SGBX - Earnings call transcript Q2 2019 | Safe & Green Holdings Corp.

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Operator

Thank you for standing by. This is the conference operator. Welcome to the SG Blocks Second Quarter Results Conference Call.

As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Instructions] [Operator

to Please over go like with Jeff the IR. Hayden ahead, turn now to conference Stanlis I’d sir.

Jeff Stanlis

XXXX SG Thank Thank you, second the you afternoon. call. quarter Blocks’ all for Ben joining us and earnings conference good for

Chief Your Mr. Officer; Financial Mahesh host Chief and and Executive Paul President today Mr. Officer. are Galvin, Shetty,

detailing website was Eastern issued release is available sgblocks.com. and Time on afternoon just press A company's this these results the pm after X

conference Following management's call will the remarks prepared for we open questions.

over call made the Litigation turn management, call please forward-looking statements I Before of the Securities certain that to the during are XXXX. remember Reform Act Private conference this meaning statements within of

position, of be statements. by or anticipate, should, In than statements plans and plan, business this statements identified other expect, future facts estimate, similar historical objectives terminologies presentation, such of negative statements terms management regarding statements contained are cases, potential future continue, forward-looking including believe, company's may, for forward-looking expressions. in financial strategy intend, these All the some operations predict, and of or and other operations can as the

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

statements that reflected of assure forward-looking or rely events. not predictions the in will We and occur. achieved you upon should events You be circumstances future the forward-looking as cannot statements

GAAP. be assessing presented operations. SG for includes measures considered results are non-GAAP should in certain in GAAP business that measures, with considered to should non-GAAP but financial a not Reference and This its uses financial as financial financial Blocks accordance measures be substitute these presentation addition also measures. non-GAAP to in

Finally, in at conference link section call is available company's this The website webcast. www.sgblocks.com. Relations webcast Investor the the is being of

I Officer Paul Galvin, the will over ahead. With comments. to now call that turn for prepared go Paul, his Chief Executive

Paul Galvin

you, SG several call. accomplishments. Blocks financial productive the had conference quarter XXXX noteworthy results We Thank achieved a welcome and second and James, to quarter

most Specifically, we Monticello hurdles the remaining we believe have project eliminated move of the to forward.

these help are has As processes parties Experience dependent timelines you in fruition. most and us financing, challenging of permitting, place of and project know in adjust to these zoning, have projects us on bring projects our to put large other timing partnerships because other terms to and proven variable. allowed contingencies

The first the project York, that this will projects in project. Sullivan New as new XXX approach the housing multifamily Monticello County, benefit from is unit known

multifamily go to but construction, we the testing, acquisition, testing, process. through and limited As funding a geotechnical completed, prior market report. on have environmental projects discussed, not of a When feasibility steps traffic including design to these can to commence development move closing and entitlements projects build then approvals, pre previously and series are site studies

reputable financial Agreement we for Monticello another investor structure a XXXX, along create a July In with the Governing executed project. to

a XX% a created entity We GP. GP and membership a interest of as CPF to Texas CPF list leasing projects the we this, project. is the will refer company, CPF GP, own As will the managing MF, I hold XXX development, liability we part in company, which the member oversee limited and anticipate and of will of which management a multifamily Delaware CPF liability unit limited

capped money by XX% million total Blocks' $X.X [ph] approximately Monticello raised company the expected project. XXXX, from the CPF with cash investors the is to simultaneously the MF outside GP of late outside to is In capital the equity project. collected remaining phase their at XX% the of SG Monticello and for equity contribution CPF project in of capital the the equity completed contributed the land from with July contribute of $X.X financing consummated governing first investors. acquisition be million

This for first structure for the Blocks construction investors is of financing the accretive to the third now Monticello and means equity phase completed party that SG shareholders. capital have

With financing, believe future returns repeatable model the once we a more will and have completion created of scalable completed equity the more that and us give on we control projects.

$XX the costs of in phase $XX construction and project the approximately are first million of total Projected the approximately are project million. the costs construction

recognize phase, We targeted million revenue expect $XX the in million. will gross with of approximately margin approximately $X.X that SG first profit Blocks of

their over through the which and about to are XX next potentially excited projects that way We backlog months. translate our could pipeline additional working revenue are incremental

As quarter time and call, XXXX and resources areas services. our been we of I procurement investing based design discussed logistics, capabilities out specifically build project finance in have in manufacturing, to the and our broaden first

single a result to modular offering for SG looking a the Our turnkey eventually in Blocks believe will them and them our improve on product source projects. And will money. to goal contact and save benefits their that to are is time faster and of investment, has been their stronger, for a significantly clients who of give construction full solution return construct

We made Geis announced goal as meaningful as progress a with year well, Companies. three strategic this towards we alliance

work related Ohio. company perform and will site and Streetsboro, the build services. services, of Geis America's civil North One provide construction headquartered installation premier in design all

requirement up to reduces, also has has projects certain expedite were process necessary for many projects. help potentially both down capacity will Geis certain of slowed hurdle the view loan in work, of maintain Geis control a manufacturing We which customers. the as cash $XX this will and for us required addition, million In us key This civil per which the project. completion and quality past. capability previously eliminating guarantees bonding help the and bonding

to Our grow. pipeline continues

from Rico, an attract Hurricane by Puerto use a housing We prospects, in continue to new opportunity mixed those affordable development for innovative ranging Maria projects, to displaced in zone.

quality and and at quantity expand. of of pipeline our $XX,XXX,XXX XX the backlog XXXX, our to continues As June stood

Grimshaw created Labor We expect after alliance commercial will to jointly with a result for off strategic the have available demand the be We believe in our product. catalog shelf catalog of Day. definitely products

Academy delivered notable major successfully others, Manhattan. food Carolina, the delivered was [ph], among PRA installed in has the Greenville, Blocks projects SG for in The on and in Navy, park and August several a a New football of a Terrace, MBAs York in Training which installation restaurant, Year-to-date, Orlando, up South a ongoing U.S. Senegal pop on bar Lower XXth and

perform. our $XXX,XXX. just engage The the We common this to satisfy raised net aggregate balance common clients stock $X.XX steps took of to public subsequent share completing monies offering shares an concerns for Also for from our of sheet, per transaction. of our we ability XXX,XXX to price ThinkEquity bolster offering underwritten an quarter, further over will proceeds of at on immediate

funds allow on convert backlog believes our will our company and us pipeline of opportunities. The execute to these

sized. While was a relatively still outstanding the offering common of has diluted the fully on number stockholders. small was modestly a debt. basis, And without dilutive company remains It to our shares and

significant made in across no York, our business, there's New we in our Angeles. that in been I'd and particular material Los note While progress on legacy project update

to in both to amicable and We resolution parties. hope faith an good continue for to negotiate come

Shetty over to for Officer, our President will Financial now call and turn I Mahesh Mahesh? his the financial summary. Chief

Mahesh Shetty

revenue $XXX,XXX in the of decline quarter decrease was second as company and was XXXX, to special Thank quarter the a you, of quarter the of afternoon. school the in Revenue result This approximately compared good second primarily XXXX. in XXXX. of and compared use million approximately to as Paul projects the the in second $X.X

to second XXXX, the compared of quarter as to Gross quarter profit second to in XX.X% Gross quarter $XX,XXX profit compared in a revenue XXXX. of the second totaled second of increased approximately of as X.X% $XXX,XXX margin in the as in quarter of the XXXX. XXXX, percentage

on in impacted this quarter. Gross anticipated than cost profit margins contracts lower were positively by

the potentially gross may larger We of lead on revert our believe back revenue, previous to continue margins that a take margins. to that to contracts recurring On overtime, XX% contracts. lower will company guidance can

Our offset operating and quarter general unchanged net of in is second compared expenses, and expenses. approximately expenses pre $X.X million result and in the payroll This partially by at an which administrative, modest remain or million quarter business the XXXX. a are related and to of in increase approximately decreases XXXX, second project marketing in $X.X largely development decrease

basic the net $X.XX XXXX. quarter XXXX, compared quarter XXXX. in Adjusted Our second improved $XXX,XXX of in basic approximately of diluted of net of and share XXXX, second the approximately to $XXX,XXX quarter of a second or $X.XX loss second loss share loss loss $XXX,XXX quarter compared in the to EBITDA diluted and to of in per the a was $X.X per approximately million, or

Principles or and comparable net under under financial adjusted Please of use loss, calculator see on of our today's the most for Accepted reconciliation information discussion US Generally Accounting heading release measure EBITDA measure to this press the GAAP. non-GAAP

turning million, revenue, first of approximately was revenue the decrease the use of to $X.X compared result as XXXX. now was half school as projects in half in XXXX. the XXXX company's first compared year-to-date decline our And million and primarily results, $X.X to to a This approximately of in special the in

revenue the the approximately to of $XXX,XXX increased margin in first first totaled of X.X% XX.X% first XXXX, to Profit half as for for approximately compared of to the half percentage $XXX,XXX compared Gross of XXXX. as of half first the XXXX, half a XXXX. as profit in Gross

is first increasing to slightly half result net a or first decrease million in in expenses of XXXX. increase million payroll other operating compared increase increased XXXX approximately by expenses expenses. approximately in to the Operating [ph] and of offset modest partially $X.X just the This in related of an half $X.X

the per in a improved Adjusted $X XXXX -- million, net half basic of in a of compared to improved in cents million to basic approximately loss of of net approximately is first per $X.X million Our adjusted compared half XXXX. and first first diluted EBITDA approximately million $X.XX loss XXXX. $X.X share loss EBITDA the the of loss share XXXX, or first half or half $X.XX of approximately and diluted $X

compared and XXXX approximately XX, to cash XXXX. equivalent million June at XX, December approximated at $X.X as $XXX,XXX Cash

shares had As at XXXX, $XX.X backlog -- to of XX, approximately X,XXX,XXX shares XXXX. Construction December $XX.X XX, we totaled million XX,XXX,XXX million XXXX, June compared outstanding. August X, approximately approximately at

June feet XXXX, XXX,XXX,XXX projects backlog. in has XX, approximately the As of square company X or

should backlog $XX delays projects XX, million. We by convert at Construction believe $XX constructions, two approximately million amounts XXXX. these June site and to or June included barring large and XXXX related revenue approvals, of the contracts, and site that XX, any

I'll Paul? now over the Paul. to turn call back

Paul Galvin

call, our debt, execution risk. XXXX approximately $XX.X last Thanks, over capabilities, Blocks financial promising our advanced which beyond. project SG of performance XXXX We model of quarter our more we our for positioned anticipate reduce believe us earnings will ended we business which backlog a pipeline, our and we with Mahesh. control the in no Since give million, a and and and expanded projects significant

the on the month recognize to of quarters approximately the next based timing through and This phase first specifically to four of hard in expect related we Monticello revenue time, work XX, updated over for $XX the took June million project. Monticello XXXX, project the will

For is phases three and of have single revenue perspective, there we from that XX-month recognized in period first any more all of our history the a project. in than

As are phase now in it project the of relates the container one and history the project. States of in the construction largest design the this Monticello, we largest United of in to the world,

Subsequently, ultimately the XXXX, which phase procurement of in building anticipate loan and steps, to delivery perfect. includes will our quarter third move and we approval During progress of next one. we and fabrication securing

that been positioned are to incremental administrative modest relatively with the sheet, for painful well that's on most We products business labor challenges a behind our and general in and model our the us allows and in key by believe after us handle expenses. as appears customers. services increase have project Leverage success. revenue We believe paid and cases, we only inventory balance both and suppliers' our appear

significant and growth. created capital constraints working model reduces Our to leverage

continues converting clients. backlog platform out focus shop create predictable with cash our existing revenue the to for pipeline, margin growing become our backlog flow Our a and our building to to consistent our and positive, stop in one

in believe marketplace. the our a marketplace product to continue the enormous. for we is superior product And We have

Block new builds disruption. is a There and modular and save exceed Mackenzie's by of in XXXX. companies Europe report traditional challenge is the US indicated to movement SG billion forefront XXX to the time this of one XXXX construction at market June believe the growing that the money. could We

to for turn the call question. the I back operator will now

Operator

Thank you.

The will from Kumar Please ahead, Instructions] [Operator Ashok with now first question-and-answer the go question We session. ThinkEquity. comes sir. begin

Ashok Kumar

Mahesh. Thank you, and Paul

a in Monticello XX% there's month then three period? half is the modeling model able the to a six $XX be one project? the your normalized in million we at for first Thank earlier or And second rate? should of the can The you. model take that on second Or be the are you as we the the interest looking months forecasts half next and

Paul Galvin

Mahesh?

Mahesh Shetty

sure. Yes,

So months, the $XX we revenues in to about XX I this Ashok million to million. of including be project. revenue the the But approximately, -- between expect million at Monticello, which we $XX.X over the we're the somewhere the next looking call, Monticello talked $XX from range during range already

Ashok Kumar

And an basis be aggregate then Mahesh? right XX%, that number would on the

Mahesh Shetty

We margin. thank Yes, you. feel comfortable about XX% a

Ashok Kumar

Right.

you the bigger commercial platform, the then of course, in is, terms update exploratory us place provide project. picture And in could please? any to -- of the And is financing support Okay. if platform a their this

Paul Galvin

that the all and sort instances. design in interest will Blocks our debt that will pipeline time The the those carried will in business Monticello SG of and is contribution for for land most shorten his to projects and The we project revenue equity. business is pipeline, and recognition. of our leverage there'll will land, going projects, platform get certain from have and projects shareholders our evolve owner and how of are delivery provide the reduce to in time to and meaning the the that a a It's for the be the manufacturing benefit some template then

So, we for it'll types of multiple classes. have several benefits. think it And asset will work

Ashok Kumar

this being this performance as us conversion will have putting revenues. projects end a a beyond, as gen up calling well in potentially Monticello getting be extra in accelerate templates the again, time to beyond. and into that next And, been we've template both pipeline could Right,

Paul Galvin

maybe And and created entrepreneurs a Yes, correct projects. developers to Monticello Ashok. of largest and -- for barrier the the occur for these beyond. We've find path that's larger you're capital stack the to our at finish one that is meticulously their to

is have have other a carried so ended path nice been opportunities good interest. slightly that on success. fit we would know with a Monticello, that while project And at we we for it's vertical. And delayed into up The that

Ashok Kumar

Thank Appreciate you, and it. Paul Mahesh.

Mahesh Shetty

Thank Ashok. you,

Operator

[Operator instructions] go ahead, with Hunter, Capital. who's The Ian Please next question from comes Value Hunter sir.

Ian Hunter

two have questions, I Yes, okay. if that's

And The the your to quarter revenues. you -- first -- of during is was think $XX at guidance million XXX expectation $XXX call discussed on $XX per what for what and million that million pipeline the backlog little happened revenues? million. you bit could time, $XX of $XX the I one of some Could caused and to was is your first your XXXX project about pipeline discuss leave million XXXX a that And backlog? guidance you that discuss

Paul Galvin

Sure.

highly -- it's projections our correlated were So obviously with Monticello. revenue recognition and

financing increased And up at able units, were the greatly zone opportunity. we so to the units in used well, said time the XXX that, Having while project delay delay XXX we were recognition. waiting, which we the Monticello's resulted to the of and manufacturing from revenue get

Monticello So that's belief would sooner. explanation the for QX occurred have

contract. commercial As $XX million far kitchen as

the their out our to to terms that taken to inability due under adhere and have We of contract. the perform backlog client's

the We process. disengagement have engaged counsel to begin

pipelines very backlogs. We and robust food related a active food and and have

prefer and to would backlog. attached nonperformer that be the not speak the to reduction to So in a we

see size specifically success to The as the And closing acquisition across in a the the the to And generated pipeline or that land from million is that projects was at were million developers collaborate of the interest is then and or occur. the that financing projects piece while and last lot who exploring the not looking of pipeline. possible to that of other on. are currently has robust. big ways were speaking as Monticello glad of opportunities zero we're and $X It to $XXX it spread the

Ian Hunter

updated XXXX to be you you. like And right? didn't it this call offer guidance Thank on for sounded

Paul Galvin

have what that think recognizing $XX in to clarify next I million. the to quarters, four million said $XX we No, anticipate is in I revenue the

Ian Hunter

achieve this about Okay. December the stock conversion the so equity was to know had lower the Thank think ago, in year. the enabled past far there that in you. economic had you that down securities investor position. of months $X securities were And And kind to my raises just $X.XX. falls. last quarters. down issuance just raises a few proportion And few some from question the is I of the few cash have a to I XX security is options stock bigger There essentially

so lot for the but is other who've -- any benefit you and of the curious that the securities ride to of there or is issued So in I stock? conversion? members And shorting team a presume way is a that this of investors far stock, along if that there in entity executive shorting any that know been December who in the investor have

Paul Galvin

I can turn that Mahesh you? over to

Mahesh Shetty

Sure.

for your there. you to issuance have which run because December conversion rate thanks Ian year of issuances not stock last any in or So not sure, exactly in did I'm December questions. speaking we

end have We security We debt one April, offerings, today. of late have April as zero one last and July. of another year the zero late debt was and in got in two

of marketplace. actually So the the question in specific we have what raised to

the about the and checking on see regard. question shorting stock lot the on don’t the of we been a incuses activity of So in people stock, diligent short what that

it going good any Obviously, any or to figure matter. for is is what's for management short for that team of the out the harder for not So shareholders stock us on.

significantly for higher well now. board our than options price of employees, stock options as the [indiscernible] All stock the as everybody's are right the market

Ian Hunter

warrants the were XX Thanks for conversion that preferred and that prospectus I has for Mahesh. it shareholders? December in that was Okay. was unattractive to pretty other dated referring options stock the

Paul Galvin

list every have ex-shelf be combination we statement you to referring security file shelf conceivable is of the offer. registration and a to formatation statement you [ph] to file. these So you And when of I think what registration have might

legal providing been -- securities a perspective. all have to actually just I that just is way the to registration that make actually shows available any been of a placeholder and any it actually organization, the want not a not is document that offered from yet, are but it's options they just out a that there just So issued. have distinction

Ian Hunter

I it. appreciate Well, Okay.

Paul Galvin

that wasn't a filing -- what that several Yeah, that wasn't variations included that was finance different occur. of could

there in And last wasn't year. December so raise

Ian Hunter

I clarification. appreciate the

a for [ph] we're conversion goes, kind appreciate called rain beneficial execute a having spiral you. investors -- and you're of projects. to that enable can not that we so converted lot provisions think waiting able any stock your of the on Thank more at lower a you I the debt would but hope

Paul Galvin

And that. again. are you XXX% Thank interests our aligned on

Ian Hunter

Thank you.

Paul Galvin

Thank you, Ian.

Operator

[Operator Instructions]

Operator

more like this I'd back are no any for There closing time. questions at to conference over turn to the remarks. management

Paul Galvin

you We'd like our to feel to there follow James Stanlis, Carbonara, Jeff over on thank and and to legally questions you, their with information team happy everybody everybody any at with If We current our And look to communications Hayden. forward nice required, end schedule future call. operator. out a of that QX to provide busy listen Hayden and you other taking projects. are be contact wish XXXX for to we'd any are our summer IR earnings we time up of competent free to that's work Thank further allowable. and

Operator

This concludes call. today's conference

participating, day. disconnect for Thanks You pleasant and lines. may your a have

Safe & Green (SGBX) 14 Aug 192019 Q2 Earnings call transcript