Sg Blocks, Inc. (SGBX) Tops Q1 EPS by 2c, Revenues Miss

Sg Blocks, Inc. (NASDAQ: SGBX) reported Q1 EPS of ($0.12), $0.02 better than the analyst estimate of ($0.14). Revenue for the quarter came in at $1.74 million versus the consensus estimate of $3.4 million.

• Revenue increased 12.4% to $1.7 million in Q1 2019, as compared to $1.5 million in Q1 2018.
• Gross profit for Q1 2019 totaled approximately $0.5 million, as compared to $0.2 million in Q1 2018. Gross profit margin as a percentage of revenue increased to 31.4% in Q1 2019, as compared to 10.6% in Q1 2018.
• Net loss totaled $0.5 million, or $(0.12) per basic and diluted share, in Q1 2019, as compared to net loss of $0.8 million, or $(0.18) per basic and diluted share, in Q1 2018.
• Adjusted EBITDA loss in Q1 2019 totaled $0.3 million, as compared to $0.5 million in Q1 2018. (See below for further discussion about the presentation of Adjusted EBITDA, a non-GAAP financial measurement).

Key First Quarter 2019 and Subsequent Operational Highlights:

• Construction backlog decreased to $95.8 million as of March 31, 2019, as compared to $97.7 million at December 31, 2018. The decrease in backlog at March 31, 2019 from the prior year end is primarily attributable to work in progress or completed contracts during the first quarter for approximately $1.7 million.
• Performed activity on 11 total projects in backlog during Q1 2019.
• Raised approximately $0.7 million in net proceeds from a follow-on equity offering of the Company’s common stock, to be used for working capital and general corporate purposes.
• Executed a $4.0 million agreement with Arizona Investissements to build approximately 50 state-of-the-art mobile hospitality units to initially be delivered to an eco-resort in upstate New York.
• Announced a joint collaboration with Capital Plus Financial, a certified Community Development Financial Institution, and EDS Development to complete 55 affordable houses to families displaced by Hurricane Maria in Guayama, Puerto Rico.
• Announced exclusive partnership with Blockchain Holdings Capital Ventures to build next generation modular data centers utilizing SG Blocks’ container-based construction, the first prototypes of which are expected to be delivered in the fourth quarter of 2019.

Management Commentary

“The first quarter of 2019 was highlighted by continued operational execution, as defined by our continued revenue growth and gross margin expansion,” said Paul Galvin, CEO of SG Blocks. “We continued to service innovative new clients, ranging from mobile hospitality units in New York to affordable housing for those displaced by Hurricane Maria in Puerto Rico, while making what we believe is substantial progress towards realizing our long-term operational goals.

“On the financial front, the first quarter of 2019 was highlighted with increased top line revenue performance and gross margin expansion, driving our gross margin profile to 31.4% in the first quarter. We are comfortable with the timeline to realize our $95.8 million backlog, and based upon conversations with our customers, and assuming no site-related delays, the Company currently anticipates generating revenue of approximately $18 million to $20 million in 2019 as compared to $8.2 million in 2018.

“We believe that our business model allows us to handle incremental revenue with a relatively modest increase in general and administrative expenses. We leverage both inventory and labor on our suppliers’ balance sheets and in most cases, pay for products and services only after we have been paid by our customers. Our model creates significant leverage and reduces working capital constraints to growth. These attributes, paired with the recent capital infusion from a follow-on equity offering, fortifies our balance sheet to support manufacturing and commercial activity for near-term transformative projects that we expect to deliver significant revenue in the quarters to come,” added Mr. Galvin.

“As we move towards the end of the second quarter of 2019, I remain confident in our ability to execute upon our backlog in 2019, while continuously growing our order book with new partners that are forward-thinking and creating solutions for tomorrow. We continue to seek out innovative ways to vertically expand our operating platform in order to provide end-to-end modular solutions on a global basis that add value to both us and our clients. I believe we are on the cusp of a major operational inflection point in our business and look forward to our anticipated creation of long-term value for our shareholders, clients and communities,” concluded Galvin.

For earnings history and earnings-related data on Sg Blocks, Inc. (SGBX) click here.

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