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SAFE & GREEN HOLDINGS CORP. (SGBX)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 revenue was $5.10M, down 33% year over year due to the discontinuation of medical testing revenue; construction/manufacturing revenue rose 21% YoY to $5.10M, with gross profit of $0.03M and adjusted EBITDA loss of $2.28M .
  • Operating expenses increased sharply to $5.64M (vs. $2.10M YoY), driven by headcount, RSU vesting, and spend to build SG DevCo and the medical segment; EPS was $(0.37) vs. $(0.11) a year ago .
  • Management reiterated near‑term execution catalysts: SG DevCo spin-off received SEC approval and a record date of Aug 21, 2023, with NASDAQ listing expected shortly; SG Echo targeted to turn cash‑flow positive in Q3 2023 .
  • Strategic wins include additional Domino’s QSR units, a multi‑million contract for modular units to an infrastructure client, design commencement of the McLean manufacturing facility, and new military/federal purchase orders exceeding $2M .

What Went Well and What Went Wrong

What Went Well

  • 21% YoY growth in manufacturing for construction services to $5.10M; “we are clearly executing on our business strategy as a vertically integrated developer and manufacturer of modular structures” (Paul Galvin) .
  • SG DevCo spin‑off milestones: SEC approval, Aug 21, 2023 record date, with listing expected shortly; independent appraisal valued SG DevCo at ~$74M .
  • Commercial traction: SG Echo to deliver/install three additional Domino’s QSR units; awarded a multi‑million modular contract; secured a >$2M military/federal purchase order .

What Went Wrong

  • Total revenue fell 33% YoY to $5.10M as medical revenue dropped to $0 (vs. $3.32M in Q2 2022); gross margin compressed to ~1% vs. ~10% YoY due to the lack of higher‑margin medical revenue .
  • Operating expenses surged to $5.64M (vs. $2.10M YoY), reflecting increased headcount/salaries, accelerated RSU vesting, and investment in SG DevCo and medical, widening net loss to $(5.56)M and EPS to $(0.37) .
  • Interest expense climbed to $0.52M (vs. $0.07M YoY) amid higher notes payable balances, pressuring bottom‑line results despite modest gross profit .

Financial Results

Consolidated P&L vs. prior quarters and prior year

MetricQ4 2022 (oldest)Q1 2023Q2 2023 (newest)
Revenue ($USD Millions)$4.10 $5.50 $5.10
Gross Profit ($USD Millions)$0.30 $(0.07) $0.03
Operating Expenses ($USD Millions)$4.00 $2.80 $5.64
Net Loss ($USD Millions)$(3.43) $(3.20) $(5.56)
Diluted EPS ($)$(0.24) $(0.22) $(0.37)
Adjusted EBITDA ($USD Millions)$(2.32) $(1.99) $(2.28)

Why the moves:

  • YoY decline reflects zero medical revenue in Q2 2023 vs. $3.32M in Q2 2022, partially offset by higher construction revenue; margins compressed alongside mix shift .
  • OpEx step‑up tied to people costs and RSUs, plus SG DevCo/medical build‑out; interest expense up on debt, widening net loss .

Segment Revenue and Mix (Q2 YoY)

SegmentQ2 2022Q2 2023
Construction Services ($USD Millions)$4.24 $5.10
Medical ($USD Millions)$3.32 $0.00
Total ($USD Millions)$7.55 $5.10

KPIs and Balance Sheet Highlights

KPIPrior PeriodCurrent
Backlog ($USD Millions)$6.81 (Dec 31, 2022) $2.23 (Jun 30, 2023)
Cash & Short‑Term Investments ($USD Millions)$0.60 (Dec 31, 2022) $1.60 (Jun 30, 2023)
Stockholders’ Equity ($USD Millions)$20.36 (Jun 30, 2022) $9.33 (Jun 30, 2023)
Working Capital ($USD Millions)—~$(5.78) (Jun 30, 2023)
Interest Expense ($USD Millions)$0.07 (Q2 2022) $0.52 (Q2 2023)

Non‑GAAP adjustments:

  • Adjusted EBITDA excludes litigation expense, stock issued for services, and stock‑based compensation; reconciliation provided in press release exhibits .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SG DevCo Spin‑off2023“Spin‑out in ~90 days” (May 11) SEC approval; record date Aug 21, 2023; NASDAQ listing expected shortly Updated, milestones achieved
SG Echo Cash FlowQ3 2023Positive cash flow targeted in 2023 Expects SG Echo to turn cash‑flow positive in Q3 2023 Maintained/timed to Q3
2023 Revenue TrajectoryFY 2023—On track to ~$30M revenue in 2023 (management commentary) Introduced qualitative target
OpEx as % of RevenueFY 2023Expected to decline meaningfully (Q1 commentary) Not updated explicitly in Q2 release; continued investment in SG DevCo/medical No formal update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022)Previous Mentions (Q1 2023)Current Period (Q2 2023)Trend
Manufacturing capacity & cash flowCapacity goal >$150M annualized; SG Echo positive cash flow in 2023 Waldron facility CO; SG Echo positive cash flow targeted Q3 SG Echo expected positive cash flow Q3; McLean facility in design Execution milestone approaching
SG DevCo spin‑off~$74M appraisal; Q2 spin‑out anticipated Spin‑out in ~90 days SEC approval; Aug 21 record date; listing expected shortly Advanced to actionable event
Commercial traction (Domino’s, infra client)Logistics client orders (~$11.5M total POs) 2 Domino’s QSR units proof‑of‑concept; ~$6M additional units 3 additional Domino’s units; multi‑million modular contract Broadening customer wins
Medical initiativesTeamsters 848 partnership; plan national footprint HALO diagnostics partnership; 4 modules by year‑end First 4 modules on track by year‑end; Native American tribe project planning Building pipeline
Environmental segment (Sanitec)10‑yr exclusive NY distribution; national footprint planned Advancing sales/service infrastructure Continued focus; fit with medical sites Early build‑out persists
Macro/costs/inflation——Inflation raised project costs; going‑concern disclosure and financing initiatives Cost pressure/financing front‑of‑mind

Management Commentary

  • “We are clearly executing on our business strategy as a vertically integrated developer and manufacturer of modular structures” (Paul Galvin, Q2 press release) .
  • “We expect SG Echo will turn the corner to positive cash flow in the third quarter of 2023” (Paul Galvin, Q2 call) .
  • “We focused on leveraging our solid asset base to secure non‑dilutive financing… including the planned sale of our Lago Vista site” (CFO Tricia Kaelin, Q2 press release) .
  • “We are on track to hit $30 million in 2023, more than double our 2022 revenue” (Paul Galvin, Q2 press release/call) .

Q&A Highlights

  • The available transcript captured prepared remarks emphasizing SG DevCo milestones, SG Echo’s expected Q3 positive cash flow, and commercial wins (Domino’s, infrastructure); detailed Q&A content was not retrievable due to database inconsistency, and management’s commentary reiterated operational focus and financing plans .

Estimates Context

  • Wall Street consensus estimates via S&P Global for Q2 2023 and prior quarters were unavailable at the time of this analysis due to a data access limit exceeded. As a result, estimate comparisons and beat/miss assessments are not provided here (Values retrieved from S&P Global).

Key Takeaways for Investors

  • Mix shift away from medical testing created a revenue headwind and margin compression; construction/manufacturing growth (+21% YoY) demonstrates core traction but profitability depends on throughput and cost discipline .
  • Near‑term catalysts: SG DevCo spin‑off (record date set; listing imminent) and SG Echo’s targeted Q3 positive cash flow; both events could reset the narrative and capital structure optics .
  • Commercial momentum across QSR and infrastructure clients suggests expanding end‑markets for modular solutions; new military/federal orders add diversification .
  • OpEx inflation and stock‑based compensation materially impacted results; watch for normalization in OpEx intensity versus revenue as projects scale .
  • Balance sheet actions (asset sales, non‑dilutive financing, factoring) are bridging liquidity; execution on Lago Vista and project pipeline conversion will be key to sustain operations .
  • Backlog decreased to $2.23M as of Q2; rebuilding backlog and accelerating conversion will be essential to support the ~$30M 2023 revenue trajectory management articulated .
  • Trading lens: Spin‑off mechanics, cash‑flow inflection in manufacturing, and visible customer wins are likely stock catalysts; risk remains around financing costs and execution amid higher interest expense and compressed margins .