Executive Summary

Record quarterly revenue of $19.6M (+34% y/y) and best net income since Q1 2021; gross margin expanded to 26.1% (from 12.2% y/y) on higher production volumes and stronger fixed-cost absorption .
Diluted EPS rose to $0.37 vs ($0.15) y/y and $0.21 in Q1 2024; operating income reached $2.7M vs a loss of ($0.98)M y/y, signaling margin inflection and improved operational throughput .
Demand tailwinds from Infrastructure Investment and Jobs Act spending and data center build-out (utility vaults) drove product and service revenue growth; backlog remained robust at ~$59.2M as of August 2024 (vs ~$60.9M a year ago) .
Catalyst: continued backlog execution plus visible infrastructure and data center demand, alongside rising royalty and barrier rental revenues, position the story for further margin progression as volumes scale .

What Went Well and What Went Wrong

What Went Well

Strong topline and margin: revenue reached a record $19.6M, gross profit hit $5.1M, and gross margin improved to 26.1% on higher production volume and absorption; operating income rose to $2.7M and net income to $2.0M .
Demand drivers: “continued strong demand for our utility vaults for data centers” and “funds from the Infrastructure Investment and Jobs Act are being used by state and local governments,” supporting sales and installations .
CEO tone constructive: “We expect these very favorable trends to continue through the second half of 2024 as we work through our strong backlog and remain well-positioned to create long-term shareholder value” .

What Went Wrong

Barrier product sales down y/y to $1.1M (from $1.8M) as the company shifts mix toward rentals; although rentals revenue rose, product sales decline reflects the strategic transition .
Backlog slightly lower y/y (~$59.2M vs ~$60.9M), suggesting near-term variability even as majority is expected to be fulfilled within 12 months .
Inflationary pressures persist (labor and materials), requiring ongoing cost management and talent retention to sustain margin improvements .

Financial Results

Consolidated Metrics vs Prior Year and Prior Quarter

Metric	Q2 2023	Q1 2024	Q2 2024
Revenue ($USD Millions)	$14.7	$16.8	$19.6
Gross Profit ($USD Millions)	$1.8	$3.9	$5.1
Gross Margin %	12.2%	23.0%	26.1%
Operating Income ($USD Millions)	($0.98)	$1.5	$2.7
Net Income ($USD Millions)	($0.78)	$1.15	$2.0
Diluted EPS ($USD)	($0.15)	$0.21	$0.37

Product Sales Breakdown

Product Category	Q2 2023 ($M)	Q2 2024 ($M)
Soundwall	$1.7	$2.2
Miscellaneous Wall	$2.9	$2.1
Utility Products	$0.62	$2.1
Easi-Set/Easi-Span Buildings	~$1.4	$1.5
Barrier Sales	$1.8	$1.1
Total Product Sales	$10.7	$13.1

Service Revenue Breakdown

Service Category	Q2 2023 ($M)	Q2 2024 ($M)
Shipping & Installation	$2.7	$4.3
Royalty Income	$0.59	$0.87
Barrier Rentals	$0.70	$1.4
Total Service Revenue	$4.0	$6.5

KPIs and Balance Sheet Snapshot

KPI/Balance Item	FY 2023 (Dec 31)	Q1 2024 (Mar 31)	Q2 2024 (Jun 30)
Backlog ($M)	~$60.8 (Mar 2024)	~$64.6 (May 2024)	~$59.2 (Aug 2024)
Cash and Equivalents ($M)	$9.2	$6.8	$7.3
Accounts Receivable ($M)	$17.7	$20.1	$18.1
Total Debt ($M)	$5.7	$5.6	$5.4
Capital Expenditure ($M)	$5.0 (FY)	$1.8 (Q1)	$1.7 (Q2)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales Volume	FY 2024	Anticipated increased sales volume vs 2023	Anticipates increased sales volume vs 2023	Maintained
Backlog Fulfillment	Rolling 12 months	Majority expected within 12 months (some multi-year)	Majority expected within 12 months (some multi-year)	Maintained
Inflation/Costs	FY 2024	Inflationary pressures remain; active cost management	Inflationary pressures remain; active cost management	Maintained

No explicit quantitative revenue/EPS/margin guidance ranges were provided in the Q2 2024 materials .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023 and Q1 2024)	Current Period (Q2 2024)	Trend
AI/Data Centers	Expect orders due to need for data centers to support AI (Q4) ; strong demand for utility vaults from data center growth (Q1)	Continued strong demand for utility vaults for data centers	Sustained demand; pipeline healthy
Infrastructure Funding	Infrastructure & Jobs Act funding expected in latter half of 2024 (Q4) ; inflow expected in latter half (Q1)	Funds are being used by state/local governments, boosting production/shipping/installation	From anticipated to realized utilization
Barrier Strategy	Barrier rental revenue more than doubled y/y (Q4)	Shift to longer-term rentals reduced quarterly rental revenue vs prior-year short-term mix (Q1)	Product sales down y/y; rentals rising on utilization
Margins/Cost Absorption	Q4 gross margin 19.1% ; Q1 margin improved to 23% on volume/absorption	Margin reached 26.1% on higher volume, fixed cost absorption; prior-year had one-time remake cost due to defective steel	Improving
Backlog	~$60.8M (Mar 2024) ; ~$64.6M (May 2024)	~$59.2M (Aug 2024)	High, slightly down sequentially

Note: No earnings call transcript was found in the document set for Q2 2024; themes reflect press release disclosures .

Management Commentary

“Our second quarter performance included a record for quarterly revenue and our best net income since the first quarter of 2021… The increase was primarily driven by increased production and shipping and installation of our products as funds from the Infrastructure Investment and Jobs Act are being used by state and local governments and continued strong demand for our utility vaults for data centers.” — Ashley Smith, CEO .
“We expect these very favorable trends to continue through the second half of 2024 as we work through our strong backlog and remain well-positioned to create long-term shareholder value.” — Ashley Smith, CEO .
“We are experiencing a strong demand for our utility vaults in response to the continued growth of data centers… Our prospects for the remainder of the year remain very favorable.” — Ashley Smith, CEO (Q1 release) .

Q&A Highlights

Not available; no Q2 2024 earnings call transcript was identified in the filings document set .

Estimates Context

S&P Global consensus estimates for Q2 2024 EPS and revenue were unavailable at the time of analysis; therefore, comparisons to Wall Street estimates cannot be made.
Given the company’s record revenue and margin expansion, any initiation or expansion of coverage could focus on sustainability of data center-driven utility demand, backlog conversion pace, and barrier rental utilization; however, formal estimate revisions cannot be assessed without published consensus .

Key Takeaways for Investors

Margin inflection: gross margin expanded to 26.1% on volume and absorption, with operating income turning positive to $2.7M; diluted EPS rose to $0.37, highlighting leverage to higher throughput .
Demand visibility: realized infrastructure funding plus data center-related utility vault demand underpin near-term revenue drivers and service revenues (shipping/installation) .
Backlog resilience: backlog stood at ~$59.2M as of August 2024 (majority expected within 12 months), providing execution runway despite a modest y/y dip .
Mix shift strategy: barrier product sales declined y/y as rentals increased; rental utilization and royalties improved service revenue quality and cash generation cadence .
Sequential momentum: revenue grew from $16.8M in Q1 to $19.6M in Q2 and margin lifted from 23.0% to 26.1%, indicating operational momentum and potential for continued margin progression with scale .
Balance sheet: cash $7.3M, debt $5.4M, AR $18.1M as of Q2; capex of $1.7M supports capacity and growth initiatives (e.g., NC plant expansion begun in Q1) .
Actionable: focus on backlog conversion rates, utility vault order flow tied to data centers, and barrier rental fleet utilization and licensing royalties; these are the levers most likely to drive near-term earnings power and stock narrative .

SMITH MIDLAND CORP (SMID)·Q2 2024 Earnings Summary