Q3 2021 SG Blocks Inc Earnings Call
Good day and welcome to SG blocks third quarter 2021 earnings conference call and webcast. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time, if you have.
A question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator. Please press star Zero as a reminder, today's conference is being recorded at this time I would like to turn the conference over to Steven Swett of Investor Relations. Please go ahead.
Good afternoon. Thank you all for joining us for our third quarter 2021 earnings call.
With me today are Paul Galvin, Chairman, and Chief Executive Officer, and Joe Sharon acting Chief Financial Officer of SG blocks.
Press release detailing our results was issued this afternoon just after the market closed and is available on the company's website at www dot SG blocks that come.
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 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 terminology such as believes May estimates continue.
Anticipates intend should plan expect predict.
<unk> 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.
The natural 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 dot SG blocks that come.
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 and the webcast is available in the Investor Relations section of our website.
Now I will turn the call over to Paul.
Thank you Steve.
In the third quarter, we continued to drive strong top line revenue as we built on our record first half results.
Year to date revenues through September totaled approximately $29 $9 million, a staggering, 2000% increase from last year and indicative of the enormous transformation, we have undertaken in the past 18 months in.
In fact, our year to date revenue for 2021 is now higher than our total annual revenue recorded since our listing on NASDAQ in June 2017.
We are excited for our short term and long term future as we bring on new manufacturing space and activate our announced pipeline of identified projects inside S. T Dev Coke as.
As we head into Q4, we expect to continue to increase our revenue record and we would anticipate based upon current conditions and operations being cash flow positive during the fourth quarter of 2021.
Looking at our recent project and business activity, we saw significant progress across our entire platform.
In our commercial vertical we announced exclusive engagements with Atco industries and street food USA to design and build modulus structures to support their growth plans in the coming years.
We are in production on two prototype units with a national food brands, who contractually has the right to control the flow of information on the projects, which we anticipate the delivery of during each one 2022.
In our health care vertical we announced plan.
<unk> to build and deploy mobile CLIA certified laboratories.
Care testing and service delivery.
These units will be fully mobile and can be deployed and redeployed anywhere to support testing and health care services for events border crossing infrastructure site campuses military bases sports team and events sponsors as well as transportation hubs and Native American reservation.
S. T Dev co continues to work tirelessly to complete due diligence onsite expand our pipeline and activate manufacturing space to accommodate our internal demand at this time our pipeline includes 2250 residential units for sale or rent.
All amenity space.
And two marine it.
In total these projects will provide much needed affordable housing in growing communities across the country and represents approximately $367 million.
Gross potential manufacturing revenue over the next four to five years.
Subsequent to the third quarter of 2021.
To ensure our ability to meet our manufacturing requirements for these projects. We recently leased the Waldron site, which is an additional facility in Durant, Oklahoma.
In addition, we entered into a contract to purchase a large tract of land in Durant, Oklahoma, which will allow us to build two more lines at a large facility further increasing our capacity as well as building 300 units of workforce rental units on the same course it.
This would bring our manufacturing capacity to five times its current output.
We anticipate on average each manufacturing walid will produce approximately $12 million to $15 million of revenue.
On an annualized basis.
Additionally, our dedicated and experienced team.
Important manufacturing footprint should provide greater flexibility to avoid unforeseen challenges in the future, including uncertainty in the supply chain and the direction of the pandemic.
Our presence in Durant, Oklahoma has been a great experience securing a stable committed and experienced workforce.
And we greatly appreciate the support from both local and state government authority.
In October we completed our public offering pursuant to which we sold an aggregate of 975000 shares of common stock and pre funded warrants to purchase up to 2.189 million shares of common stock.
In a concurrent private offering of warrants to purchase 1 million 898, 630 shares of common stock, which resulted in net proceeds of approximately $10 $5 million.
Several key benefits associated with the raise include first.
The additional funds will be used to support growth and be available in case of any material supply chain problems second.
Capital funds were raised with the new institutional investor, which should help to provide stability to our share price and potential ongoing strategic support.
Third.
The capital raise this for investments and additional projects, which has been consistent for the past two years.
We have funded approximately $8 million in our projects over the last 12 months. We expect these investments will ultimately drive growth, we're manufacturing revenue development fees depreciation and income from asset sale or lease.
We continue to deepen our team in September we have put in place long term employment agreements with key executives to ensure stability and subsequent to the third quarter of 2021, we announced the hiring of James Henderson to lead the sales and business development for our medical vertical.
James brings significant experience as well as deep relationships within the medical industry.
As we have said that.
Tremendous growth in our business and opportunity requires a deep management team with industry specialists within all of our verticals with the goal of driving consistent revenue and bottom line results.
Now, let me discuss our recent activity in each vertical in more detail.
Beginning with our commercial vertical.
In August we announced an engagement with atco structures that logistics, a one stop provider of integrated housing.
Energy transportation and infrastructure solutions.
To produce 20 units as a part of a national rollout of its modular fleet throughout the U S. We are starting production on these first units in the fourth quarter 2021, and expect to continue delivering units over the next five years.
Importantly, we believe this is a start of a long term relationship with Esso.
Which is expected to lead to continued production in years to come.
In September we were selected a street food USA as exclusive manufacturer for its national launch of a rollout of food halls Street food USA establishes and manages street food markets that focus on local entrepreneur chip sustainable economic growth and small business by bringing together the independent owner operated kitchen.
The first location is planned in the southern U S, which we expect to be rolled out next year, we are providing architectural design consulting and engineering services for the project.
These projects are significant as we build the roster of repeat clients and recurring business for that and we have delivered our Mo living prototypes.
After the value engineering process, we anticipate a sizable rollout order could be built at all recently announced voltaren manufacturing facility.
We are working on multiple units for a large national brand, which we expect them to announce during Q1 2022, and we are working on growing our presence in the federal and military space and hope to have additional announcements.
In the not too distant future.
And our medical testing and services vertical we continue to generate strong results from our deployed units, particularly our L. A X units.
Our iconic detect lab has proven to be highly functional and flexible as a cost effective solution to provide much needed point of care access to health care.
For the third quarter.
Our medical testing and services revenue totaled approximately $8 $5 million, which is consistent and demonstrates the deep and enduring need for our services.
However, this is always the beginning in our goals.
Extend much further in September we announced plans to build and deploy mobile intermodal.
What are you certified labs for point of care health care testing labs will be fully mobile and have the potential capacity to test for various diseases and infections.
We'll own and operate these units, providing simplified end to end solutions, including staffing and billing for various customers.
While we have seen great success, thus far with our partners.
You must inbound interest is immense and we believe there is a broad deep and immediate demand for better and faster points of care delivery solutions, which we are in a unique position to support.
Turning to our manufacturing units.
Manufacturing revenue totaled approximately 682000 for the third quarter, 16% higher than the third quarter last year.
We commenced work on announced projects as of the quarter, we were under contract for six manufacturing projects outside of our remaining legacy projects, representing one $5 million in potential gross revenues over the course of two quarters.
We continue to do the challenging work of cleaning up legacy projects inherited from our acquisition late last year.
And dealing with the ongoing disruptions from Covid within our facility and of course the supply chain.
During the quarter, we booked an additional accrued loss of $1 1 billion from the prior quarter.
2021 related to these legacy projects.
Largest loss was related to our evergreen hospitality project, where supply chain issues have resulted in scope changes and cost increases.
We have honored our legacy partner commitments, which we plan to have out of our production in Q1 2022.
Importantly, the projects, we have announced so far this year remain on time and on budget and these projects transitioned to active manufacturing in the coming year.
Continued diligent focus and execution will be critical.
We remain confident in our expectation to achieve no less than 15% margins on future manufacturing projects now.
Now turning to our development activity.
In the third quarter, we continued to execute on our announced projects. These projects remain key to our long term growth and profitability by keeping our manufacturing facilities near capacity provide.
Providing steady and visible flow of manufacturing income.
Diversifying our revenue base with project fees and potential profit sharing from asset sale.
Let me quickly summarize our current project pipeline.
Lago Vista on Lake Travis in Austin, Texas is currently plan will consist of up to 225, two and three bedroom condominium units as well as our Marina and large amenities building.
<unk> is expected to come in in early second quarter of 2022 with an anticipated completion date in the second quarter of 2023, we expect to capture approximately $25 million and gross.
Manufacturing revenue over the life of the project and anticipate that our minority interest in the sale of the units will be about $5 million.
As the units are sold.
We own a 50% interest in a development venture for 138 unit 125000 square foot affordable housing community in East point GA within the Atlanta MSA the community will be known as norm and Barry village, we will control the planning and construction process.
<unk> revenue as well as a share of development CE.
I want to sell them use a multifamily development project located in the Catskills region of New York as currently planned will yield 187, townhomes with one and two bedroom units with amenities, including clubhouse, Jim and outdoor green spaces.
The initial units are scheduled to be delivered in December 2021, with a projected completion in the third quarter 2023.
He has a carried interest in this project of approximately $650000 and is entitled to earn.
125 million redemption distributional paint upon project completion.
Finally, we purchased a 10% non dilutive equity interest in J D. I Cumberland Inlet, LLC, a Georgia, a limited liability company for $3 million.
To develop a 1286 acre waterfront parcel in historic downtown St Marys, Georgia.
Actually blocks has the contractual rights to produce all of the modular units throughout our ecosystem.
The project is expected to commence site work in the third quarter 2022 with initial deliveries of modular units expected in the third quarter 2023.
Now I'll turn the call over to Gerald.
Thank you Paul turning to the financials, beginning with the income statement.
Revenue for the third quarter 2021 was approximately $8 $8 million compared to approximately 576000 for the third quarter of 2020.
Gross profit for the third quarter 2021 was approximately 105000 compared to approximately 195000 in the third quarter of 2020 gross profit was negatively impacted our third quarter 2021 due to the accrued losses the company recognized related to the legacy ACCO contracts.
Operating expenses for the third quarter 2021 were approximately $2 $8 million compared to approximately $1 $7 million in the third quarter of 2020.
For the third quarter 2021, and net loss attributed to common shareholders was approximately $3 $8 million or negative <unk> 43 cents per share compared to a net loss of approximately $1.5 million or negative <unk> 17 cents per share in the third quarter 2002.
<unk>.
The net loss attributed to common shareholders and included the following items.
Approximately 842000 of noncash depreciation and amortization expense.
Noncash stock compensation expense off an asset disposal and litigation expenses as explained in the adjusted EBITDA loss, and 2.25 million and continued and accrued losses related to certain legacy manufacturing projects, but have been impacted by.
Covid related delays and supply chain disruptions that Paul previously mentioned.
At September 30th 2021, the company had total assets of approximately $25 million.
Compared to approximately $26 3 million at September 32020.
Turning to the balance sheet at this time, we have a strong and flexible capital structure to support our near term requirement.
The company had cash and cash equivalents of approximately $3 $3 million as of September 30th 2021 compared to approximately $2 $3 million at June 32021, which does not include the proceeds from our recent financing.
Over the past 12 months the company's cash.
<unk> has been deployed into strategic investments with the acquisition of both land development and projects totaling approximately $8 million.
At quarter end, we had debt of $2 million and approximately $8 8 million shares of common stock outstanding.
Subsequent to the quarter end in October we issued approximately three 1 million shares of stock in our public offering and from.
Exercise of the pre funded warrants and we also issued warrants to purchase approximately one 9 million shares of common stock and the concurrent private offering are using approximately $10 $5 million in net proceeds pro forma for this offering we currently have approximately $12 million.
Shares of common stock outstanding.
Now I'll turn the call back to Paul.
Thank you Gerald.
2021 has been a momentous and transformative year for SG blocks in the third quarter continued our progress on every front.
We have spent years getting us to a point, where we can create strong and consistent revenue growth from a diversified pipeline of projects, where we control the means of delivery.
We are aligned with great partners and successful customers through SG Dev co and clarity mobile ventures, we have established a strong momentum heading into the end of the year.
We are grateful for our record results and the ability to expand our projects and workforce with an emphasis on made in the USA.
We look forward to the consistent work that our development projects will bring.
Our medical vertical is now poised for continued growth.
We thank our shareholders and investors and those that follow our stock.
We are also grateful for the sustained efforts and relentless piece of staff consultants attorneys partners and our board of directors.
This completes our prepared remarks, we will now open the call to your questions.
Operator.
Thank you if you'd like to ask a question you can press. The one followed by the four on your telephone and you'll hear a three ton problem technology request.
If you'd like to withdraw your question for any reason you can press one three.
Again that is one four to queue up for questions.
One moment for the first question.
The first question is from Spencer Layman, a private investor. Please go ahead.
Oh, Hi, I'm, just wondering did you.
Anything that the easy no your deal with Blink.
At this time there is no update update on the Blink relationship.
The announced blinked relationship, where a supplier and kind of a designer of their existing product line.
They are working on to bring out in a modular fashion and.
SG blocks is also working closely with them on ways that we could potentially deploy them ourselves and we should have more to come on that in the fourth quarter.
Yeah do you feel with the.
Passage of this infrastructure Bill.
Bill that are that could get.
Good to be an exciting area.
Yeah.
Yeah, I concur with that idea that.
Any kind of investment in the infrastructure will require addressing.
Zee and some other things.
We have an inventory of products and ideas that can be responsive.
Alright, thank you.
Okay. Thank you.
Yeah.
One moment.
The next question is from line of.
Cliffs Berber with SG blocks. Please go ahead.
Positive, but I'm wondering what the company's doing so the share price is more reflective of all the progress the company is making.
Hi, Cliff Thanks for your question.
Well, what we're trying to do is to continue to drive revenue and growth.
Any achieve being cash flow positive in the fourth quarter.
Continue messaging and we feel like the fundamentals of the company.
Are gonna just in eight Leigh create shareholder value.
Uh huh.
Something that we work hard with we have a great IR firm.
We're going to be investing some time and effort in the first quarter.
Evangelize the stock I think for now we're just focused in on ending the year strong and getting closings done and booking revenue.
Good thank you.
I like evangelize stock because it certainly seems like a company.
Is that it has great potential in the <unk>.
Hi, Sachin.
I for one don't think I suspect a lot of investors feel the same way. It's just really reflective of what you guys you're building. So thank you.
Thank you I appreciate that.
Sure.
The next question is from the line of Ken Joseph with Joseph Farm markets. Please go ahead.
Hi, there.
In analyzing the the financials I see that the.
Companies in a good position.
I like the pipeline of work like the market cap.
Close to.
Book value.
But when I look back at 2017, I see the stock price was way up there.
And I haven't looked in the history of <unk>.
Why it's gone from roughly 120 bucks down to where it is now.
I can see in the future how it could climb back up but can you tell me why back then the stock price was so high.
I'm not referring to any particular.
<unk> de or market closing price in 2017, you can track our trading activity, but that would've been an outlier.
And that what we've done since <unk>, just kind of start to steadily build the right people and the right team and apply consistent efforts and Youll see.
Year over year over year, our revenue now is growing to the point, where we approached $30 million for the first three quarters of this year, which.
As Gerald indicated represents the.
Greater than the sum of all of our other years on NASDAQ combined through three quarters of this year. So.
We're looking forward to improving upon.
Okay Yeah.
And just to make a note that stock price is based on a 20 for one reverse split.
So so I didn't know that.
Yes.
Yeah.
Yes.
Well, that's that's shed some light on it thank you.
A few of them have a good day.
You too.
And as a reminder, if you'd like to ask a question. Please press one for in.
And your next question is from the line of tow champion private Investor. Please go ahead.
The question was already asked.
Regarding blink.
Yeah.
Why.
You are you have any plans to.
Hum.
So when you feel that you're dealing in helping them to built the.
The charging station with Blake at all.
Yes.
There is there is the units that blinked themselves will deploy and fulfill for their customer base and then there is other products that we're working on with Blink that we will discuss and hopefully have some information from everybody. During this fourth quarter as our previous investor.
Question referenced we do believe the infrastructure Bill provides.
Incentives for people to do some technology adoption and we think we'll be at the forefront of that when it comes to deploy them.
EV charging technologies across our highways in our landscape.
And hopefully someday our developments.
Yeah.
I noticed that you had done.
Io business dealing with them.
Do you have any contracts or are negotiating any contract with them at this time.
No nothing that I would reference now.
Alright, thank you.
There's a follow up from the line of Spencer Layman, a private investor. Please go ahead.
Or are you all doing to ask you about the.
Alright.
Containers situation, whether that's create.
Create any problems or does that is that helping.
Helping you or.
Hurting you as far as access to containers.
Good question and one we hear a lot about right now we have no issue getting.
Containers or having visibility on container based products.
We also build with light gauge steel and wood modular and.
Right now, we're keeping a close eye on our supply chain and all of our projects and have a nice working group looking down the road on supply chain issues that could impact our delivery and hence our payments and we are right now.
Managing the situation in about a six month increments.
Yeah.
Thank you.
The next question is from the line of David Puttnam Private Investor. Please go ahead.
Yes, Hi, I was curious with the increases in home prices, where you see S. G. Dev corp's going long term I know, there's a large pipeline which is great just.
I'm just curious the impact of <unk>.
Rising housing prices and obviously the work you guys do offer affordable housing and do you see that.
Kind of allowing for even greater opportunity down the road.
We.
We definitely are committed to helping to expand the country's affordable housing rental product. There is a desperate need for it, especially as people enter and exit the workforce and especially as the cost of our homes as we all know spiking in certain areas. So we are very much committed to.
Building, our rental fleet, we do have some products that we will sell and we look at those as well.
Great money to have to support operation to potentially two distributions with.
Some form of the shareholders and at the end of the day that money backs up everything we wanted to do so.
That's how we're approaching it.
Okay. Thank you.
And there are no other questions at this time I'll turn it back to Mr. Paul Galvin.
Well, thank you for that and thank you, Steve and Gerald for joining and we appreciate everybody's time and attention today and wish everybody a nice night.
That does conclude the conference call for today, we thank you for your participation and you can now disconnect your lines.
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Sure.
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