SMG Industries Inc. (SMGI)·Q2 2023 Earnings Summary

Executive Summary

• Q2 2023 delivered record revenue of $21,787,389, up ~21% year over year, with gross margin expanding to 14% and Adjusted EBITDA rising to $1,644,496 (8% of sales), indicating improved pricing and mix in heavy and super heavy haul operations .
• Net loss narrowed to $(1,761,880) from $(3,020,276) in Q2 2022; however, interest expense remained elevated at $(1,972,369), highlighting leverage and financing costs as key headwinds .
• Management emphasized a transformative acquisition of Barnhart (closed July 7, 2023) expanding service lines, customer base, and scale, with pro forma combined results anticipated in September 2023 as a near-term catalyst .
• No formal numeric guidance or earnings call transcript found for Q2 2023; S&P Global Wall Street consensus estimates were unavailable for SMGI, limiting beat/miss analysis (unavailable due to CIQ mapping) .

What Went Well and What Went Wrong

What Went Well

• Revenue growth and margin expansion: Revenues rose ~21% YoY to $21.8M; gross profit increased to $2.9M with margin at 14% versus 6% in Q2 2022, driven by higher revenues and enhanced customer pricing .
• Profitability progression: Adjusted EBITDA reached $1.64M (8% of sales), reflecting operational leverage and pricing improvements in industrial transportation and heavy haul .
• Strategic inflection via acquisition: “Transformative” Barnhart acquisition adding over 500 non-overlapping customers and broader service scope; “one stop shop, full service logistics provider” positioning enhances cross-selling and utilization opportunities .
  • CFO: “The Company experienced gross margin improvement during the second quarter of 2023 resulting from higher revenues and enhanced pricing” .
  • CEO: “This transaction allows the combined businesses to be a one stop shop… delivering seamless logistics solutions spanning the globe” .

What Went Wrong

• Continued net losses and high financing costs: Q2 net loss $(1.76M); interest expense $(1.97M) in the quarter underscores a heavy debt burden .
• Balance sheet pressure: Total liabilities $51,846,816 vs. total assets $20,592,789, with stockholders’ deficit at $(31,254,027), and substantial current obligations (e.g., secured LOC $11,079,731; current portion of convertible note $8,906,741) .
• Limited investor visibility on forward metrics: No numerical guidance for revenue or margins in Q2 release and no earnings call transcript, constraining near-term expectations-setting .

Financial Results

GAAP Income Statement Comparison

Notes: Q1 2023 revenue, gross profit, and net loss are derived from six-month figures minus Q2 results using amounts disclosed in the Q2 2023 8-K .

Profitability and Cash Metrics

Balance Sheet Snapshot (Quarter-End vs. Prior Year-End)

Segment Breakdown

• Not disclosed; commentary attributes growth to industrial transportation, heavy haul, super heavy haul, and pricing improvements .

KPIs

Guidance Changes

Earnings Call Themes & Trends

No Q2 2023 earnings call transcript found; themes drawn from press releases.

Management Commentary

• CFO: “The Company experienced gross margin improvement during the second quarter of 2023 resulting from higher revenues and enhanced pricing.” He added Q2 was strong, and the Barnhart acquisition “significantly increased the scale of the combined business” with pro forma results expected in September 2023 .
• CEO: “The upcoming pro forma combined results… will illustrate improvements to SMG’s scale, growth potential and balance sheet… a one stop shop, full service logistics provider… significant opportunity for ‘customer cross-fertilization’ [and] increased utilization of our combined equipment fleets” .
• Strategy: Barnhart acquisition adds over 500 non-overlapping customers and broadens services (e.g., dry bulk, non-hazardous liquids, intermodal, warehousing, NVOCC) enhancing cross-selling and utilization .

Q&A Highlights

• No Q2 2023 earnings call transcript located; no formal Q&A discovered in primary sources .

Estimates Context

• Wall Street consensus estimates via S&P Global for SMGI were unavailable due to missing CIQ mapping; therefore, beats/misses vs consensus cannot be assessed for Q2 2023 (Values retrieved from S&P Global unavailable due to mapping error).

Key Takeaways for Investors

• Positive operating momentum: Record Q2 revenue with margin expansion and higher Adjusted EBITDA indicates improved pricing and demand in heavy/super heavy haul; watch for sustainability through H2 .
• Acquisition integration is the near-term catalyst: Pro forma combined financials with Barnhart expected in September could reset the narrative on scale, diversification, and cross-selling potential .
• Balance sheet risk remains: Large stockholders’ deficit and high current liabilities, with elevated interest expense, are key constraints; deleveraging, refinancing, or improved cash generation would be impactful .
• Visibility gap on guidance and consensus: Lack of numeric guidance and unavailable S&P Global consensus complicates expectations; investors should focus on pro forma disclosures and any subsequent 10-Q filings .
• Operational focus: Continued emphasis on industrial infrastructure logistics and super heavy haul projects (bridge beams, compressors, refinery components) supports pricing/mix and potential utilization gains .
• Watch liquidity: Modest cash ($209,843) vs rising receivables and working capital needs suggests importance of disciplined collections and financing management near term .
• Medium-term thesis: If pro forma results demonstrate margin durability and leverage paths improve, the combined platform’s expanded service lines and customer base may support multi-year growth and margin trajectory .