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 @sgblocks and select the space titled SGBX 2Q 2022 earnings call. As a reminder, if you want to ask a question, you will need to join the Twitter Spaces on a mobile device. If you want to listen, you can join the Twitter Spaces 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 Galvin, please remember that various remarks about future expectations, plans and prospects 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. SG Blocks 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 SG Blocks . Paul, take it away.
Thank you, Mark, and welcome to all. We're excited to be hosting our first earnings ever on Twitter Spaces. 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 that is. The S& G in our name stands for Safe and Green. This is where our mission begins. Picture with me the same things that have helped, too, but have also lost its promise. These same things also. In fact, those same things have the potential to cause. That's why SG Blocks is taking a different approach. This is a unique cross economy, making it unique and certainly a lot more free from. On top of that, they are already perfectly equipped with it, which makes them an ideal partner for us.
It's that perfect storm of perfect fits to get started here, and it has been significant. Our group was gifted to go down this path because it was, and it still is, the wrong direction to take. Our partners will go on to lead the way in technology while the SG Blocks will follow with its establishment. Our system blocks pretty much has been transformed into the third largest hotel in this country when it comes to its factories across the country. However, this next block has evolved significantly. What used to work for us, we now completed. This allows us to completely vertically integrate and gives us much more flexibility for any co-process that comes our way. In addition, while previously we only had 1,000 different product offerings, which is the first by modular construction to come, what's next?
You think of modular construction the same way you might think of traditional construction, which is that it's not much different than traditional construction. Therefore, they brought flexibility for our clients and different types of projects that SG Blocks now pursues. We love modular because it's much lower carbon footprint to produce this construction as well as the speed at which it can be built. Because modular construction is faster, it's subject to the same issues with campground because of construction sites. More modular construction reduces any chances of disputes and other types of delays. We have found that depending on the type of project, it can provide our full depth partnership with the best detail on site build. It is what falls back on when the foundation is poor. We are in the factory. A lot of our product is out approximately every 20 minutes.
If the finish with the being done in advance would cost $320 construction at every $20. These projects are built up in our log in. As we discussed, we use the exclusive build for other inclusive build. Today, we are and build projects with products. In addition, we provide a COVID soon to be point-of-care. We are seeking to disrupt the medical to provide safer. We are a builder of biomedical structures of the best corporate in the country. Housing has been a passion of ours. Across the block, I spent the first 25 years of my career. A non-profit that may help the best provide housing services and to also invest in buyers who have.
Given the housing crisis that we face, I feel people across the country must be involved as we now seek to find a profit traditional construction. America suffers from a massive housing crisis. As you know, one of the things that we suffer from traditional construction costs of supply because there is no in the construction industry. According to McKinsey, globally, labor productivity growth in construction has averaged 1% per year over the past two decades, compared with the growth of 2.8% for the global economy and 3.6% for manufacturing. In addition, according to the National Equipment Register, the construction industry faces serious asset problems related to equipment and security around building. Our modular prevents and clears up asset risk and storage. Traditional construction has one of the largest and longest.
What we're providing is five alternatives to traditional construction that is not only quicker but less expensive. Our success is evident in our client list, which includes some of the world's recognized companies, including Verizon, Equinox, Starbucks, Lacoste, Puma, and Taco Bell. We are actively pursuing a partnership with existing new markets. As we'll see in our financial section, we put significant focus to our expansion in commercial, which we will discuss in more depth later in our presentation. Despite being a global company, we are focused on large vertical. Commercial construction vertical is $80 billion market opportunity. Global modular construction vertical is $85 billion market opportunity. Point-of-care diagnostic medicine in 2027 will be $30 billion. The largest e-commerce market, multi-family housing, is expected to have $213 billion in 2022 alone.
With a company that is unlike any other, we are leading the charge for less expensive and quicker to market solutions. Before discussing our financials, let's talk about our important segment. We're a construction, engineering, and medical facility. We currently own and operate our own campus in Oklahoma, which allows us to control our production. Our second factory, SG Blocks Durant ribbon cutting, should occur in late September, as previously announced. Our current manufacturing pipeline is $750 million driven by Murfey and SG DevCo projects. We significantly seek additional manufacturing capacity to meet our growth. We have further executed long-term strategic production strategy. We're currently up to 1.3 billion sq ft of production space identified for in development for ourselves and for third parties to support. We see significant potential for our development company and our medical segment with the full power.
We are focused to capitalize on the opportunity to lead product and systems healthcare solutions. We think we create a different path forward. Second, we are focused on point-of-care testing, something that is revolutionary. We are focused on being able to provide a pilot for point-of-care by being able to provide fast and efficient delivery of state solutions. We have been able to touch base on cities including Detroit, Chicago, and the entire Northeastern Seaboard as we have the support both at the state and county level in 2021. Giving us the opportunity to capitalize on capital projects like our recent win on point-of-care testing lab service contract at the Port of Long Beach for 10,000 tests on container 648. We're happy to report that we executed on 11 contracts this quarter and will be able to talk to you about them.
This is just what we expect to be the beginning. We believe we have already established this as well as our partnership between employer and employee, having point-of-care testing lab services at a place of work is a win-win for all parties. We are working with people to perform best-in-class diagnostic testing that is not invasive via blood draw. Early detection work to get people back to healthy and productive lives. Our story of growth in 2019 was $3 million in revenue. This grew by 193%, $8.8 million in 2020, and then skyrocketed to $12.5 million in 2021, a 13-fold increase. The phenomenal growth was driven for a lot of reasons, but segment and segment is the category for our company to become diverse from a revenue perspective.
In addition to this, our experience during COVID has set us up to be able to capitalize on point-of-care projects to protect critical markets just as they are at the center of COVID. I'll pass this on to Mark to continue with the rest of the discussion.
Please continue to hold the line. The conference will resume shortly. Again, please continue to hold the line. The conference will resume shortly.
Gains with a thinly traded stock. 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, to grow deeper and deeper into our record backlog of approximately 750. In closing, we are thrilled to have the opportunity to express our vision for the future of our global growth, having a 200% to a 13-time increase in third quarter last year, along with our best quarter to date. We believe that this is just the start to come in our equity story. Historically, our earnings calls have had a new investment in an effort to further our story to provide transparency to potential new investors.
This will be the first time that we conduct one level of conflict as we think about the future. Thank you very much for your time and allowing us to tell our story. We are excited for what the future holds and how we can impact it.
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 Base Capital.
Yeah. Hello. Thanks. Galvin, I had a question on, you know, you were speaking to some of the different companies we're currently partnered with in building out like Taco Bell and some others. 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.
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 small footprint store, walk up, drive through store that can be if they're not doing property. Generally speaking, we can potentially site the fast food restaurants between four to seven weeks of opening time, which is really hard for them to avoid. Lastly, we've had a lot of great fun and success working with food hall and food court market, and we still see a steady stream, including people creating some interesting venues. You can see a lot of them on our website. I won't single any one particular out.
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.
Awesome. Thanks, Mark. Appreciate you doing this on here, Galvin. My question is around the concentrated revenue. I was just looking through, looks like, over 70% of the reported revenue last 10-K 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, you know, curious how you're tamping down on the risk of that revenue concentration.
Sure. That's a great question, and it's one we have individual conversations. Our goal was never to become a full-time COVID testing company. Our goal was to prove that point-of-care medicine, if strategically done and done 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 used that money to buy the real estate for our factory and to buy the real estate for our development company and to buy into projects that will fill our factories. There's always been anticipated tapering off of COVID revenue from the airport location. Part of that strategy had a major milestone last week when we were able to join forces with the Teamsters Local 848 down at the Port of Long Beach. Progressive leadership.
They're interested in bringing point of care primary care, point of care testing, and point of care lab services to the 10,000 members at the port daily 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 employees relate to each other. This type of intervention will help people with health, with young, healthy, early diagnostic tests, which we hope to be talking about more shortly. 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, predictable revenue in that vertical. Those events occur
Okay, perfect. One quick follow-up question. Just talking about the industry overall. Engineering and construction industry has really had a nice boom, right? For 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 low mortgage rates, there was reopening economy, infrastructure stimulus, and more. Now we're starting to see labor as other pieces in the sector that could affect SG Blocks. Then of course, the rising inflation. You're not gonna get down the inflation hole 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.
One is just understanding that we're gonna have to always be flexible on the ground and have 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 does well in best practices. We have multiple scenarios to deliver, always procure suppliers for volume. All of that manufacturing potential, we could potentially build them out for suppliers to feed our ecosystem. Lastly, the largest client inside our pipeline to build our factories is SG DevCo itself. 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 alignment.
Okay, perfect. Just my last question, then 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?
The overall market conditions have been rough for most sectors. I would say our stock for the past eight to 10 quarters have been between $1.50 and say $8.70 or $9. We're running a business with all the right verticals. We have the right BPS. Our approach to investor, our approach to fighting for shareholders, and in our approach to the cap table. The stock price has fluctuated in that range. We think the current price, which is why we deploy capital to acquire people to be very value stock.
Thank you, sir.
Thanks for the question, Wolf. Really appreciate it. Next up, we're gonna bring Ticker History.
Thanks, Mark. More general question for the group. Paul Galvin, you talked about, you know, the construction vertical and the pivot to medical. Do you see other verticals that SG Blocks could eventually expand to and operate in?
Yeah. We think that getting into some environment, which includes medical waste, sanitary waste, we think that is a new and potentially booming new market that tightly controlled that doesn't offer best practices. We have a license with a technology called Sanitec that microwaves medical waste into landfill-eligible materials versus the current practices, which sometimes are incinerated up and down to the water table. We're looking for potential verticals. We think there's gonna be an awful lot of infrastructural money spent by the government, state, federal level, and we want to have access to some of that, and we have a way to do that. Otherwise, the development companies have residential components, hospitality components, hotel components. Inside each project, there's a diversity of opportunity and a hedge on any one bet.
For the first time, we said that we have a broad base of revenue, each one that could potentially pop at any time. We're going to do some more thinking about the relationship with the Team sters. We're just trying to get a grasp on what that opportunity is going to mean for 2023 and to have our module support providing services in 2023.
Great. Thanks so much for the question, Ticker History. Next up, we're gonna bring Charlie to the floor once he's able to connect. 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. I was looking at some of the peer metrics. I was looking at, like, Greenbrier, AECOM, and some of the others. 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?
That's a great question and observation. We don't think that they are a perfect fit of peers for us. One of the things that's going on now is the company is undergoing 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 it is necessarily. I think we see that all as a part of the process.
Okay. Got it. Appreciate that. It looks like, I think, is that Charlie up here now, Mark, or Coffee? Someone else came up.
Yeah. We were gonna bring Charlie up in a second, but first let's bring Coffee Meets Capital up.
Hey, thanks for taking my question. I was just curious.
Hello.
on the recently signed LOI, if there was additional progress for the Lago Vista property.
Sure. The Lago Vista property is still under LOI. We are hopefully wrapping up the process of having a purchase and sale agreement in the near term. We continue to advance best practices on getting the title approved and the land use change. We've talked about that from partial rental to full rental. We still love the asset. We look forward to working with the potential buyer. That's the latest on Lago Vista.
Got it. As a follow-up, could you talk a little bit more about your DevCo? How much control do you typically have, and what are the funding requirements after you get the project set up? Will banks typically go fund your build with debt, or how does that work?
Sure. Modular construction is the fastest growing sector of the construction industry to go up. There are parts of the industry that have merged with MLF. Typical standard debt metrics would be part of our plan, which is buy sites, entitle them, and then get the permit ready, and then build the structure in a controlled environment at a controlled price and an exit time. That's a formula to produce projects that we believe should all be at or above 25% IRR on a project basis. The majority of the projects we're in, we have operating rollover. The Cumberland Inlet project, where it is the capable hand of Jacoby Development. We have a 10% non-reciprocal interest in that and are contracted to build out all the units and get the project performed in the asset class.
Got it. Okay. Thank you.
Great. Thanks so much for the question. Now let's bring Charlie up to the floor.
Hello?
Hey, we can hear you.
In the last few quarters as COVID has fallen off, the medical revenue has fallen. As you bring in the other,
Diseases like diabetes that you've mentioned in previous calls, how long do you think it'll take for those to ramp up to overtake the revenue peaks of COVID?
We see it more transitioning to operating out of L.A. It's contracted and December 31 of this year. Our LOI is to have certain modules at port in January of 2023, and that we see that as much more permanent and predictable revenue, a much approach to wealth than what we're doing now. 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, of the diseases that years of life. We're gonna combine that with whatever medical testing has to be done at the moment. Some of it'll be brick-and-mortar, intended, sitting in containers some. The other is gonna be mobile and on chassis, going where people are episodically. We're very excited about it.
It's a real change in medicine, and one we think is gonna pay off.
Okay, one more question about the pipeline. You said the $750 million y'all currently have in the pipeline, do you think that will speed up growing or do you think you hit a peak? Do you have any projections in actual revenue you will hit in this next quarter and coming quarters?
Sure. That $750 million are related to the projects that are inside the development company. We're either the owner, manager or a partner that has the contractual rights to build every one of those. Those are gonna 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 wanna get inside above 10,000 units. That will only increase the $750 million. It'll take years to roll out that fleet of homes and then replace them with the pipeline. It'll fully activate our factory network. In a way where we're not only gonna get the revenue from the factory, but we're gonna be vertically integrated. We're the client.
We're gonna own asset management fees, project fees, development fees, appreciation, income from rent, income from sale, refinance. Every one of those ways is a way to raise capital for our company without issuing a single share. That's what the real estate portfolio has done. That's what the eventual monetization of Lago Vista has done. In contract at $15 billion or in LOI to sign $15 million. Our acquisition price and our all-in, approximately $4.5 million. That profit will help the company grow and give us much-needed operating monies. It'll give us the juice we need to unfold and unleash the power of our projects and our factories in a more rapid manner. That's the story.
Okay, one last question. I know the company right now is in a rapid growth phase, but have you all started to think about net income and profitability?
The day we sell Lago Vista will be positive cash flow basis that year. Otherwise, we'll be issuing some guidance as to revenue as we get closer to our own projects being in factories. Since then, we control the project, the project's financing, and the operations at the factory level. We'll be able to give a little guidance and visibility on as our projects enter the factory, so we can be less dependent on the up and down of other entrepreneurs or potential clients.
Okay. Thank you, Paul.
Okay.
Thank you very much, Charlie. Thanks, Paul and Charlie. Now for our last question, it's gonna be Ticker History. Ticker History, you're up.
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?
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 of care, getting Lago Vista to the point of sale, and to continue to build our factories. The market cap will take care of itself. We only have 12 million shares. We have enough operating funds, and we have multiple ways to raise money to grow. That doesn't require us to issue shares.
At some point, the weight of all that good news and all the support, and our friends at Equity Animal who are gonna help us fight through and get this story further, and get the right tools for the right job here. We think new portfolio, 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.
Fantastic. Paul, very much appreciate the time and appreciate everyone listening. Wanna give a special shout out to Dr. Parikh Patel, who is here. Thank you Wolf, Ticker History, Historic Bids, Charlie, Base Capital, Coffee Meets 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. I thought the last question was just a great one that highlights a lot of the opportunity that's here. That being said, wanna encourage everyone to follow the SG Blocks 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.
Thank you. This concludes the presentation. Thank you for dialing in, and you may now disconnect your lines.