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SAFE & GREEN HOLDINGS CORP. (SGBX)·Q1 2023 Earnings Summary

Executive Summary

  • Q1 2023 revenue was $5.5M, down 36% year over year due to the discontinuation of COVID-19 testing, but Construction Services revenue rose 230% YoY to $5.5M, reflecting strong demand in the core modular manufacturing business .
  • EPS was $(0.22), compared to $(0.06) in Q1 2022, driven by higher OpEx to support growth and investments in SG DevCo and the medical segment; adjusted EBITDA swung to a $(2.0)M loss from a $0.239M gain YoY .
  • Management reiterated expectations for SG Echo (manufacturing) to turn cash-flow positive in Q3 2023 and highlighted potential capacity expansion from the new Waldron facility (up to $25M annualized revenue), plus a planned spin-out of SG DevCo in ~90 days to unlock value .
  • Key near-term catalysts: execution on Domino’s QSR modular storefront rollouts, $6M private customer order delivery by Q3 2023, Waldron ramp, and SG DevCo spin-out; liquidity expected to be supplemented by the Lago Vista property transaction, which was refinanced for ~$2.0M net proceeds and targeted for sale in mid-2023 .

What Went Well and What Went Wrong

What Went Well

  • Construction Services strength: segment revenue grew 230% YoY to $5.5M, supporting the pivot back to core modular manufacturing and validating demand .
  • Capacity expansion and strategic wins: Waldron facility certificate of occupancy secured; management targets up to $25M in additional annualized revenue potential; Domino’s QSR proof-of-concept units delivered and installed, with plans for broader rollouts .
  • Management tone and strategic confidence: “Our enthusiasm and outlook for the business has never been greater…We are confident that we have created a highly scalable and profitable business model,” reflecting momentum in four verticals and SG Echo’s projected positive cash flow in Q3 2023 .

What Went Wrong

  • Revenue mix shift headwind: total revenue fell to $5.5M from $8.6M on the wind-down of COVID-19 testing, pressuring gross profit (loss of $69K vs $2.5M profit a year ago) .
  • Margin compression and higher OpEx: operating expenses increased to $2.8M (from $2.1M), including $404K non-cash and significant expenses for SG DevCo and Medical buildout; adjusted EBITDA turned to $(2.0)M from $0.239M, reflecting investment ahead of growth .
  • Liquidity/working capital tightness: cash and short-term investments were $1.5M at quarter-end versus $13.1M a year earlier, increasing sensitivity to timely asset monetization (e.g., Lago Vista sale) .

Financial Results

Consolidated P&L and EPS vs prior periods

MetricQ1 2022Q3 2022Q4 2022Q1 2023
Revenue ($USD Millions)$8.6 $4.1 $4.1 $5.5
Gross Profit ($USD)$2.5M $(0.165)M $0.3M $(0.069)M
Operating Expenses ($USD Millions)$2.1 N/A$4.0 $2.8
Net Loss ($USD Millions)$0.717 $2.454 $3.3 $3.2
Diluted EPS ($USD)$(0.06) $(0.18) $(0.24) $(0.22)
Adjusted EBITDA ($USD Millions)$0.239 N/A$(2.32) (Q4) $(1.99)

Notes: Q3 2022 gross margin improved from (6.9%) to (4.0%) YoY, per company disclosure .

Segment revenue

SegmentQ3 2022Q4 2022Q1 2023
Construction Services Revenue ($USD Millions)$2.659 $4.2 $5.5
Medical Revenue ($USD)35% of revenue (no absolute disclosed) N/ADeclined materially YoY (no absolute disclosed)

Balance sheet and KPIs

MetricQ1 2022Q4 2022Q1 2023
Cash & Short-term Investments ($USD Millions)$13.1 $0.583 $1.5
Stockholders’ Equity ($USD Millions)$21.6 $14.9 $12.6
Construction Backlog ($USD)N/A$2,585,012 N/A
Project Pipeline (Gross Potential Value)>$800M (company pipeline) >$800M ~4,000 units; ~$800M at ~15% margins
Waldron Capacity PotentialN/AN/AUp to $25M annualized revenue within 12 months

Actuals vs Wall Street estimates

MetricQ1 2023 ActualQ1 2023 Consensus (S&P Global)Surprise
Revenue ($USD Millions)$5.5 Unavailable via S&P GlobalN/A
EPS ($USD)$(0.22) Unavailable via S&P GlobalN/A

Note: Wall Street consensus via S&P Global was unavailable for Q1 2023 at time of review.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SG Echo cash flow2023Positive cash flow in 2023 (manufacturing) Cash-flow positive by Q3 2023 and for full year Clarified timing (Q3); maintained full-year target
Waldron facilityNext 12 monthsOpening in Q2 2023; capacity supports >$150M annualized across network CO obtained; potential up to $25M additional annualized revenue from Waldron More specific revenue potential
SG DevCo spin-out2023Q2 spin-out anticipated; shareholders to receive 30% interest Nasdaq spin-out expected in ~90 days; 30% to existing shareholders Timing reiterated; structure maintained
Lago Vista asset monetization2023Auction; expected Q2 sale at premium Refinanced for ~$2.0M net proceeds; sale likely Q2–Q3 2023 Liquidity secured; sale timing window clarified
Teamsters medical modules2023Deploy initial 4 modules; repurpose LAX lab On track to deliver four modules before year-end; HALO added as diagnostics partner Execution progress; partnership expanded

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2022, Q4 2022)Current Period (Q1 2023)Trend
Manufacturing capacity & cash flowPlan for positive cash flow in 2023; network capacity >$150M annualized (Waldron opening Q2) SG Echo targeted to be cash-flow positive in Q3 2023; Waldron CO obtained; up to $25M annualized potential Improving visibility; timing narrowed
SG DevCo spin-outQ2 spin-out; 30% stake to existing shareholders; ~$74M appraisal ~90-day spin-out reiterated; 30% stake to shareholders Progressing; consistent messaging
Medical vertical (Teamsters, HALO)Plan to deploy 4 modules; point-of-care market growth to $51B by 2029 On track to deliver 4 modules; HALO partnership added; $5M gross revenue potential per site Execution continuing; ecosystem expanding
Environmental (Sanitec)10-year exclusive in NY; building sales/service footprint Advancing sales infrastructure; positioning as add-on for medical sites Building go-to-market
QSR rollout (Domino’s)N/ATwo units delivered/installed as proof of concept; plans to roll out more New commercial use case validated
Construction pipeline/backlogPipeline >$800M; backlog disclosed ~4,000 units in planning; ~$800M potential value, ~15% margins Stable large pipeline

Management Commentary

  • “During the first quarter of 2023, the Company achieved a 230% year-over-year increase in construction services revenue…we remain confident that SG Echo…will turn cash-flow positive in Q3, 2023” — Paul Galvin, CEO .
  • “The extra 58,000 square feet…has the potential to reach up to $25 million in additional annualized revenue for SG Echo within the next 12 months” .
  • “We are on track to deliver four modules [Teamsters 848] before year-end…we expect to generate $5.0 million in annual gross revenue per distinct medical site” .
  • “Our Construction Services segment is on course to attain positive cash flow in Q3 and for the full year” .
  • CFO: “Revenue…was $5.5 million compared to $8.6 million…reflecting the discontinuation of COVID-19 testing facilities…Operating expenses…$2.8 million…Adjusted EBITDA loss…approximately $2 million” .

Q&A Highlights

  • The Q1 2023 transcript provided prepared remarks and financial review; no detailed Q&A content was available in the retrieved document set. Management emphasized SG Echo’s path to positive cash flow, the Waldron capacity ramp, and SG DevCo spin-out timing and shareholder participation .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2023 revenue and EPS was unavailable at time of review; therefore, no beat/miss determination can be made. The company reported revenue of $5.5M and EPS of $(0.22) for Q1 2023 .
  • Given the mix shift away from COVID-19 testing and the investment ramp in manufacturing and development, we would expect estimates to adjust toward Construction Services growth, near-term margin pressure, and improved cash conversion in H2 once Waldron is fully operational .

Key Takeaways for Investors

  • Construction Services momentum is intact with sequential growth (Q4 to Q1) and 230% YoY; the manufacturing pivot is working despite the medical segment’s step-down post-COVID .
  • Near-term margin pressure reflects deliberate investment (SG DevCo, Medical) and ramp costs; monitor Waldron throughput and SG Echo cash-flow timing (target Q3) as the key inflection .
  • SG DevCo spin-out within ~90 days and the Lago Vista monetization are potential catalysts to unlock value and bolster liquidity in 2023 .
  • Commercial validation via Domino’s QSR and the $6M private customer order underpins demand diversity beyond residential, supporting utilization and proving modular speed-to-market advantages .
  • Balance sheet is tight vs prior year; successful asset sales and execution on backlog are important to sustain operations and fund growth until manufacturing is cash-flow positive .
  • The pipeline (~4,000 units; ~$800M potential) and expected margins (~15%) provide medium-term visibility if conversion accelerates; watch contract wins and factory productivity in coming quarters .
  • Environmental (Sanitec) and Medical (HALO/Teamsters) segments can add incremental revenue streams and cross-sell synergies with modular manufacturing over time, but are still in early commercialization stages .