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.
spk08: Greetings and welcome to SG Blocks second quarter earnings call. I'm Mark Moran, CEO of Equity Animal. I'll be the host of our call today. I'm here with Paul Galvin, chairman and CEO of the company. If you aren't doing so already, it's easy to participate in the call on Twitter spaces. On Twitter, go to at SG Blocks and select the space titled SGBX 2Q22 earnings call. As a reminder, if you want to ask a question, you will need to join the Twitter space on a mobile device. If you want to listen, you can join the Twitter space on a personal computer. SG Blocks is also making this call available to listeners through a traditional landline and webcasting. At this time, all participants are in a listen-only mode. A question and answer session will follow. This conference is being recorded. A press release detailing the company's results was issued after the market closed at 4.05 p.m. and is now available in the investor relations section of the company's website at www.sgblocks.com. A replay of this conference call will be available for 30 days immediately after this call on the SG Blocks Twitter page. Before I turn the call over to Paul, please remember that various remarks about future expectations, plans, and progress 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 Blocks 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 SEC. These forward-looking statements are subject to a number of risks and uncertainties and any forward-looking statements made on this conference call only as of today's date, Monday, August 15th, 2022. SGBlox does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. Now, it's my pleasure and privilege to introduce Paul Galvin, Chairman and CEO of SGBlox. Paul, take it away.
spk03: Thank you, Mark, and welcome to all.
spk01: We're excited to be hosting our first ever on-site basis. Given that many joining us today may not be aware of SG Blocks and our mission, I want to first start off by explaining what SG Blocks is.
spk03: The S-N-G in our name stands for safe and good. This is where our mission begins. Picture with me a traditional... The things that have helped to But as folks watch this program, these things are not just for the life of the patient. This is just for the life of the patient. This is just for the life of the patient. This is just for the life of the patient. This is just for the life of the patient. This is a cross-sectional technology that can be used to create and test modules for you, such as mobile restaurants, which have a couple of other features. This is a self-sufficient system, but the simple part is that it's not all perfect. On top of that, the coverage is perfectly quick, which makes sense, as I see. If you ask for a company to give you to get started here in this industry, I'm sure you'll find it's so powerful. I think that it's what and it's so powerful to start to think about. I would love for you to go on and let the technology process be part of the process of accomplishment. Our business model the third part of the cell in addition to the fact that it's from a country. However, since then, as you watch as the box is ignited, while it still works for us, we now completely disassemble it. This allows us to completely reintegrate and give us much more flexibility for any whole process that's currently taking place. In addition, while this is capable of with the first five months of the book coming out. What's that mean? You pick a module that you think you might make a difference with, that's the thing that I want to talk about, and that's the thing that I want to talk about. Therefore, they provide lessons for our clients and different types of projects that people are now pursuing. One of the reasons we love modules is because it's much lower carbon. as well as the speed at which it was possible to take the same distance with the camera to get from the construction site. More modular construction would do to the energy and other types of pollution. We have to build depending on the type of project to keep our money out of pollution, or it's a set of scales and the on-site book. What this allows people to do is it's the first of all, that work and the foundation of the course. We are looking at that. So, I want to try to do that approximately every 20 minutes. If the finish with the lecture being done in advance, we're looking 350, 250, 250, and every 20,000 families. These projects are going to be up there on the clock, in place, and in time. As previously mentioned, we used to exclusively build for others, and we still do today. We are going to build for others, and we'll continue to build for others. Additionally, we're going to provide for COVID We are a builder of modern construction. Housing is a passion. The first 25 years of my career. And profits have helped me. I've never been suffering from a mental health problem. At school, one of the things that we've suffered from is a mental health problem. because they're in the industry. According to McKinsey, globally, labor productivity growth in Russia has averaged 1% over the past two decades, compared with the growth of 2.8% for the total and 3.6% in the past. In addition, according to McKinsey, Our modules present traditional construction and have one of the largest and largest What we provide is five alternatives to traditional construction. Our success is evident in our best client list, which includes some of the recognized companies, including Verizon, Equinox, Starbucks, La Paz, Puma, and Taco Bell. We are actively pursuing a long-term plan for existing and new markets, as well as seeing our financial sector to our expansion in construction verticals, which we've discussed more definitely in the presentation. Despite being a small company, we are talking large verticals. Commercial construction verticals in the market are present. Global construction verticals is $8.5 billion. Point of care, in 2027, will be $30 billion. And the market market is expected to have $213 billion in 2022 alone, which is something that's not like any other, and we're leading the charge for less expensive and quicker market solutions. Before we jump into our question, let's talk about our reporting segment, which is what's construction, engineering, and medical facilities. We cover the only type of restaurant in Kansas City, Oklahoma, which allows us to control the production. Our second factory, S Street Poultry and Ribbon Cutting, will occur in late September, as previously announced. Our current manufacturing pipeline is $750,000, given by Murphine, and has been developed We continue to seek additional manufacturing capacity to meet our growing needs. We have further executed on-premise and domestic production strategies. We are currently up to 1.3 million workers in a production space. I hope this will be an important development for ourselves and for the community. Thank you. for our development company, and our medical segment, which is called Clarity. They're both capitalized on the opportunity to build the leading product system in healthcare, and we think to create this effort for the segment. We have a point of care testing company that is revolutionary. They're an open business, and people can provide a pilot for point of care By being able to provide efficient solutions, we are including Detroit, Chicago, and . Giving us capital projects, like our Point-of-care testing, lab service contract, and support for 10,000 students on campus day 48. We're happy to report that we expect to do an 11th semester and we'll be here from the beginning of the year. This is just what we expect to be the case. We hope to be able to do this as well as the partnership between employers and schools having a point-of-care payback, testing, lab services, how to place the work. It's a win-win for both parts. We're working with people to perform best in lab diagnostic testing that is not inclusive via blood test. Early detection works to get people back to healthy and secure lives. Our story is growing in growth. In 2019, 3 million residents 593% 8.8 million in 2020, and that's about 25 million in 2020, a 13-fold increase. The phenomenal growth has driven for all of us, but it's not enough. And that's what makes the trajectory of our company to become the first of a revenue perspective. In addition to this, our experience during COVID-19 Please continue to hold the line. The conference will resume shortly. Please continue to hold the line. The conference will resume shortly.
spk02: Thank you. Thank you. Thank you. Thank you. © transcript Emily Beynon We'll be right back.
spk03: traded stock.
spk01: We are confident in our strategy as it is. Do not run your business based off its stock price, yet we know that a fair valuation of stock will help us to only grow more and work deeper and deeper into our record backlog of approximately $700 million.
spk03: In closing, we are thrilled to have the opportunity to reflect our vision for the future of retail Having gone from 2,000 to a 13-time increase to 30,000 last year, along one of our best quarter status, we believe that this is just the start to come in our equity story. Historically, our earning growth has had a new introduction. In an effort to further sell our story, we provide parents with the potential new investment. This will be the first time that we conduct one, let alone one third. Thank you very much for your time and allow us to tell our story. We are .
spk08: Thanks, Paul. With the conclusion of the company's prepared remarks, we'll now open the floor for the question and answer portion. As a reminder, to ask a question, you must be participating via Twitter Spaces on a mobile device. For our first question, we're going to bring up based capital.
spk03: Yeah, hello. Thanks. Gavin, I had a question.
spk05: You were speaking to some of the different companies we're currently partnered with in building up, like Taco Bell and some others.
spk03: And so I'd love to know if there's any thoughts around the next sector that you'd like to expand, like the fast food or different sectors into expanding into fruit and vegetables? Sure. We have had some very good success in the quick-serve restaurant space and some interesting names in our pipeline, but under NDA. What we offer those companies are people from the store walk up, drop through the door, if they're not doing property. And we could potentially save the restaurants between four to seven weeks of opening time, which is really important to avoid.
spk01: Lastly, we've had a lot of great fun and success working in the food court market.
spk03: And we'll see a steady stream including people creating some interesting venues. You can see a lot of them on our website. I won't single anyone in particular out.
spk08: Fantastic. Thanks very much, Base Capital. Next up, we're going to bring Wolf up to the stage to ask a question. Wolf, you're up.
spk05: Awesome. Thanks, Mark. Appreciate you doing this on here, Galvin. My question is around the concentrated revenue. So I was just looking through, it looks like over 70% of the reported revenue in the last 10K was coming from a single client. It looks like, yes, 77% was coming from one customer of the revenue. I know you're working to diversify the streams of revenue. I'm just curious how you're tamping down on the risk of that revenue concentration.
spk01: Sure, and that's a great question. It's one we hear of individual conversations. Our goal was never to become a full-time COVID testing company. Our goal was to prove that point-of-care medicine is strategically done and does well, will increase utilization and positive outcomes wherever it's placed. We generated a tremendous amount of revenue from the CLIA lab operated at LAX Airport. We use that money to buy the real estate for our factories and to buy the real estate for our development companies and to buy into projects that will fill our factories. There's always been an anticipated tapering off of COVID revenue from the airport location.
spk03: And part of that strategy had a major milestone last week when we were able to join the letter of intent with the teacher's local aid force, staff at the Port of Long Beach, progressive leadership, primary care, point-of-care testing, and point-of-care services for 10,000 members at the portality and their families and their retirees. We see that as a model for things going forward. We see that as a real shift in how employers and employers each other and this type of intervention will help people with health when young healthy early diagnostic tests which we hope to be talking about more shortly. So we don't necessarily anticipate COVID testing revenue to go away. We see it being right sized and we see it being replaced with more steady and predictable revenue and that's Those events occur.
spk05: Okay, perfect. One quick follow-up question. Just talking about the industry overall. So engineering and construction industry has really had a nice boom right before COVID. That industry added around $900 billion in Q1 2020 and employed over 7 million people. There were a bunch of tailwinds that I saw. There was a lot of mortgage rates. There was reopening economy, infrastructure stimulus, and more. Now we're starting to see labor demand. as mother pieces in the sector that could affect SG Block. And then, of course, rising inflation. We get down to inflation a whole too much. But, of course, that affects the cost of materials such as lumber and other pieces. So I'm curious as to which shift for the industry as a whole, if there's any adjustments you're making.
spk01: One is just understand we're going to have to be flexible on the ground and have a, a good team at the factories, both the builders and the manufacturing experts. At this time, we have no major supply chain issues. Our team is well in best practices.
spk03: We have multiple scenarios to deliver, always procure suppliers from all of that manufacturing. We could potentially build them out for suppliers to feed our ecosystem. And lastly, The largest client inside our pipeline of factories is SG Depot itself.
spk01: And so there'll be a high level of cooperation in trying to find out the most efficient way to deliver our safe and green structures. There's a total of mine.
spk05: Okay, perfect. And then just my last question, I'll turn it back to Mark. Could you speak to the stock price movement over the last few years and just, you know, any thoughts you have on the way that it's gone?
spk03: The overall market conditions have been rough for most sectors. I would say our stocks for the past eight to ten quarters have been between $1.50 and $8.70 or $9.00. We're running a real business with all the right verticals. We have a great BFBF. and our approach to investor in our approach to fighting for shareholders and in our approach to the cap table. And so the stock price has fluctuated in that range. And we think the current price, which is why we deploy capital to acquire people to be very valuable stock. Thank you, sir. Thanks for the question, Wolf. Really appreciate it.
spk08: Next up, we're going to bring ticker history.
spk07: Thanks, Mark. More general question for the group. Galvin, you talked about the construction vertical and the pivot to medical. Do you see other verticals that SGBlocks can eventually expand to and operate in?
spk03: Yeah. We think that getting into some environment that which can include medical waste, sanitary waste. We think that that is a potentially booming new market that's tightly controlled, that doesn't offer best practices. We have a license with a technology called Sanitech that microwaves medical waste into landfill-eligible areas versus the current practices, which by most accounts incinerate up in the air.
spk01: to the water table. So we're looking for potential verticals. We think there's going to be an awful lot of infrastructure by the government, state, federal, local. And we want to have access to some of that. And we have to do that. Otherwise, the development companies have residential components, hospitality components, hotel components, etc.
spk03: Inside each project, there's a diversity of opportunity and a hedge on any one of that. And so we're For the first time, we said that we have a broad base of revenue that could potentially pop at any time. We're just trying to get right on what that opportunity is going to be for 2023 and to have our module providing services in 2023. Great, thanks so much for the question, Vicar History. Next up, we're gonna bring Charlie to the floor once he's able to connect.
spk08: And so, looks like Charlie dropped off, was unable to connect. I believe we have another question from Wolf. Wolf, you're up. Okay, sure. Yeah, I can pop back in here.
spk05: I was looking at some of the peer metrics. I was looking at like Greenberg, ITT, and some of the others. But it feels like you're operating in so many different areas, right, with the medical side and other things. Do you consider these to be traditional peers, or are there other people that you would say are better kind of benchmarks for people to look at when examining the company?
spk01: That's a great question and observation. We don't think that they are a perfect fit of peers for us.
spk03: One of the things that's going on now is the company has announced a research report that we think will be done in about six weeks that will help clarify and consolidate what our peers should be versus what we didn't necessarily be. So I think we see that all as a part of the process. Okay. Got it. Appreciate that.
spk05: It looks like, I think, is that Charlie up here now? Someone else came up.
spk08: Yeah, we were going to bring Charlie up in a second, but first let's bring Coffee Meets Capital up.
spk00: Hey, thanks for taking my question. I was just curious on the recently signed LOI if there was additional progress For the Lago Vista property.
spk03: Sure. The Lago Vista property is still under LOA. We are hopefully wrapping up the process of having a purchase and sale agreement in the near term and simultaneously with the Lago Vista property. And then as a follow-up, could you talk a little bit more about your Devco?
spk00: How much control do you typically have, and what are the funding requirements after you get the project set up? Do you need to – I mean, will banks typically go fund your build with debt, or how does that work?
spk03: Sure. Modular construction is the best growth sector of the construction industry so far. There's a lot of debt industry that emerged with and without this. That's a formula to produce projects that will be at or above 25% IRR on the project basis. The party of the project, we have operations to roll over. The Cumberland Inlet project, we're in the capable hands of Jacoby Development. And we have a 10% non-reliable interest in that. And we're contracted to build a couple of units and form an asset plan. Got it. Okay. Thank you. Great. Thanks so much for the question. Now we'll bring Charlie up to the floor. Hello? Hey, we can hear you.
spk06: So in the last few quarters as COVID has fallen off, the medical revenue has fallen. And as you bring in the other diseases like diabetes that you've mentioned and how long do you think it'll take for those to ramp up to overtake the of COVID?
spk03: We see it more as a transition to operate out of LA. It's contracted and for 1231 of this year. Our in LOI to have different modules in January 2023. and that we see that as much more permanent and predictable revenue, a much more realistic approach to wellness than what we're doing now.
spk01: And we think the potential for that is virtually endless, providing best-in-class medical care, including some tests we're looking to use in cancers and Alzheimer's disease tests.
spk03: throughout the years of life.
spk01: We're going to combine whatever medical testing has to be done at the moment.
spk03: Some of it will be brick and mortar, no pun intended, sitting in containers somewhere. And the other is going to be mobile and on chassis, going where people are episodically. It's a real change to medicine, and it's one we think is going to pay off. OK, so one more question about the pipeline.
spk06: So you said the $750 million you currently have in the pipeline, do you think that will speed up growing, or do you think you hit a peak? And do you have any projections that actual revenue will hit and export it in the coming quarter?
spk01: Sure. So that $750 million is related to the projects that are inside the development company, which is the owner-manager partnership. or a partner that has the contractual rights to build every one of those. And those are going to be built at a 15% open book billing process. As we bring in new business into the development company, and as previously stated on today's call, we want to get in the state of 10,000 units that will only increase the 750 million. It'll take years to work out that fleet of homes and then replace them with a pipeline. And it'll fully activate our factory network. And in a way where we're not only going to get the revenue from the factory, but we're going to be vertically integrated. We're the client. We're going to own asset management fees, project fees, developer's fees, appreciation, income for rent, income from sales, free finance. Every one of those ways is a way to raise capital for our companies. without issuing a single share. And that's what the real estate portfolio has done.
spk03: That's what the eventual monetization of Lago Vista has done in contract at $15 million, in LOI designed at $15 million. And our acquisition price in our oil is approximately $4, $4.5 million.
spk01: That profit will help the company grow and give us not needed operating monies. It'll give us the juice needs to unfold and power of our projects and our factories in a more rapid manner. So that's the story.
spk06: Okay. One last question. I know the company right now is in a rapid growth phase, but have y'all started to think about net income and profitability?
spk03: The day we sell our system will be positive cash flow basis that year. Otherwise, we'll issue some guidance as to revenue as we get close to our own projects being in factories. Since then, we control the project, the project's funding, and the operations at the manufacturing level. And so we'll be able to get a little and visibility on as our projects enter the factory, so we can be less dependent on the other entrepreneurs or potential clients. Okay, thank you, Paul. Thanks very much, Charlie.
spk08: Thanks, Paul and Charlie. Now for our last question, it's going to be ticker history, ticker history, ticker out.
spk07: Thanks, Mark. I just had a question about revenue and market cap. You said you did, I think it was $38.5 million in 2021. The stock trades at $26 million market cap by today's close. Why is revenue higher than market cap and why do you see that?
spk01: Well, It's not a condition new to us or new to anyone in this marketplace. It's a very complex question. There are different answers by different people you would ask from different perspectives on why that's the case. What we're focusing in on is keeping our heads down and transitioning to this point getting Lago Vista to the point of sale and to continue to build our factories The market cap will take care of itself.
spk03: We only have 12 million here. We have enough operations and have multiple ways to raise money to grow. That doesn't require us to issue here. At some point, the way all that good news and all the support and our animal who are going to help us fight through and get this story further and get the right tools for the right job here, we think
spk01: meeting more people, a fresh set of eyes, and getting more people participating in the life of the stock and the stock's ecosystem will take care of the price of the stock itself and the market cap.
spk08: Fantastic. Paul, very much appreciate the time and appreciate everyone listening. I want to give a special shout out to Dr. Parikh Patel, who is here. Thank you, Wolf, Ticker History, Historic Vids, Charlie, Base Capital, Coffee Meats Capital, and everyone else who asked questions and joined us in this. We plan to be able to do this more often to be able to communicate more effectively with the market to help tell this story. And I thought the last question was just a great one that highlights a lot of the opportunity that's here. That being said, I want to encourage everyone to follow SG Block's corporate account, Paul Galvin's personal account. as well as the Equity Animal account and many of the other speakers here like Wolf. We appreciate your time and we'll be concluding this call now.
spk03: Thank you. This concludes the presentation. Thank you for dialing in and you may now disconnect your lines.
Disclaimer