Executive Summary

Revenue rose 72% year over year to $33.29M in Q3 2023, driven by the July 7 Barnhart acquisition ($14.38M contribution) and stronger heavy/super-heavy haul activity; gross margin was 7% versus 6% a year ago .
Net loss from continuing operations improved to $(1.23)M versus $(3.20)M a year ago, aided by a $3.38M non-recurring gain on extinguishment of debt; EPS was $(0.01) versus $(0.09) in Q3 2022 .
Liquidity is tight: working capital deficit expanded to $27.86M; total debt stood at $50.04M; the company disclosed covenant non-compliance under both the Term Loan and ABL facilities and is seeking lender waivers/amendments .
No earnings call transcript was available; S&P Global Wall Street consensus for Q3 revenue/EPS was unavailable, so estimate comparisons could not be made (consensus unavailable).

What Went Well and What Went Wrong

What Went Well

Accretive acquisition impact: Barnhart contributed $14.38M revenue and supported gross profit/margin improvement; management emphasized synergy capture and integration completion by year-end .
Margin resilience: gross margin improved to 7% from 6% YoY on higher revenues and incremental margin improvement covering more fixed costs; Q2 had demonstrated margin uplift to 14% pre-acquisition .
Balance sheet actions: recognized $3.38M gain on settlement of debt tied to transaction-related conversions/settlements, improving net loss from continuing operations versus prior year .
- Quote: “Our team is excited about our future growth prospects… we have executed on several of the expense saving initiatives, including national account buying for fuel and other expenses” — Tim Barnhart, CFO .
- Quote: “We have several revenue synergies underway… building a ‘one stop shop’ full-service logistics provider” — Bryan Barnhart, CEO .

What Went Wrong

Covenant breaches: not in compliance with covenants under the Term Loan and ABL agreements as of quarter end; debt classified as current while seeking waivers .
Heavy leverage and working capital deficit: total debt $50.04M; working capital deficit widened to $27.86M, highlighting near-term balance sheet strain .
Opex and transaction costs: operating expenses rose to $5.17M (16% of sales) with $743.6K transaction costs in Q3; loss from operations increased YoY .

Financial Results

Income Statement vs Prior Periods and YoY (oldest → newest)

Metric	Q1 2023	Q2 2023	Q3 2023
Revenue ($USD)	$20,869,763	$21,787,389	$33,289,602
Gross Profit ($USD)	$2,629,403	$2,926,301	$2,282,652
Gross Margin (%)	12.6% (derived from revenue and gross profit)	14%	7%
Loss from Operations ($USD)	$(433,198)	$202,914	$(2,890,968)
Other Income (Expense) ($USD)	$(3,092,007)	$(1,958,356)	$1,662,801
Net Loss from Continuing Ops ($USD)	$(3,525,205)	$(1,755,442)	$(1,228,167)
EPS – Continuing Ops ($USD)	$(0.08)	$(0.04)	$(0.01)

Notes:

Q3 other income included a $3,381,248 gain on settlement of debt .
Q2 margin uplift (14%) preceded acquisition close; Q3 margin (7%) reflects mix/integration and higher depreciation from acquired assets .

Segment/Contribution Breakdown (Q3 2023)

Item	Amount
Total Revenue ($USD)	$33,289,602
Barnhart Acquisition Contribution ($USD)	$14,378,874

KPIs and Balance Sheet Snapshot (Q3 2023)

KPI	Q3 2023
Cash and Cash Equivalents ($USD)	$3,668,846
Revolving Line of Credit Outstanding ($USD)	$11,343,090
Term Loan Outstanding ($USD)	$31,289,982
Total Debt ($USD)	$50,042,260
Working Capital Deficit ($USD)	$27,856,757
Covenant Compliance Status	Not in compliance (Term Loan and ABL); waivers/amendments pursued

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q3 2023	None provided	None provided	Maintained (no formal guidance)
Gross Margin	FY/Q3 2023	None provided	None provided	Maintained (no formal guidance)
OpEx	FY/Q3 2023	None provided	None provided	Maintained (no formal guidance)
Other	FY/Q3 2023	N/A	Integration targeted by year-end 2023 (qualitative)	Update (integration timeline)

No quantitative guidance ranges were disclosed; management reiterated integration completion expectations and synergy initiatives .

Earnings Call Themes & Trends

No Q3 2023 earnings call transcript was available in the document set; themes are drawn from Q1/Q2 press releases and Q3 10-Q.

Topic	Previous Mentions (Q1 & Q2 2023)	Current Period (Q3 2023)	Trend
Margin/ Pricing	Q2 gross margin improved to 14%; cited higher pricing and revenues	Gross margin 7% YoY up from 6% (mix/integration, higher depreciation on new assets)	Stabilizing post-acquisition
Acquisition/Integration	Q2 noted Barnhart close July 7 and pro forma focus	Integration targeted by year-end; synergy capture underway	Executing integration
Heavy/Super-Heavy Haul Demand	Q1/Q2 noted strong industrial/over-dimensional activity	Continued activity; contributed to revenue growth	Sustained demand
Liquidity/Leverage	Q2 showed high current liabilities and convertible debt	Working capital deficit; covenant breaches; seeking waivers	Elevated risk profile
Non-GAAP Metrics	Q1: Adjusted EBITDA positive $1.08M; Q2: Adjusted EBITDA $1.64M	Pro forma FY 2022 Adjusted EBITDA disclosed (non-GAAP)	Shift to combined pro forma context

Management Commentary

Strategic message: Building scale and a one-stop logistics platform across heavy/super-heavy haul, brokerage, intermodal, and international NVOCC, with cross-fertilization of hundreds of customers between SMG and Barnhart .
Cost actions: National account buying for fuel and other expenses; similar transportation management systems aiding integration; accounting and IT integration expected to conclude by year-end 2023 .
Acquisition economics: Pro forma FY 2022 combined revenues $152.77M; pro forma Adjusted EBITDA $15.05M (non-GAAP) illustrating combined scale and cash generation potential (historical pro forma) .

Q&A Highlights

No Q3 earnings call transcript or Q&A was available; key clarifications came via the 10-Q:

Debt and covenants: Term Loan at 11.89% rate; ABL interest ~7.93%; not in compliance with certain covenants; debt classified as current pending waivers .
Transaction costs: $743,591 recognized in Q3 related to acquisition .
Barnhart contribution: $14.38M revenue in Q3 within consolidated results .

Estimates Context

S&P Global Wall Street consensus for Q3 2023 revenue and EPS was unavailable for SMGI.
As a result, there are no beat/miss comparisons to consensus for this quarter (consensus unavailable).

Key Takeaways for Investors

Acquisition-driven step-up: Q3 revenue of $33.29M reflects Barnhart’s immediate impact; legacy/platform synergy potential is meaningful given management’s cross-sell strategy .
Margin trajectory: Near-term margin reset post-acquisition (7%) versus Q2’s 14% pre-close; look for integration synergies and fixed cost absorption to support margins over coming quarters .
Balance sheet risk: $50.04M total debt, working capital deficit of $27.86M, and covenant breaches elevate refinancing/waiver risk—monitor lender negotiations and any recapitalization actions .
Non-recurring benefit: $3.38M gain on debt settlement boosted Q3 results; underlying operating loss highlights need for cost discipline and synergy capture .
Customer diversification and service breadth: Broader offerings (heavy haul to international freight forwarding) and “asset-lite” brokerage could help utilization and margin mix as integration progresses .
Execution watchpoints: Integration completion by year-end, realization of cost savings and revenue synergies, covenant waivers, and working capital management will drive near-term stock narrative .
No consensus lens: With S&P Global consensus unavailable, trading catalysts hinge on company-specific updates (waiver outcomes, integration milestones, margin progress) rather than beat/miss dynamics.

SMG Industries Inc. (SMGI)·Q3 2023 Earnings Summary