This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Good day and welcome to SG Block's first quarter 2022 earnings conference call and webcast. Today's conference call is being recorded. At this time, I would like to turn the conference over to Stephanie Prince of PCG Advisory. Please go ahead.
spk00: Good afternoon and thank you, Douglas. Thank you all for joining us for the SG Block's first quarter 2022 earnings conference call. With me on the call is Paul Galvin, Chairman and Chief Executive Officer and Acting Chief Financial Officer. A press release detailing the company's results was issued after the market closed at 4.01 p.m. and is now available in the investor relations section of the company's website at sgblocks.com. A replay of this conference call can be accessed in the IR section of the website as well. 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 purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. SG Block cautions that these forward-looking statements are subject to risks and uncertainties that may cause their actual results to differ materially from those indicated, including risks described in the company's filings with the FCC. Any forward-looking statements made on this conference call speak only as of today's date, Monday, May 23rd, 2022. SG Blocks does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. With that, I will now turn the call over to Paul Galvin, CEO of SG Blocks. Paul?
spk02: Thank you, Stephanie, and hello, everyone. Thank you for joining us today. Today, I'm going to discuss the first quarter's highlights and our outlook for the year ahead. I'll also discuss the quarter's financials as I am currently the acting chief financial officer after a disruption in our finance department. I want you to know that we have a solid strategy for correcting the situation, and it is of the utmost importance. SG Blocks had a good start to the year with revenue of $8.6 million in the first quarter. Gross profit expanded significantly to $2.5 million, and we reported net income of a half million dollars. These results enabled us to end the quarter with cash at roughly the same levels as year-end, $13.1 million. We continue to carry low debt levels and have 12 million shares outstanding. Since we last spoke on our year-end conference call just a few weeks ago, we grew SGDevCorp's active residential unit pipeline by over 100 units to approximately 4,200 units and the construction pipeline is still roughly $750 million as at year end. We are currently vetting another approximately 5,000 units across additional sites. We want to hit pause on phase one of SGDevCorp's pipeline when we reach 10,000 residential units, which we believe we will hit this year. The construction backlog was 7.7 million, which is related to 11 projects we had under contract at March 31st. Of the 11 projects, several include prototypes which are planned for large-scale rollouts, and those numbers are captured in our pipeline and not our backlog. As a reminder, this backlog number does not include any projects related to SG Development Corp. and or any ongoing medical testing. In addition to the cash on the balance sheet, we anticipate a sale of Lago Vista site this year, and together, we believe these funds can well support our cash needs. We opportunistically listed Lago Vista for sale for $15 million just a couple of months ago. We are also still exploring the sale of the minority stake of SG DevCorp. Many of you remember when we launched this subsidiary of Q1 last year. During this first year of operation, we built its residential unit pipeline organically to its current 4,200 units. We believe there will be strong interest in a minority stake, especially for investors who have the opportunity to vertically integrate. Operationally, the first quarter was active. SG Blocks was selected by HTR investors for a design deal contract that is expected to lead to 150 glamping-style units for placement at interactive, unique, experiential properties around the U.S. We listed the Lago Vista development parcels. We completed the purchase of McLean mixed use site in Durant, Oklahoma. This is a 114 acre parcel where we have plans to build a minimum of 300 residential units and 680,000 square feet of industrial manufacturing space. Some of this space will be for SD blocks manufacturing operations and we'll build out the rest for others. We believe there will be a strong, potential interest from tenants based upon market feedback, current supply chain disruptions, and the growing interest in made in the USA products. We also led the seed round for MoLiving, the world's first luxury nomadic hospitality solution to offer hoteliers and landowners the opportunity to adjust room inventory to match demand in real time with minimal disruption to the environment. We're contracted to build 60 units for Moe Living's flagship hotel, Moe Living at Hurley House, in the progressively popular Hudson Valley. It is scheduled to open this summer, and additional five locations are expected to open in 2023, which calls for another approximately 400 standalone units. I have also been invited to join Moe Living's board, which I accepted. We received approval to buy and build 114,000 square foot manufacturing facilities on 33 acres in St. Mary's, Georgia. This facility will support our 1,286-acre waterfront Cumberland development. We also signed a 10-year exclusive distribution agreement with Sanitech Industries LLC. They have a sustainable waste management company that is the global patent holder for the Sanitech Microwave Healthcare Waste Disinfection System. This is a unique patented system that shreds and disinfects biomedical waste. Lastly, our SG ECHO subsidiary announced its largest contract to date. The contract is for more than 100 units and is valued at about $6 million. These units are scheduled to be delivered by the end of this quarter. As I mentioned earlier, revenue for the first quarter of 2022 was 8.6 million, a decrease of 6.5% compared to 9.2 million for the first quarter of 2021. Last year's first quarter included higher construction services revenue generated from legacy projects. The medical segment generated 6.9 million in revenue, a 15% year-over-year increase. Total gross profit for the quarter expanded significantly to $2.5 million compared to $0.6 million in the first quarter last year. This reflects the increased profitability of the medical segment, which continues to allow the company to advance its own internal projects, the first of which is expected to hit our factory floors in Q4 of this year. For the first quarter, operating expenses were $2.1 million, an increase of 23% compared to $1.7 million. General and administrative expenses declined slightly to 0.8 million compared to a year ago. This was primarily due to increased deficiencies at the medical segment offset by an increase in payroll and related expenses to 1.1 million, which includes stock-based compensation of 0.6 million. We reported operating profit of 0.4 million compared to a loss of 1.2 million last year. Net profit was 0.5 million compared to a net loss of 1.1 million in the first quarter of 2021. At quarter end, cash and cash equivalents totaled 13.1 million. Total assets were 38 million, and shareholders' equity was 21.6 million. We continue to have a clean cap table, a low share count, Long-term debt includes only one note outstanding for $750,000 and a lease liability of $2.4 million. And there are only 12 million shares of common stock outstanding. Looking ahead, we expect five projects to start up in the next 12 months. Our second factory will open in August in Waldron, Oklahoma, and will begin operations by fulfilling the initial MoLiving contract. We also plan to begin construction during 2022 on the St. Mary's Manufacturing Facility to support the build-out of the Cumberland Inlet project. Cumberland is expected to begin Phase 1 construction of 1,200 units in April 2023. After that, the start of construction is scheduled for Q2 2023 for the McLean Manufacturing Facility, our third and fourth factory lines, the McLean residential development that will have about 300 multifamily units totaling approximately a half million square feet, and the startup of construction on the Norman Berry II, a 130-unit multifamily moderate income project in Fulton, Georgia. We've been planning these projects for several years and are very excited about their upcoming launches. We'll generate revenue from them in several ways, all of which we don't model. These revenue streams include manufacturing revenue, estimated developer fees, the blended average of 1.75%, revenue from refinancing or sale, exit dollars after hold period. We are projecting to be cash flow positive this year. At that point, we'll have incurred about $30 million in operating losses to build out our entire platform, including the development company. Many companies on NASDAQ lose hundreds of millions or more dollars before they hit break-even, and some never make any money. I think that is a testament to our team, our ingenuity, that we sit here on the cusp of generating positive cash flow while our market cap is still low. We have little debt and only 12 million shares outstanding. Ultimately, our goal is to achieve strong and consistent revenue growth from a diversified pipeline of projects where we control the means of delivery, and we keep getting closer to that every quarter. In closing, the investments we've made over the last two years to build a strong foundation have brought us to the edge of the tipping point. Together with the value being built into our projects, our investments, cash on hand, cash flow from our medical segment, and the initial five projects that are expected to start up over the next year, we believe that SGBlock's outlook for growth is strong. That completes our prepared remarks. Thank you for joining me today. For those that have questions today or at any time, please contact Stephanie Prince at sprinceatpcgadvisory.com. Stephanie will be scheduling 15-minute calls with me for Q&A. We look forward to speaking with you again on our second quarter call in mid-August. Be well and stay safe, and thank you. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Disclaimer