objectives of management for future operations or forward looking statements in some cases forward looking statements can be identified by terminology such as people. You may estimates continue anticipates intend should plan expect predicts potential for them.

Good about 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.

Strategy and financial needs. These forward looking statements are subject to a number risks uncertainties assumptions described including those set forth in our filings with Securities Exchange Commission, which are available.

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You should not reply you cannot rely upon forward looking statements that's predictions of future events.

We cannot assure that the events and circumstances reflected in the forward looking statements will be achieved worker.

Finally, this conference call is being webcast. The webcast is available in the Investor Relations section of our websites that I see block Daqo.

With that I'll now turn the call over to Chief Executive Officer pull Calvin for his prepared comments Paul.

Thank you James and welcome to the S U Blox fourth quarter and full year 2019 financial results Conference call.

Everyone in the S.P. blocks family wishes health and safety to all those who are impacted directly or indirectly by the pandemic and we all most grateful for your talking today.

This was a strong and to a transformative year for S.P. block and due to the company exhausted efforts over the previous year, we anticipate being cash flow positive by year's end.

We entered 2020 position to receive the benefit of the activities and strategies implemented and now transition to a residential license model during the past year, we took steps to capitalize our business keeping dilution to one that enabling us to enter the new year with a clean kapstream.

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Our new business model for our residential business enables us to focus on what we do best Evangelize thing the benefits of our technology, while the appropriate third parties take on the responsibility in the financial burdens up deployment as a result, we significantly streamlined our corporate operations shedding.

Cost and reducing all cash burn rate as we begin to recognize net margin royalty revenue was screens, we should be positioned to scale the company through the execution of additional licenses.

Clearly had an inflection point I'd actually blocks and our commitment to product distribution and shareholder value has never been stronger.

The most impactful achievement to our business operations in 2019, what's the trend fishing about residential business from project based construction model with a heavy initial investment to a royalty based fee model. This change effectively eliminated the drag on our overall portfolio and enable this portion of our.

Business to be a meaningful contributor to our financial results almost immediately.

Residential market represents an important sector of our target market by changing the terms and structure of the projects, we participate and we have materially reduce the need for upfront capital investment by U.S.P. blocks.

To start corporate overhead expenses and enabled a repeatable and scalable model from which we can grow onto the royalty model. We now license all residential platform, which enables the transfer of project level execution risk took a licensee materially reduces our cash burn rate.

Frees up resources to pursue opportunities for growth and other vertical markets, such as healthcare education and hospitality.

Under the new model project delivery commitments and associated expenses are now the responsibility of the licensees of our residential platform.

Since this shift.

We have reduced our operating expenses and expect to yield a significant royalty stream.

Just as importantly, we have shifted the risk of cost overruns and schedule delays away from SG blocks.

As you May recall, we signed our first residential licensing agreement for the Monticello project, a 302 unit multifamily housing project in New York.

The project is to be completed in three phases with SG blocks entitled to a 5% royalty fee on project revenue.

The developer owns the site and is nearing completion of the pre construction phase, which consisted of entitlement site plans layouts environmental impacts and financing we will continue to keep you informed when important milestones are achieved.

S.P. blocks also executed a design build contract for an approximate 100, you'll need affordable housing project at Atlanta. The project is being developed by C.M.C. with design build support from Grimshaw and SG blocks.

Please note. This project is approximately 17 million in gross revenue and is excluded from our licensing agreement and it will be delivered at more traditional margin.

Collectively we continue to believe that these two residential transactions combined with our activities in Puerto Rico will be primary drivers of self sufficiency.

Subsequent to yearend, we launched a new container based project ranch box valued at 50000 per unit in Dallas, which represents our first go to market residential units.

The ranch box was featured in the March April issue of the real estate network offers homebuyers and outdoor enthusiasts turnkey solution is temporary and long term living that are durable affordable and easily deployed in remote locations with its unique design and the strength.

And use of steel these containers can function as permanent home using city services or operate remotely off the grid with optional generators and portable water and waste systems for extended periods. They can be deployed rapidly installed in a single day and all flexible.

Off to increase capacity for future expansion.

Most recently, we closed on our first project in Puerto Rico, where we have been hired to construct to projects to help address the housing crisis. Following hurricane Maria in 2017, both of which are subject to the royalty agreement. The land has been acquired out the development site.

And began the work to complete and bring to market 55 concrete show and the construction of 128, new three bedroom two bath.

Our backlog in commercial business was 17.6 million at the end of 2019.

December was a particular busy month of new commercial contract signings, our pipeline increased including a new contract with the design and construction of a fully modular space for a food and beverage provider located in Detroit, Michigan.

The project, which has been funded by the developer is valued at nearly $560000 and is expected to be completed and delivered to the only developer mid year.

We were also awarded one new contract.

And architectural and engineering design request for a modular office expansion for a union in California with completion expected by the end of the second quarter of 2020.

More recently over the past few weeks, we launched a series of container based health and safety modules to help support the response to the novel Corona virus pandemic, how container based products are in a deal application to help patients health professionals and others exposed to covert 19 to ISO.

Late in a safe place.

Beyond the transition of our residential business model new contract wins in our commercial business and overall general improvements in our operations. We made several key financing decisions in 2019 to bridge the gap in our cash flows. Most recently, we closed an underwritten public offering of 800.

And 57500 shares as adjusted to affect a once a 20 reverse stock split.

Of our common stock raising net proceeds of approximately $2.1 million, we used a portion of the proceeds to repay $481000 of outstanding debt and another portion to funding obligation to the licensee and or using the remainder for general working capital purpose.

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As a result, we materially strengthens our balance sheet, which combined with a significant reduction in our cash burn rate provide us with the runway to grow our business to a point of sustainable cash flow generation.

SG blocks is happy to report that the above steps has restored our NASDAQ a minimum price compliance.

Revenue in the fourth quarter of 2019 was 337000 compared to 185000 in the prior third quarter of 2019, an increase of 82%. This increase is primarily due to a $252000 office contract that was recognized in the fourth quarter.

Which was offset by a decline of $115000 in retail contracts that were completed in the third quarter of 2019.

Gross profit in the fourth quarter of 2019 was 48000 compared to a gross loss of 182000 in the prior quarter.

Payroll and related expenses in the fourth quarter of 2019 were 560000 compared to 548000 in the prior quarter roughly flat quarter over quarter.

Loss from operations was 4.1 million for the fourth quarter of 2019 compared to a loss of 1.3 million in the third quarter of 2019.

Without the impairment charge the loss from operations for the fourth quarter of 2019 went up in 1.2 million a sequential improvement over the prior quarter.

Looking at the balance sheet.

We had cash and cash equivalents of 1.6 million as of December 30, Onest 2019, which compares to approximately 2000 at the end of the September quarter. You increase is a direct result of the finances. We recently completed we have a significantly stronger balance sheet and capital sufficient to support our.

Good day operations and the pursuit of new business operations as we move towards positive cash flow generation in 2020.

Thank you for joining us today, if you have specific question what would like to speak with me or our Investor Relations team you can email us at STB Act at Hayden IR Dotcom.

All the S U blox hotline number on our website and we'll look forward to arrange Nicole.

Once again.

We want to wish everyone health and safety. During these uncertain time, and we look forward to keeping you informed as the S.G. block story unfolds.

Operator.

Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time it have a great.