Q4 2022 Safe & Green Holdings Corp Earnings Call
Greetings and welcome to the fourth quarter and year end 2022 conference call. At this time all participants are in a listen only mode. Please note. This conference is being recorded.
I'll now turn the conference over to your host David Waldman, you may begin.
Good afternoon, and thank you for joining safe and Greens fourth quarter 2022 conference call and business update on the call with US today is Paul Galvin, Chairman and Chief Executive Officer of Safe and Green and Christopher Gagliardi Senior accounting consulting earlier today, the company announced operating results for the <unk>.
Warner ended December 31, 2022 press release is posted on the company's website Www Dot season Green Holdings Dot Com. In addition, the company plans to file its annual report on Form 10-K with U S Securities and Exchange Commission, which will be accessible on the company's website as well as the SEC's website at Www Dot FCC Dot 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 2126711020.
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 the purpose of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1095, CS and Green cautions that these forward looking statements are subject to risks and uncertainties that may cause their actual results.
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 the date as of today's date Wednesday March 29, 2023 states in 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'm now pleased to introduce Paul Galvin, Chairman and CEO of Safe and Green Paul. Please go ahead.
Thank you David Good afternoon, and thank you to everyone for joining us today.
On behalf of the safe and Green team I would like to take a moment to thank our investors for your tremendous support and confidence in our vision.
We are committed to realizing our objectives and driving sustainable long term value for our shareholders.
Underwent a transformation in 2022 that led to an almost five fold rise in construction services revenue during the fourth quarter as compared to the fourth quarter of 2021. Initially the Companys main focus was on creating and delivering advanced and eco friendly structures crafted from.
Mr. Kato cargo shipping containers. However in response to the COVID-19 pandemic, we efficiently pivoted our business model to offer modular labs.
Our decision to pivot during the pin debit proved to be the correct, one generating significant revenue kind of affirming the effectiveness of our business model with.
With the pandemic now waiting we have successfully transitioned back to our core competencies and have evolved into a vertically integrated developer and manufacturer of modular structures. Additionally, we are focusing on four key verticals, including a nimble medical sector each of which we believe will drive our long term revenue.
Growth and profitability.
Our construction pipeline grows surpassing 800 million, we are more confident than ever that there is vast untapped potential in the multibillion dollar industry in which we operate we believe that our distinct competitive advantage in terms of pricing and speed to market stems from the vertical integration of our business. We're in houseman.
Are you factoring allows us to fill our factories with our own work.
Furthermore, we are confident that this approach will lead to significant margin expansion given the proprietary technologies and processes we have developed.
The progress in each of our four key verticals has been rapid and substantial in particular, our manufacturing segment SG Echo is experiencing robust demand from a wide range of customers as well as internal development projects with our recent acquisition and subsequent investment into our doors.
The Oklahoma manufacturing headquarters.
<unk> to open the Waldren manufacturing facility in Q2, 2023, as well as our plans St. Mary's manufacturing facility, we expect to have total capacity of over $150 million of revenue on an annualized basis. Additionally.
Additionally, we're leveraging this capacity by manufacturing 800 residential units for SG Dev Coast Magnolia Garden's project.
Which alone is expected to generate $130 million and additional manufacturing revenue.
<unk> has also received a series of purchase orders, which expands upon our relationship with a large private clients, providing one of the most meaningful contracts to date for SG Echo.
Most recently the client which operates within the logistics and infrastructure sector has signed additional purchase orders for 90 trailers. This is the fourth order and a series of orders with this client with more anticipated to follow for the coming year 2023.
Expected total price from the units from the purchase orders received and expected from this client currently sits at approximately $11 $5 million.
Given the fixed cost nature of our business, we anticipate gross margins exceeding 15% and a significant operating profit as we optimize throughput.
Utilization of our factories.
In fact this segment is on track to achieve positive cash flow in 2023, marking an important inflection point within a relatively short timeframe.
Safe and Green medical our medical vertical is focused on establishing a sustainable and long term business model by capitalizing on the rising demand for local point of care medical services, particularly in underserved communities.
The COVID-19 pandemic, when we intend to create a national footprint of various clinics and labs designed to suit local needs.
Point of care diagnostic market is projected to grow to over 51 billion.
By 2029 from $36 billion in 2022, providing ample opportunities for growth.
We believe we can generate $5 million in annual gross revenue from each distinct medical site, not including the value of assets and data collection.
As evidence of our early success, we recently announced plans to deliver for full mobile medical modules, consisting of one testing module, one CLIA lab facility module and two primary care modules to the People's Health care, which will provide teamsters local Inc. <unk>.
With point of care medicine in diagnostic testing utilizing our medical modules to the 10000 members of the local $8 48 and their families.
The current plan includes Repurposing, the former lab at Lax airport into an initial Teamsters unit.
To ensure industry standards are met each module will be designed with full EPA compliance and equipped with the necessary equipment for turnkey operation to provide medical services. The company is in discussions with several operators service providers and technology companies pertaining to the launch of the Port of long Beach project.
Agreements such as these illustrate our unique position within the market as well as demand for decentralized medical and dental solutions. This partnership showcases our competitive edge in the market, enabling us to offer our cutting edge state of the art flexible medical centers that support a wider range of services from wellness exams to diagnostics.
<unk> testing.
With over $1 2 million teamsters across the United States as well as their families and retirees, we anticipate strengthening our relationship with them and announcing more such partnerships in the near future.
Our real estate development segment S. T. Dev co is making tremendous strides and we anticipate that it will soon become an independent publicly traded company, which I'll discuss further in a moment.
As mentioned earlier SG difficult plans to complete a purchase of the Waldren site, which was recently appraised for $5 $2 million, which provides us access to additional low cost debt financing Society is currently leased by SG Echo and expect it to open April 2023.
<unk> also intends to construct and own over 3500 units at our Cumberland and St Mary sites alone.
We have received a certificate of occupancy for the month of fellow project in the Catskills region and are looking forward to starting phase two of the project in total SG Dev co has a project pipeline of more than 4000 units to be developed.
In addition to building a substantial asset base with an S. G. Dev co. This strategy should contribute significant cash flow to our SG Echo manufacturing operations. We also commenced the auction for the Lago Vista site, which we expect to close in Q2 2023, the massive growth in the greater Austin, Texas.
Area has greatly increased the value of the property.
It was originally acquired for approximately $3 $5 million, we are confident that the sale price of the property will be significantly more than the purchase price, reflecting the substantial appreciation in the value of the property.
As I mentioned, we're making progress with the planned spin out independent listing of SG Dev co with existing investors expected to receive 30% of SG Dev co can safely green retaining the balance given.
Given the asset base and projections, we do not anticipate a need for near term equity financing or equity dilution to shareholders. In turn we believe this strategy will unlock significant value for shareholders.
Separating the businesses will allow <unk> to focus intently on its core competencies in real estate development. The Spinout aims to the future growth and profitability of both companies as well as provide much simpler and easier to understand business models. When we're out marketing the respective companies to the investment community.
According to third party fairness opinion.
G Dev COSE estimated fair market value is approximately $74 million, which is about seven times safe and Green Holdings' current market cap.
With an estimated $22 million of this asset value coming directly to our shareholders and safe and Green holdings, retaining the balance of the equity value with the parent company level investors will immediately see accretive value of your holdings and now have two shots on goal hopefully you can understand why we felt this transaction was a no brainer.
In anticipation of the Spinout, we recently named David <unk>, as its president and CEO and Nicolai Broom to work alongside him as its chief Financial Officer.
David it's impressive and diverse background makes him an exceptional leader perfectly suited to lead this company.
In connection with this announcement safe and Green Holdings is pleased to announce that Christopher Milton will assume the role of lead independent director of the board.
Replacing Mr. Hillary I'll get into his new role.
On one final note regarding <unk>, it's important to point out that the planned spin out of STI Dev co does not include our Dennison property.
Which will remain with safe and Green Holdings. The current plan is to design and create an active senior living community with roughly 500 units in various amenities.
The total development cost is expected to be approximately $150 million with projected profit of approximately $40 million over five years.
The $115 million in development costs, approximately $80 million will feed directly to SG echo for manufacturing within anticipated $15 million in margin to our manufacturing campus.
Turning now to the environmental segment, we signed a 10 year exclusive distribution agreement with Sinopec interest Res LLC.
Partnership seeks to utilize our mobile and modular units to deploy the Santa Tech microwave healthcare waste disinfection system.
The onsite disposal of bio medical waste.
Michelin within the state of New York.
Nano-tech microwave disinfection unit, shreds, and disinfect biomedical waste, making it indistinguishable from household waste imposing no greater health risk.
This market is significantly underserved and we aim to offer an innovative cost effective compliance and decentralized solution that will decrease healthcare systems transportation and landfill expenditures, while meeting regulatory requirements in an environmentally friendly and sustainable way. We are in the process of building a Nash.
<unk> sales and service footprint for Santa Tech. Furthermore, This segment is a perfect add on at our manufacturing locations and we will provide services to wall safe and Green medical sites.
One final note.
John Shaw finally file to schedule <unk> with the SEC that he was required to file a long time ago.
Schedule 13D shows that he owns 26% of our common stock.
And that he is actively trading and put options in our stock.
I'm pleased to report that after months of pressure from us both private and public our efforts have resulted in full transparency for our shareholders well.
We will continue to fight for fairness.
Price manipulation and protect the rights of each and every shareholder.
So to wrap up.
The outlook for our business has never been brighter our team is thrilled about the possibilities are business model is not only scalable, but it's also expected to become highly profitable in fact heading into 2023, we have substantially reduced our SG&A as a percentage of revenue as a result, we expect to generate positive cash flow within our manufacturing.
<unk> segment.
We believe we are operating at a time when the industry is ripe with opportunities and our management team has the experience and expertise to execute our plan. We are confident that with the leadership team. We have in place we will continue to drive and achieve our goals.
I would now like to turn the call over to Christopher Gagliardi Senior accounting consultants to review the financial results for the three months and full year periods ending December 31 2022.
Chris.
Thanks, Paul.
Looking at the fourth quarter results first the company reported revenue of $4 1 million compared to $8 5 million for the fourth quarter of 2021 as Paul mentioned earlier. This reflects the discontinuation of COVID-19 testing facilities offset by an increase in construction services revenue.
The construction services segment generated $4 2 million in revenue of 476% increase compared to the same period last year.
Gross profit for the fourth quarter of 2022 was <unk> 3 million compared to <unk> 2 million in the 2021 fourth quarter, reflecting the decline in medical revenue offset by increased revenue and improved gross margin within the construction services segment.
Operating expenses for the three months ended December 31, 2022 of $4 million compared to $2 4 million in the fourth quarter of 2021 due to increased payroll related expenses as well as increased general and administrative expenses, which reflect the company's investments to support anticipated growth.
Operating expenses for the fourth quarter of 2022 included approximately $1 1 million of noncash expenses, including 145000, depreciation and amortization as well as 924000 of stock based compensation expense.
This compares to approximately 1 million of noncash expenses, including a 156000 depreciation and amortization as well as 869000 of stock based compensation expense for the same period last year.
The fourth quarter of 2022 also included approximately $2 4 million of expenses allocated to SD <unk> that were not incurred for the same period last year. The company expects its operating expense as a percentage of revenue will significantly decline in future quarters.
The net loss attributable to common shareholders was approximately $3 3 million or negative <unk> 24 per share in the fourth quarter of 2022 compared to a net loss of $3 4 million or negative <unk> 32 per share in the fourth quarter of 2021.
The company's EBITDA loss for the three months ended December 31, 2022 was approximately negative $3 5 million as compared to approximately negative $3 3 million for the same period in 2021.
The company's adjusted EBITDA loss for the three months ended December 31, 2022, which excludes the loss on asset disposal litigation expense and stock based compensation expense was approximately negative $2 3 million compared to negative $2 4 million for the same period last year.
Turning to the results for the year ended December 31, 2022, total revenue was $24 4 million compared to $38 3 million for the year ended December 31, 2021, reflecting a decrease in medical revenue due to the discontinuation of COVID-19 testing facilities offset by a 94, 8% increase.
Construction services revenue.
Gross profit for 2022 was $3 3 million compared to $2 3 million for 2021.
Afflicting the increased revenue and improved gross margin within the construction services segment offset by the decline in medical revenue.
Operating expenses for 2022 were $10 6 million compared to $8 3 million for 2021.
The increased payroll related expenses as well as increased general and administrative expenses, which reflects the companys investments to support anticipated growth.
Operating expenses for 2022 included approximately $3 4 million of noncash expenses, including 615000 in depreciation and amortization as well as $2 8 million of stock based compensation expense.
This compares to approximately $2 3 million of noncash expenses, including 605000 of depreciation and amortization as well as $1 6 million of stock based compensation expense for the same period last year.
Company expects its operating expense as a percentage of revenue will significantly decline in future quarters.
The net loss attributable to common shareholders was approximately $7 9 million or negative 59 per share in 2022 compared to a loss of $10 8 million or negative one point.
<unk> <unk> six per share for 2021.
The company's EBITDA loss for the 12 months ended December 31, 2022 was approximately negative $7 4 million as compared to approximately negative $10 3 million for the same period in 2021.
The company's adjusted EBITDA loss for the 12 months ended December 31, 2022, which excludes the loss on asset disposal litigation expense and stock based compensation expense was approximately negative $4 million compared to negative $8 million for the same period last year.
At December 31, 2022 on December 31, 2021, the company had a cash balance and short term investments of 583000 and $13 million respectively.
As of December 31, 2020 to stockholders equity was $14 9 million compared to $21 7 million as of December 31, 2021.
Importantly, we believe we have sufficient cash and borrowing capacity to support near term operations. In addition, as Paul mentioned earlier, we are in the process of auctioning a lack of Easter site, which should sell at a significant premium to the purchase price given the appreciation in the property value.
This transaction should provide additional liquidity to support ongoing operations.
I'd now like to turn the call back over to Paul for closing remarks.
I would like to thank each of you once more for joining US today, we take pride in the progress that safe and Green has achieved over the last year and are eagerly anticipating the opportunities that lie ahead, our commitment to executing our strategy remains unchanged and we look forward to providing you with updates on our progress in the coming months.
Sure.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.