Sg Blocks, Inc. (NASDAQ: SGBX) reported Q2 EPS of ($0.29). Revenue for the quarter came in at $2.3 million versus the consensus estimate of $1.54 million.

• Revenue increased 130% to approximately $2.3 million, as compared to $1.0 million in Q2 2017. Approximately $0.8 million in revenue from a $5.6 million contract was deferred into the third quarter due to project timing from June to July 2018.
• Construction backlog increased to $102.9 million, as compared to $102.8 million at March 31, 2018 with $3.8 million in contract revenue recognized in the six months ended June 30, 2018.
• Performed activity on 15 out of 16 total projects in backlog in Q2 2018.
• Gross profit totaled approximately $32,000, as compared to $146,000 in Q2 2017. Gross profit margin as a percentage of revenue for projects outside of one $5.6 million contract had a margin profile range of 18% to 20% in Q2 2018.
• Net loss totaled $1.2 million, or $(0.29) per basic and diluted share in Q2 2018.
• Named Scott Hill, a 30-year modular construction veteran, as Vice President of Operations.
• Secured an architectural and engineering services contract for a 27,000-square-foot affordable housing project on the West Coast.
• Secured a construction and delivery contract for a 3,500-square-foot fully modularized food and beverage park in Orlando, Florida.
• Initiated procurement of containers for the fabrication of a 242-car parking garage in Houston, Texas.
• Secured a 23 module, 6,000-square-foot construction and delivery project with Gather GVL, an eco-friendly food and beverage venue in Greenville, South Carolina.
• Announced partnership with Isodiol International Inc. to construct an initial 10 “KURE Vape Pod” retail locations across the United States and Canada.
• Signed Master Services Agreement with Grimshaw Architects, a leading global architecture firm, for incorporation into its global award-winning industrial design portfolio.
• Appointed Yaniv Blumenfeld, a 20-year real estate veteran with extensive commercial real estate loan and equity transaction experience, to the Company’s Board of Directors.

“The second quarter of 2018 was highlighted by our improved financial performance and the announcement of our strategic partnership with Grimshaw Architects, a globally renowned architecture firm,” said SG Blocks Chairman and CEO Paul Galvin. “This partnership allows SG Blocks the opportunity to participate in high-margin and high-visibility projects around the world – moving us towards our gross margin targets and increasing awareness of our unique container-based construction solution throughout the global architectural industry.

“On the financial front during the second quarter, we delivered solid revenue growth that increased 130% versus the same comparable period in 2017 and 49% as compared to the first quarter of 2018. Unfortunately, due to site delays at the HOLA Project, we had to defer approximately $0.8 million of revenue into the third quarter of 2018. We do expect the HOLA Project to be commissioned in the second half of 2018 and it has already led to the introduction of several large affordable housing projects in the Los Angeles area,” continued Galvin.

“While gross margins were muted in the second quarter of 2018 as a result of work on legacy, lower-margin projects, we did achieve a gross profit margin profile in the range of 18% to 20% in Q2 2018 for projects outside of the $5.6 million HOLA contract. We believe that, given the asset-light nature of our business model, we can handle incremental revenue with a relatively modest increase in general and administrative expenses. We leverage both inventory and labor of our platform partners and, in most cases, pay for products and services only after we have been paid by the customers.

“We continue to look for innovative new ways to expand our operating platform and believe that we are positioning ourselves to achieve our goal of sustainable cash flow-positive operations. Our backlog of high-margin projects continues to grow, and we believe that in the upcoming quarters we are setting up to deliver significant top-line revenue growth that will achieve our stated year-end goals for fiscal 2018.

“Moreover, the third quarter of 2018 is off to a strong start as we are participating in an increased number of project referral opportunities with our new partner, Grimshaw Architects. Due to this activity and our growing backlog, we recently made a strategic hire, Scott Hill, as our new Vice President of Operations. Mr. Hill is a leading modular construction expert and we believe his expertise will ensure an accelerated conversion of our backlog and efficiently scale our rapidly growing platform business. We believe Mr. Hill’s appointment is also a testament to the level of inbound interest we are receiving regarding potential partnerships utilizing our sustainable method of construction. We believe this indicates that our disruptive solution to traditional construction is gaining momentum.

“We look forward to sharing more on our developing story at several institutional investor conferences in the fall and the upcoming Heart of Los Angeles Community Arts and Recreation Center Ribbon Cutting Ceremony,” concluded Galvin.

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