Smith-Midland Reports Second Quarter 2023 Financial Results

Rhea-AI Summary

Smith-Midland Corporation reports Q2 2023 results with an 11% increase in revenue and a record backlog of $60.9 million.

Positive

• Revenue increased 11% from the prior year quarter to $14.7 million
• Selected to produce SlenderWall architectural precast panels for $4.5 million hospital project
• Awarded $2.1 million contract for architectural panels for BMW's campus in South Carolina
• Backlog of $60.9 million as of August 1, 2023 is a record for the company

Negative

• Net loss of $782,000, primarily related to isolated items in the quarter
• Cost inflation and cybersecurity issue negatively impacted the bottom line

Revenue Increased 11% from Prior Year to $14.7 Million; Record Backlog of $60.9 Million

Announces Preliminary Third Quarter Year-over-Year Revenue Growth in Excess of 20%

MIDLAND, VA / ACCESSWIRE / October 11, 2023 / Smith-Midland Corporation (NASDAQ:SMID) a provider of innovative, high-quality proprietary and patented precast concrete products and systems announced its second quarter results for the period ended June 30, 2023.

Second Quarter 2023 Summary Compared to Second Quarter 2022

• Revenue increased 11 percent from the prior year quarter to $14.7 million
• Product sales increased 58 percent from the prior year quarter to $10.7 million
• Net loss of $782,000, or loss per share of $0.15, primarily related to a pair of items isolated to the quarter
• Selected to produce SlenderWall architectural precast panels for $4.5 million hospital project
• Awarded $2.1 million contract for architectural panels for BMW's campus in South Carolina

The Company's second quarter 10-Q filing was delayed due to the transition to a new independent registered accounting firm. The Company expects to file its third quarter results on or prior to the November 14^th deadline as required by the Securities and Exchange Commission and does not anticipate additional delays in its future filings.

"Revenue for the second quarter of 2023 represents the third consecutive quarter of double-digit, year-over-year revenue growth, reflecting the underlying strength of our business," said Ashley Smith, Chairman and Chief Executive Officer of Smith-Midland. "We continue to secure new contracts thanks to increased demand for our innovative product offerings and increased spending from the public and private sectors. Our backlog of $60.9 million as of August 1, 2023 is a record for the company, and it does not include the recently announced project to produce $6.8 million in architectural precast panels for the Baltimore Harbor Tunnel."

"Our bottom line was negatively impacted by the overall cost inflation that persists across our business as well as by a pair of items that were isolated to the quarter. We incurred approximately $400,000 in costs related to the remaking of architectural panels for one specific project because of product from a material supplier that did not meet project specifications. Secondly, we had a cybersecurity issue related to a payment to one of our vendors for approximately $342,000. We have been able to recover $67,000 to date from insurance and believe there is an opportunity to offset most of the remaining amount through additional insurance proceeds," Mr. Smith continued.

"We expect third quarter revenue growth to be in excess of 20 percent compared to the third quarter of the prior year as we execute on the production of our historic backlog. Overall, the multiple tailwinds across our business should continue the trend of strong top-line growth, positioning us to create long-term shareholder value," Mr. Smith concluded.

Second Quarter 2023 Results

The Company reported revenues of $14.7 million for the second quarter of 2023 compared to revenues of $13.3 million in the second quarter of 2022. Product sales for the quarter were $10.7 million, a 58 percent increase from the prior-year quarter. Service revenue, which includes barrier rentals, royalty income and shipping and installation, was $4.0 million compared to $6.5 million in the second quarter of 2022.

Gross profit was $1.8 million compared to $3.2 million in the prior year quarter. Gross margin for the current year quarter was 12.2% compared to 24.4% in the previous year's quarter. This year's gross profit and margin results include additional costs, of approximately $400,000 related to panels remade for one specific project and lower barrier rental revenue, which generate higher margins than product sales.

Operating loss for the quarter was $981,000 compared to operating income of $1.1 million in the prior-year quarter. The decrease is mainly due to the reduction in gross profit and due to a one-time wire fraud incident that occurred in the second quarter of 2023 resulting in additional general and administrative expenses of $342,000. Net loss for the second quarter was $782,000, or loss per share of $0.15, compared to net income of $910,000, or $0.17 per diluted share in the second quarter of 2022.

Product Sales

Total product sales for the second quarter of 2023 were $10.7 million compared to $6.8 in the prior-year quarter. Soundwall sales were $1.7 million compared to $0.4 million in the second quarter of 2022 due to higher production volumes. Architectural panel sales were $0.3 million, compared to $1.3 million, reflecting the completion of two architectural projects in the second quarter of 2022. SlenderWall sales were $1.5 million, compared to $0.1 million in the second quarter of 2022, due to two projects being produced consecutively in the first half of 2023 compared to a single project in the first half of 2022. Miscellaneous wall sales increased to $2.9 million from $0.6 million in the prior-year quarter due to the increased amount of retaining wall projects in production. Barrier sales were $1.8 million compared to $2.3 million in the second quarter of 2022, due primarily to a large barrier project that began in the prior-year quarter and completed by the end of 2022. Easi-Set and Easi-Span Building Sales increased 52 percent from the prior-year quarter to $1.4 million.

Service Revenue

Service revenue which is comprised of royalty income, barrier rental revenue, and shipping and installation totaled $4.0 million, compared to $6.5 million in the second quarter of 2022. Shipping and installation revenue was $2.7 million compared to $3.7 million in the prior year quarter. Royalty income decreased to $0.6 million from $0.8 million in the second quarter of 2022, due to the project delays experienced by licensees. Barrier rental revenue for the second quarter of 2023 was $0.7 million compared to $2.0 million in the prior-year quarter due to a temporary slowdown in barrier rental projects.

Balance Sheet and Liquidity

As of June 30, 2023, cash totaled $4.7 million compared to cash totaling $6.7 million for the year ended December 31, 2022. Account receivables totaled $16.6 million and debt totaled $6.0 million as of June 30, 2023. Capital spending totaled $1.8 million for the second quarter of 2023.

Macro Environment and Outlook

With the growing backlog and continued strength in bidding activity, Smith-Midland anticipates increased sales volumes for the remainder of 2023 and continuing into 2024. The immediate outlook of continued infrastructure initiatives across the United States are anticipated to yield positive tail winds across our portfolio of patented, proprietary, and custom products. While we see a continually dynamic macro environment including increases in labor and material costs, we are working hard to mitigate these effects and to attract and retain quality labor as well as manage input costs. Backlog was approximately $60.9 million recorded as of August 1, 2023. The majority of the backlog is anticipated to be fulfilled within 12 months; however, some projects will have a multi-year timeline. The Company remains focused on long-term strategic growth initiatives to drive shareholder value.

About Smith-Midland Corporation

Smith-Midland develops, manufactures, licenses, rents, and sells a broad array of precast concrete products and systems for use primarily in the construction, transportation, and utility industries.

Smith-Midland Corporation has three manufacturing facilities located in Midland, VA, Reidsville, NC, and Columbia, SC, and a J-J Hooks^® Safety Barrier rental firm, Concrete Safety Systems. Easi-Set Worldwide, a wholly owned subsidiary of Smith-Midland Corporation, licenses the production and sale of Easi-Set products, including J-J Hooks and SlenderWall^®, and provides diversification opportunities to the precast industry worldwide. For more information, please call (540) 439-3266 or visit www.smithmidland.com.

Forward-Looking Statements

This announcement contains forward-looking statements, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors which might cause such a difference include, but are not limited to, product demand, the impact of competitive products and pricing, capacity and supply constraints or difficulties, inflationary factors including potential recession, general business and economic conditions, our debt exposure, our high level of accounts receivables, the effect of the Company's accounting policies and other risks detailed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

Company Contact:

Stephanie Poe, CFO
540-439-3266
investors@smithmidland.com

Investor Relations:
Steven Hooser or John Beisler
Three Part Advisors, LLC
214-872-2710

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

ASSETS	June 30, 2023 (Unaudited)			December 31, 2022
Current assets
Cash	$	4,727		$	6,726
Accounts receivable, net
Trade - billed (less allowance for credit losses of approximately $912 and $781, respectively), including contract retentions		16,554			16,223
Trade - unbilled		653			990
Inventories, net
Raw materials		2,396			1,776
Finished goods		2,356			2,042
Prepaid expenses		1,212			706
Refundable income taxes		577			477
Total current assets		28,475			28,940
Property and equipment, net		26,886			25,124
Other assets		356			249
Total assets	$	55,717		$	54,313

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(continued)

LIABILITIES AND STOCKHOLDERS' EQUITY	June 30, 2023 (Unaudited)			December 31, 2022
Current liabilities
Accounts payable - trade	$	5,684		$	5,816
Accrued expenses and other liabilities		874			799
Deferred revenue		1,991			2,243
Accrued compensation		792			788
Accrued income taxes		-			146
Operating lease liabilities		51			77
Current maturities of notes payable		629			618
Customer deposits		2,985			737
Total current liabilities		13,006			11,224
Deferred revenue		2,633			2,174
Operating lease liabilities		24			45
Notes payable - less current maturities		5,412			5,730
Deferred tax liability		2,181			2,085
Total liabilities		23,256			21,258
Stockholders' equity
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued and outstanding		-			-
Common stock, $.01 par value; authorized 8,000,000 shares; 5,345,189 and 5,345,189 issued and 5,256,413 and 5,256,413 outstanding, respectively		53			53
Additional paid-in capital		7,611			7,440
Treasury stock, at cost, 40,920 shares		(102)			(102)
Retained earnings		24,899			25,664
Total stockholders' equity		32,461			33,055
Total liabilities and stockholders' equity	$	55,717		$	54,313

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue
Product sales	$	10,702		$	6,788		$	18,944		$	12,638
Barrier rentals		700			1,962			1,819			3,447
Royalty income		594			771			1,005			1,198
Shipping and installation revenue		2,702			3,732			5,772			6,405
Total revenue		14,698			13,253			27,540			23,688
Cost of goods sold		12,912			10,023			23,588			18,810
Gross profit		1,786			3,230			3,952			4,878
Operating expenses
General and administrative expenses		1,884			1,409			3,233			2,568
Selling expenses		883			725			1,645			1,388
Total operating expenses		2,767			2,134			4,878			3,956
Operating income (loss)		(981)			1,096			(926)			922
Other income (expense)
Interest expense		(64)			(71)			(128)			(118)
Interest income		5			3			10			6
Gain on sale of assets		116			27			199			65
Other income		32			162			57			183
Total other income (expense)		89		121				138			136
Income (loss) before income tax expense (benefit)		(892)			1,217			(788)			1,058
Income tax expense (benefit)		(110)			307			(87)			267
Net income (loss)	$	(782)		$	910		$	(701)		$	791
Basic and diluted earnings (loss) per common share	$	(0.15)		$	0.17		$	(0.13)		$	0.15
Weighted average number of common shares outstanding:
Basic		5,256			5,230			5,256			5,230
Diluted		5,256			5,266			5,256			5,262

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands, except share data)

		Common Stock					Treasury Stock							Additional Paid-in Capital			Retained Earnings				Total
		Shares			Amount		Shares			Amount
Balance, December 31, 2022		5,345,189			53		(40,920	)			(102	)			7,440			25,664				33,055
Stock-Based Compensation Expense		-			-		-				-				85			-				85
Adoption of ASU 2016-13		-			-		-				-				-			(63	)			(63	)
Net income (loss)		-			-		-				-				-			80				80
Balance, March 31, 2023		5,345,189		$	53		(40,920	)		$	(102	)		$	7,525		$	25,681			$	33,157
Stock-Based Compensation Expense		-			-		-				-				86			-				86
Net income (loss)		-			-		-				-				-			(782	)			(782	)
Balance, June 30, 2023		5,345,189		$	53		(40,920	)		$	(102	)		$	7,611		$	24,899			$	32,461
Balance, December 31, 2021		5,353,095		$	53		(40,920	)		$	(102	)		$	6,935		$	24,864			$	31,750
Stock-Based Compensation Expense		-			-		-				-				126			-				126
Net income (loss)		-			-		-				-				-			(119	)			(119	)
Balance, March 31, 2022		5,353,095		$	53		(40,920	)		$	(102	)		$	7,061		$	24,745			$	31,757
Stock-Based Compensation Expense		-			-		-				-				126			-				126
Net income (loss)		-			-		-				-				-			910				910
Balance, June 30, 2022		5,353,095		$	53		(40,920	)		$	(102	)		$	7,187		$	25,655			$	32,793

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	(701)		$	791
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,176			1,400
(Gain) loss on sale of assets	(199)			(65)
Allowance for credit losses		67			45
Stock-based compensation expense		171			253
Deferred taxes		96			-
(Increase) decrease in
Accounts receivable - billed	(462)			(2,700)
Accounts receivable - unbilled		337		(121)
Inventories, net	(934)			(686)
Prepaid expenses and other assets	(625)				61
Refundable income taxes	(100)				177
Increase (decrease) in
Accounts payable - trade	(132)				1,661
Accrued expenses and other liabilities		75			364
Deferred revenue		207		(55)
Accrued compensation		4		(265)
Accrued income taxes	(146)			(1,912)
Deferred buy-back lease obligation		-		(1,617)
Customer deposits		2,248		(16)
Net cash provided by (used in) operating activities		1,082		(2,685)
Cash flows from investing activities:
Purchases of property and equipment	(2,974)			(1,962)
Deferred buy-back asset		-			988
Proceeds from the sale of property and equipment		199			65
Net cash provided by (used in) investing activities	(2,775)			(909)
Cash flows from financing activities:
Proceeds from long-term borrowings		-			2,805
Repayments of long-term borrowings	(306)			(278)
Net cash provided by (used in) financing activities	(306)				2,527
Net increase (decrease) in cash	(1,999)			(1,067)
Cash
Beginning of period		6,726			13,492
End of period	$	4,727		$	12,425
Supplemental Cash Flow Information:
Cash payments for interest	$	128		$	118
Cash payments for income taxes	$	65		$	2,179
Capital expenditures included in accounts payable	$	2,244		$	2,014

SOURCE: Smith-Midland Corporation

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https://www.accesswire.com/791830/smith-midland-reports-second-quarter-2023-financial-results

FAQ

What was the revenue growth in Q2 2023 compared to the prior year?

Revenue increased 11% from the prior year quarter to $14.7 million.

What are some significant projects Smith-Midland Corporation has been awarded?

They were selected to produce SlenderWall architectural precast panels for a $4.5 million hospital project and awarded a $2.1 million contract for architectural panels for BMW's campus in South Carolina.

What is the backlog of Smith-Midland Corporation?

The backlog as of August 1, 2023, is a record $60.9 million.

What caused the net loss in Q2 2023?

The net loss of $782,000 was primarily related to isolated items in the quarter, including costs for remaking architectural panels and a cybersecurity issue.

What is the outlook for Smith-Midland Corporation?

They anticipate increased sales volumes for the remainder of 2023 and into 2024, with a growing backlog and continued strength in bidding activity.