SGBX - Earnings call transcript Q3 2018 | Safe & Green Holdings Corp.

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Operator

Ladies and gentlemen, good day and welcome to the SG Blocks Third Quarter 2018 Conference Call and Webcast. Today’s conference call is being recorded. At this time, I’d like to turn the program over to Chris Tyson, Managing Director of MZ North America. Thank you, sir. Please go ahead.

Chris Tyson

afternoon. good and you Thank I’d like join conference taking to all thank for SG you us XXXX for Blocks’ time to third call. quarter

the Officer; customer the today Galvin, provide Financial a hosts Mr. which and will Executive Mr. will update, cover Your afternoon press company’s is results crossed these partner Mahesh Officer. discuss will Paul Mahesh President detailing and announcements, company’s sgblocks.com. are Shetty, Eastern the wires website release at this while business available PM and on and Chief financial results. Chief Paul A X:XX the

we open comments, prepared management’s questions. floor Following will the for

position, litigation I statements act statements All than over contained are intend, terminology operations negative Before statements management statements believe, of to statements terms plans certain expect, release business identified other these by facts contained estimate, future our of and such and In and potential or this including statements predict, remember securities are expressions. be plan, of or presentation of forward-looking that of call forward-looking anticipate, continue, in statements. cases, reform forward-looking may, similar the in objectives strategy can regarding meaning this within XXXX. management, financial operations should, turn as the future historical the for please some private the

with and Commission, available risks, set in described those are statements are forth Securities of events results We have at uncertainties number conditions, subject trends financial and that future Exchange filings and various business expectations forward-looking based our we financial to about financial assumptions needs. these forward-looking which www.sec.gov. of may These projections statements current largely a strategy SEC, on and believe affect our and including the our operations,

occur. but as and business You GAAP. circumstances or events substitute should assure non-GAAP results will not in be presentation considered non-GAAP that financial measures. uses addition in measures you upon assessing should We in also the Blocks cannot certain SG operations. be non-GAAP not reflected with these its considered and that in achieved statements financial This measures statements these a Reference measures includes accordance financial predictions of should forward-looking events. financial forward-looking future be to rely presented GAAP are for to

is Finally, like webcast. in call of the is conference the – time, Paul call this webcast to this our is link turn I’d being Galvin. Relations The www.sgblocks.com. is yours. Investor At over available the website, floor Paul, to section

Paul Galvin

quarter SG to financial Thank you, third results Blocks and Chris, welcome XXXX the call. conference

as margins strong Third a improvements quarter XX% from by gross in QX core in QX X% of was in XXXX our highlighted XXXX. XXXX, compared to

HOLA projects Excluding have margins a of is during XXXX. the our nine other legacy all the on first project, months XX% averaged project, which

new expect current XX% and line stated margins We goal of backlog with future on be our to in projects.

projects completed During before projects NBA third the we each the five the entered will XX be recognized end quarter during quarter, third for the projects. revenue Blocks from and U.S. into of completed revenue and year-to-date. we we Tavistock, the for projects realized this XX and which contracts recognized with which during contracted SG largely revenue We Navy anticipate year. of XXXX, on Notably,

to construction. updating to convert to new approach new with existing while backlog container-based We find our projects who’ll customers, continue for our to and both applications continue revenue, innovative

aim found over earners and foreigners [ph] that Americans, few a African-Americans and could address economy. available millions residents and affordable National our with are for Housing operations. to of or Times minimum the July generates. the received and zero earning affordable the bedroom modular from renters by will to from in worker just fully and safe Development margin due incomes the single-family rental modular during day-to-day XXXX, squeezed in picked cost-effective is in on be SG of sales housing improving to an front, years in earnings gross construction annual hitting California Americans of the rose the spend now Coalition a subsidiary The profit will XX% to Low up financial only third decade counties country. New Charitable and available. people, homes by entire Residential wage The and their a in epicenter right and for the housing a Department U.S. Median by has their increases to exodus last within lack XXX% remain XXXX, executives low-income are quarter prices Trusts. the to while quarter. than SG lags [ph] from supplier Urban of modular nationwide we half now and financial of executives and directive majority An The and U.S. across with the of elderly market solution poor the rent Pew afford rents out XX ground appoint to rich of than sales rise shelter, The Residential have housing subsidiary Income York our to most homes opportunities rate wage a affordable on the of normal U.S. constant we SG continue and housing the once and survey conjunction offer ago while In manage financial more the far the in of on Blocks established the of SG safest, of perspective, homeowners, of market behind we significant according dollars estimated low-income market millions prices. important XX% to state room some basis. greenest million the to including gross is According rents article pace will homes Nevada services exclusive XX paying Residential’s according the need. the the statistics. From XX% on crisis rental affordable Housing flat the a of national with XXXX housing of the apartments market one in by senior apartments several X,XXX XXXX, moving Now of achieved of more on apartment across milestones more low-income

currently sustainable of areas into quarter, Crossroads a Rico. the and to on the Since companies containerized to low country Systems, aimed financing Puerto across We XXX-home convert the working focusing across projects United will Plus our income and by single-family into moderate are focus the of on with delivering housing of Financial, financial The we to homes some States the during housing addressing third modular sale largest of most provide SG subsidiary to them borrowers. entered and nation’s crisis at of relationship pipeline homes underserved a network to modular the affordable one areas institutions on development community a that today. down container-based programs. and strategic will Capital Inc. sources Residential housing vulnerable signed affordable payment is contracts, facing partnerships allow These new the and purchase assistance connect to and buyers home homebuilders funding establishing and

modular with with using ON donated housing. facing. contiguous is Urban by the the housing its provider providing including a nicely estimated veterans, with to of renderings by need nonprofit organization development veteran provide our organization, to over being a across affordable new key for whose supportive SOLDIER corporate lands start Grimshaw that responsibility from development SG Housing veterans a are homeless community Development and In and partnership our start, this homelessness United see veterans who there for rapidly the to its initiatives, U.S. of work our working great This exclusive States. and addressed modular targeted to as with the our we as nonprofits XXXX selected off now with we sites United see have and that design XX,XXX can homeless organization they’re and mission safe is are engineering in goals the services Architects. potential Department ON build residences Residential. A identified believe end best marries social coming solution that better as States, five for is and problems thing and markets achieve help You SOLDIER report

elements industry, construction, hit his of of New in On SG own quarter, all architectural he all construction He projects. large in company position, the activities Vice senior will implement XX during the day-to-day new executive In Scott with and management Scott design, to President of oversee brings pipeline team projects to modular City Operations. Blocks. business including the the expect and his our to now and be recent running. construction will overseen the brings Hill closely we new work Scott and has has experience ground aspects Scott including third operations modular strategies. construction of front help years York

media On interviews outlets, we the had the News, front during several leading News. including National quarter, CBS and CNBC high-profile media third Fox Business with

in an reporters to solution result the increase during of sustainable victims some the these a are and better, We occurred interest ability that interviews. a faster destruction hurricane in to areas highlights our fire this during housing and seeing deliver season, ravaged year’s has were key of focused as stronger, the on

opportunities, excited including more United pipeline humanitarian States in anticipated forward, multi-family hospitality residential, As of education and and couldn’t we I single-family our abroad. about and move be the residential,

in of the from our We developers value some across Mahesh? projects and continue requests believe Chief to financial is gaining Shetty, the summary. now Financial We proposition momentum inbound our over compared to the traditional for to the construction, will turn industry, model call as adoption replicate is of and remains construction President, Mahesh our announced see previously States. I compelling. to as very his United Officer

Mahesh Shetty

Paul, afternoon, Thank and you, good everybody.

period to three XX at was in nine result XXXX compared ended increased the of million XXXX, on a million XXXX. XX% million XXth in increase being of in increase at million September as to $X.X in the Construction the totaled as of months backlog This September quarter recognized in XXth months revenue of compared of to additional third projects an QX revenue were XXXX. September that of revenue progress $XX.X $XXX.X XXXX. million, totaled $X completed same quarter in in Our million, XX%, September to XX or compared of XXXX. to primarily first the $X.X XXXX, Revenue of of compared $X.X

large the of profit third XXXX, had XX, $XX in of all first September quarter nine third percentage Gross December as third amounts company same quarter approximately XXXX. realized XXst Gross XXXX, in projects, three increased The The quarter quarter $XXX,XXX, compared of to the company the the contracts an million, million, $XX as XXth at of the XXXX. X.X%, in backlog of XXXX, backlog. revenue construction and XXXX this revenue to in September margin $XX included the approximately square of of in XX compared compared XXXX. be as of or totaled XXXX. of will foot respectively. increase $XXX,XXX of As in by third in totaled million expected to XXX,XXX months in a Gross period to of $XX,XXX the of XX% profit X% of $XXX,XXX profit

the revenue, in as XXXX. of to As X.X% profit a first was percentage nine gross months in of margin XX.X% XXXX, compared

a XX.X%, loss $X.X December of $X.XX of reconciliation margins for expenses was contract, of to of fully the million due or and September million the The compared [Sic] for $X.X Excluding the the Operating revenue costs per months XXXX XXth net measure XXth engineering million Operating – or of Adjusted and XXXX QX million an the $X.X diluted and per comparable QX of XXXX encompass XXXX. of in heading operating EBITDA to and phases: to three $X.X or expenses $X.X XX% share, XXXX months months the design, increased XXth $X $X.XX nine nine of margin compared diluted today’s loss EBITDA to Net same SG ended and months to XXXX. Please expenses XX.X% for with in at totaled of period a months the as Information” increased basic the $X.X fees nine in such million, September GAAP. diluted and to of calculated period at percentage associated of legacy formation per and by share of me, of and a and accepted nine to under in expenses increased profit of June XXXX, of for compared $X.X first million, as in of of in for operating to million, a $X.XX September all projects and totaled generally XXXX. period share adjusted Adjusted margin EBITDA loss operating million a $X.X Financial same $X.X Non-GAAP $X.XX months principles of positively million in and of of basic totaled XXXX. XXst or and compared same QX for the million, the period QX the XXXX, XXXX. compared affected a in of in and of the increase to million first architectural compared or of nine commencement nine million, the share modular to costs was first of decrease the of XXth increase forgive professional million, U.S. of $X.X single release Gross an million that XXXX. and from Net Cash as totaled basic same construction gross million, most and measure first compared profit $X are the XX% first three QX of in XXXX, at totaled loss moths XXXX delivery. basic ended in of a to to discussion million increase $X.X loss QX press QX net XXXX. diluted $X the under personnel XXXX. XXXX XXXX per XX%, Residential of and in XXXX. in in primarily as accounting three $X.X note $X “Use loss XXXX

we tax approximately positions XXXX, we of million commenced summary, future outstanding. net use to $X.XX quarters reduce We fully may our carry-forward to limitations. project QX The carry-forward our transition years. XXth expect construction will In in XXXX. be which from and be losses of burden exiting approximately Based operating legacy architectural quarter are million with of operating stable date, design, company will phases. As margin Paul. subject cash company’s and an with in anticipate has its net average low and break-even beyond. turn progress a basic performance Paul? and SG record had balance of modular of of and of back to subsequent delivery the for of project backlog promising margins XX%, the that and losses, operating financial shares projects we $XXX upon we $XX sheet, in and expire company encompass a also call Blocks the no debt, flow diluted in November promising XXXX now to we as projects engineering annual target approximately XXXX. million the loss which to The ended balance XXXX third pipeline, believe over These I’ll and

Paul Galvin

Mahesh. Thanks,

consistent third opportunities, our a current we of progress which focused we we fourth into all of of made we During has as stated primary quarter pipeline margin achieving occurred; on which these the have is in flow areas: our achieving and doing XXXX, growth on goals exit line anticipate Mahesh; cash positive profile. operation, top momentum rolling revenue QX, accelerated our by backlog that executing the and of three already and our with quarter in XXXX. to XX% believe XXXX drive We backlog

We XXXX. negotiating will that backlog by the drive are to over currently anticipate of $XXX projects end million construction we

on container-based our prototype engineering and Our kitchen modular the and includes innovative Residential. an new services backlog subsidiary for includes now architectural our contract recent pipeline SG also single-family from Coast West homes

value. bring operation. such the line our innovative that operations, believe actions, We believe goal our a that conversion, cash Based of backlog than our I investor as I level. developing continue we sharing XXXX. exiting we upcoming shareholders story conferences, on New next our Industrials a business LD our call Conference forming break-even listeners. to accelerate ROTH I’d well-positioned for ever result our closer At the on have at the Operator? long-term strategic the to open questions create that to of for Main including to achieve LA and we to expand of growth we believe look including now like revenue for ways to to to look more Annual this institutional stated sight up Xth forward key partnerships flow our in and sustainable will believe Micro XXth New to York. clear expected of Annual we the in cash flow are Event achieving our time, are We goal

Operator

Thank Our of the Kumar Instructions] you. Q&A comes question from Ladies will line we our [Operator and now session. be Ashok ThinkEquity. from conducting gentlemen, first

You are now live.

Ashok Kumar

Well, question. school complete Thank the the associated million targets the second is escalation thank is event the that the in of yet? place? is revenue increased million, you. cost for $XX the One LA question is and you, still that part changeover Paul to $XX with insolvency, in building, Mahesh. And Two-part year

Paul Galvin

talked first the So that a project, we the There first we either year was be fourth about the the quarter, some completed sorry, as the in school have during call, project we delays quarter either this of the have school is the in next project to signed or of site expect legacy year. before. quarter project

for rate fairly In we we about break-even idea the you look terms three expect, we We our give the through to fourth you guidance. revenue year, first run a anticipated for the be quarter. first at that nine of if – But the of months revenue quarter. cash months flow revenue giving good still not are should the expect specific do guidance,

Ashok Kumar

revenues that, would be and profit homes What the residential translate – opportunities. And to would this of Mahesh? profitability. timeline on expect take of I I you And for Paul do guess, to million XXX to Great. about and in to translate your guess, residential potentially focus you Paul do the that year? revenues and the you terms pipeline Mahesh, family math, and in even of a $XX if generating

Paul Galvin

backlog Well, million. amounts, production and positive Blocks about in four margins Residential Ashok, SG our year. $X.X Residential we and contribute XXXX, have I currently our pipeline to leave XX SG to SG to building the in going think, homes had contribute homes which at will anticipate

Ashok Kumar

of making Okay, last positive so great. And flow and backlog all of your those and assume in the announced you’ve them transition to then revenue also, days, objective guess, year And year? additional increasing on projects. and going accelerate main backlog Navy the this cash then and in then projects you’re to conversion Orlando some are timeline early next and of Greenville I XX XX some one in to revenue fronts. three I progress

Paul Galvin

That’s of through had QX, flow a XX break-even correct. at in projects through flow because bunch on closer And this attract XX We’ve that are in XX point and business this to We’ll year, paying worked projects, have moving process. we noteworthy work while hard projects, our are We’ll and sales launch. cash active be we closer to year-to-date. whole cash paying a managed December. break-even very bigger

backlog remains $XXX over Our million.

million over the fallout. We’re million and year’s $XXX expecting is to be with $XXX conversions even comfortably our at end, pipeline and

Ashok Kumar

Also, [Multiple terms of your ahead, what your Upstate with reading and York, of in projects only I’m that York. was Speakers] not some you’re you. the on granularity Go done $XX Okay. million Paul? in sure for that New Paul, some approval New project in

Paul Galvin

year. business, of project. in manufacturing of winter any out reviews. through anticipate coming of the in project going is anticipate We normal term with sheet the the early We next reviews developer’s QX being and getting Without planning specifics

construction old the facts months the that, year. the a couple there’s of in of is Northeast of One through

do to going work. not You’re site

million those earnings And expect will not hit we Bronx year, for manufacturing but script, project so the XXXX. of extending the as in that, and we in envision the that recognize QX of stated the anticipate during do any beyond for the projects revenue we both beginning XXXX. to major $XX contract, And

Ashok Kumar

great. and timing. continue enable loan, different another your the guess, focus Okay, Well, the it buffer you I of Paul diversity so Mahesh on to macro question. you to increasing bank

the should we was that So there? just wondering are milestones what look I for

Paul Galvin

will to What consistent and to projects, our predictable we’ve paying the the Well, our do. Upstate be $XX projects projects trying on year and that we’re a of is we’ve run And quarters large predictable good contracts developments the company revenue York three had unfold by margins paying business when seven to is as two spending project often going be big solid that that the what to indicated XX spread over deliver buildings. with one, and year. million I then think core able big we’ve done fact and with how in and do shows business as projects that quite New flow of in cash operated number this is and large this

So we’re employed, that’s the it. strategy with we’ve confident

Ashok Kumar

thank again Paul and and progress. Okay. Mahesh, you on Once the congratulations

Paul Galvin

you. Thank

Operator

Thank you.

from & next the question from Cooney comes Paul Gunnar Our line of Joseph Co.

You now are live.

Paul Cooney

you are Hey, guys, doing? how

Paul Galvin

Paul. Hello,

Paul Cooney

right. All

a of things. just So couple

trying First – quarter end upon think off, just model million have by you losing quarter margins. as looks right the now little saying the if based way you’re be your like a it last $X you’ll that of and far break-even the to you I’m the XX% this out as bit quarter. that you’re

your about to would Is million? that way $X.X be at the quarter look So it? break-even

Mahesh Shetty

knocked mean, if – I million and I have XX% we talked [ph] you margins about think, in the operating gross is, off $X our this always gross at about before of Well, margins a year-to-date look expenses. expected Paul way

a So between current expenses the in margin revenue be the our operating on quarter million margins $X.X million we deliver of for in the depending to range support to somewhere only. to $X in have – to order

Paul Cooney

All right.

wrong? So upon, just to do it’s revenue, this the at on $X XX% would a million million now. looking based quarter it $X trying I’m be lost million $X margins not break-even Am math in I guys million. $X to you

Mahesh Shetty

Yes.

break-even, be when break-even, we which expenses the about talking cash basically talk comp expenses, would non-cash out carving We’re stock amortization. looking we’re – about like

better adjusted at to have give you that look basis of what… kind will of you a that an EBITDA on So idea

Paul Cooney

Okay.

would be million? So a $X.X cash guys million you flow $X for quarter break-even to

Mahesh Shetty

a XX%, about – good Based that’s expected Paul. is a good number, that on margins the of

Paul Cooney

okay. Okay,

to but $XXX this hold on to the saying number, that – entire amount by Now will XXXX, you call end of we’re you now the million the realized pigeonhole be a not backlog, okay?. and

like does and up break that $XX as utilization million next as year-to-year in that out? that how kind break Is million percentage-wise year, does or next expected far in So year the of $XX revenue? how

Paul Galvin

information I developer, the is started that, buildings if what we’re weather the you second-half Well, revenue probably would manufacturing and in anticipate that the and to to site planning the and revenue say proprietary contract. QX, having having doing without year then significant sharing fabricating through work manufacturing would finalizing cold of whole of XXXX related

Paul Cooney

Okay.

I at of guys the the the the backlog second bulk the the quarter. mean, I that little can a because end it of quarter, million had quarter think at anticipate, $XXX.X $XXX at of now towards you. the – honest to of mean, you end now again, next seems you I’m a happen the So of end like third figure be late $XXX.X growth first bit and million we’ve out, stalled year? with would to we and trying

doesn’t okay? like backlog from wondering we’re the couple last this quarters been growing, growth, it see the So seem okay? revenue when okay? The So to just of going hasn’t is growing,

Paul Galvin

think… I Well,

Paul Cooney

that It seems know been asking? has has been there I it’s up, I’m it holding don’t like, – just something

Paul Galvin

are of a earnings in these had the fact, goals. directly calls conversations in And, as main part No. and three we’ve

and are company we will we XXXX cash the flow projecting be As of a be. positive new at from was the year to in operations end

it pipeline the $XXX backlog are over year $XXX end Our at be up, is and million we of projecting at to to million. and go our was the

projects of any would direct your break-even So that [ph] to you would think we big spin to tapped cash of flow be we XXX could haven’t degrees, I happy kind into optimism our yet. that

Paul Cooney

as as statement year your the potentially next on what XX about Okay, then okay. built And houses far side. residential

Paul Galvin

Yes.

Paul Cooney

you house give revenue is an what – per me what? is roughly If can like idea,

Paul Galvin

we’re depends and house is. a it it what of kind – on is That where it building

yard XXX from to X,XXX XXX to are anywhere foot, markers. is and X,XXX house X,XXX those a square X,XXX the at some or looking square We’re foot average to

Paul Cooney

right. All

XXX,XXX put to a number to XXX,XXX is So fair roughly?

Paul Galvin

It’s be that’s Paul, seeing, market the we’re mostly what to [indiscernible]. honest,

Paul Cooney

saying XX? right. $X.X would a that build all opportunity to revenue $X like you XXXX, for I’m just basically, Okay, No, so potential – million million if be

Paul Galvin

XX XXX, converted the we out If of yes.

Paul Cooney

Okay. that’s pipeline? And – is now that’s – pipeline? pipeline, XXX XXX that a is not – now That’s is the

Paul Galvin

since that’s Yes, fire is active up. activity the pricing, heat the possible. hurricanes as the the we’re activity around and pricing, And on Residential climate working resistant build as getting projects earthquakes, storms. designing – residences amount of we’ve to enormous getting And are the and priced we non-governmental of government SG and ring we’re things really trying an

And because now million factor. households of attention of housing so catastrophe. extreme a safety getting a of we’re having XX lot the climate-related American in are danger

we that X weeks. And A X,XXX on lot roughly activity deliver developments between of rebuilding, now. so in and building going house three and can a container is have we about a feet and

that’s put wind whether to crisis banks We’ll the facilitate the climate end crisis extremely it this our up annuity company, pipeline. faster meet discrete why of we a feel America loan against platform affects in mortgages. website houses, up credits that’s our we summer. lending to new and tax apartment America. or the established a transactions The we have we our lot standard in the of small by market, year that And attention in why So it’s for to well-positioned on housing other set $XXX,XXX into under need every housing

Paul Cooney

traction developed there I Is earlier you any on with anything big Okay. know going And with one guys had that? with – in being just firm. that there what’s year the a engineering other. announcement

Paul Galvin

array backlog. jointly – about integrated bring into designing are to of I’d they’re the network now They’re of right will our existing finished about say, an XX% when XX% involved of our being pipeline XX%, and they products our at market. and

Paul Cooney

right, Paul. very Thank All you Okay. much.

Paul Galvin

you. Thank

Mahesh Shetty

this you. no I’d at we and floor back gentlemen, for Thank further Instructions] management to queue the you. to over turn [Operator Thank closing. questions time. Ladies in have like

Paul Galvin

Thank for and you, Adam and Chris, Mahesh joined today. us everyone who

many Blocks. people throughout have We and hard-working dedicated SG

profitable that you a things appreciate didn’t international alternative have experts, months Most drivers, and people an we and approved not were hard product. more in manufacturing was seeing the the $XX we a do than work construction MET we a short engineers, marketing, We pipeline in on sales, its internationally of period and importantly, NASDAQ. we not just partners, did time. a of green amazing our in and to without this interested Two years MZ lot folks, happened development and appreciate traditional have ago, It million. truck we into logistics marketplace. efforts XX of safe we are And ago architects, experts, organizing call. way the Our everybody’s of have that make business shareholders appreciate and couldn’t short

We’re backlog to that be continue business convert model a platform. create going a into quite revenue as one to going compelling to that’s and that is

look future we results week. very to Thanksgiving sharing Thank a and you. everybody So next Happy wish forward our

Operator

does gentlemen. and ladies you, Thank This today. our conclude teleconference for

this line disconnect now you a the may You patience, for Thank time. day. and wonderful at have

Safe & Green (SGBX) 14 Nov 182018 Q3 Earnings call transcript