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SM

SMITH MIDLAND CORP (SMID)·Q3 2024 Earnings Summary

Executive Summary

  • Record quarterly revenue and net income: Revenue rose to $23.6M (+51% YoY) and diluted EPS reached $0.59 vs $0.24 a year ago; gross margin expanded to 27.9% (+500 bps YoY) on special barrier projects and better fixed-cost absorption .
  • Services drove upside: Barrier rentals surged to $7.1M (from $0.8M YoY) and total service revenue hit $12.8M (+170% YoY), offsetting flat product sales; operating income rose to $3.8M vs $1.5M YoY .
  • Backlog and outlook: Backlog reached ~$62.8M as of Nov 1, 2024, with management anticipating increased 2024 sales vs 2023; majority of backlog expected within 12 months .
  • Strategic milestones: Provisional patent and successful crash test of J-J Hook MASH 16 Low-Profile Barrier; continued data-center vault demand and IIJA tailwinds cited as drivers .
  • Potential stock catalysts: Record results and backlog, barrier rental strength, and patented barrier progress; note that Wall Street consensus estimates were unavailable via S&P Global for formal beat/miss comparison (SPGI retrieval error).

What Went Well and What Went Wrong

What Went Well

  • Record revenue and net income with margin expansion: “Our third quarter was a record-setter for both revenue and net income… multiple special barrier projects… more favorable margin profile” (Ashley Smith, CEO) .
  • Services mix and rentals: Barrier rental revenue jumped to $7.1M on multiple special barrier projects; shipping and installation rose to $4.8M; royalties increased to $0.96M .
  • Backlog strength and sector tailwinds: “Our record backlog of $62.8 million reflects the continued strong demand… IIJA funds and utility vaults for data centers… favorable trends should continue into 2025” (CEO) .

What Went Wrong

  • Product sales were flat YoY: Product sales were $10.8M vs $10.9M in Q3’23; soundwall declined YoY ($1.9M vs $2.4M) and barrier product sales fell ($0.55M vs $1.4M) amid strategic rental shift .
  • Inflation persists: Management highlighted ongoing inflationary pressures across labor and materials, requiring cost management to protect margins .
  • CFO transition earlier in the year: CFO resigned effective July 17, 2024; an interim CFO consultant provides continuity while a search proceeds, a potential near-term execution risk around financial processes .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$15.7 $16.8 $19.6 $23.6
Operating Income ($USD Millions)$1.5 $1.5 $2.7 $3.8
Net Income ($USD Millions)$1.3 $1.1 $2.0 $3.2
Diluted EPS ($USD)$0.24 $0.21 $0.37 $0.59
Gross Margin (%)22.9% 23.0% 26.1% 27.9%
Consensus Revenue (S&P Global)N/A*N/A*N/A*N/A*
Consensus EPS (S&P Global)N/A*N/A*N/A*N/A*

*Estimates unavailable due to SPGI retrieval error. Values would have been retrieved from S&P Global.

Segment Breakdown – Product Sales ($USD Millions)

Product CategoryQ3 2023Q1 2024Q2 2024Q3 2024
Soundwall$2.4 $3.0 $2.2 $1.9
SlenderWall$2.3 ———
Architectural Walls$0.315 ——$1.6
Miscellaneous Walls$0.947 $1.8 $2.1 $1.7
Utility$0.891 $1.7 $2.1 $2.4
Easi-Set / Easi-Span Buildings$1.2 —$1.5 $1.8
Barrier Sales$1.4 $1.7 $1.1 $0.546

Service Revenue Breakdown ($USD Millions)

Service CategoryQ3 2023Q1 2024Q2 2024Q3 2024
Barrier Rentals$0.784 $0.893 $1.400 $7.100
Shipping & Installation$3.147 $4.536 $4.300 $4.800
Royalty Income$0.822 $0.575 $0.869 $0.958

KPIs and Balance Sheet Highlights

KPIQ3 2023Q1 2024Q2 2024Q3 2024
Backlog ($USD Millions)$60.2 (as of Nov 1, 2023) $64.6 (as of May 2024) $59.2 (as of Aug 2024) $62.8 (as of Nov 1, 2024)
Cash ($USD Millions)$5.8 (Sep 30, 2023) $6.8 (Mar 31, 2024) $7.3 (Jun 30, 2024) $9.0 (Sep 30, 2024)
Accounts Receivable ($USD Millions)$16.8 $20.1 $18.1 $18.7
Total Debt ($USD Millions)$5.9 $5.6 $5.4 $5.3
Capital Spending ($USD Millions)$1.1 $1.8 $1.7 $2.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales VolumeFY 2024Anticipated increased sales vs 2023 (Q2 PR) Anticipated increased sales vs 2023 (Q3 PR) Maintained
Backlog FulfillmentRolling 12 monthsMajority within 12 months; some multi-year (Q2 PR) Majority within 12 months; some multi-year (Q3 PR) Maintained
Explicit Revenue/Margin EPS GuidanceFY 2024None provided in filings None provided in filings N/A
Cost EnvironmentFY 2024Inflationary pressures remain; managing labor/materials (Q2 PR) Inflationary pressures remain; managing labor/materials (Q3 PR) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
Infrastructure funding tailwinds (IIJA)Expect favorable trends through H2’24; increased bidding/orders (Q2) . Strong prospects for year; backlog supportive (Q1) .Continued strong demand and record backlog; favorable trends expected into 2025 .Strengthening
Data center utility vault demandStrong demand cited; utility sales up (Q2) . Utility product sales rose (Q1) .Utility sales increased to $2.4M vs $0.9M YoY .Strengthening
Barrier rentals strategyRental revenue up; shift from short-term to longer-term projects (Q1) . Rentals increased YoY (Q2) .Rentals surged to $7.1M on special projects; barrier product sales decreased YoY .Strengthening (rentals), declining (product sales)
Margin driversBetter fixed-cost absorption; product mix improved (Q2) . Margin improved with higher volumes (Q1) .Margin expansion to 27.9% on special barrier projects and absorption .Improving
Backlog trajectory~$64.6M (May), majority within 12 months (Q1) . ~$59.2M (Aug) (Q2) .~$62.8M (Nov 1), majority within 12 months; some multi-year .Stable to improving
Regulatory/technical milestones—Provisional patent and successful crash test of low-profile barrier .Positive
Management/FinanceCFO resigned; interim CFO consultant engaged; continuity emphasized (July) .No new changes disclosed in Q3 PR.Neutral

Management Commentary

  • “Our third quarter was a record-setter for both revenue and net income, driven by the tailwinds within our sector and multiple special barrier projects… which have a more favorable margin profile” — Ashley Smith, Chairman & CEO .
  • “Our record backlog of $62.8 million reflects the continued strong demand… IIJA funds… and utility vaults to meet the increasing growth of data centers… favorable trends should continue into 2025” — Ashley Smith .
  • “The increase [in Q2] was primarily driven by increased production… as funds from the Infrastructure Investment and Jobs Act are being used… and continued strong demand for our utility vaults for data centers” — Ashley Smith .
  • “We are off to a strong start in 2024… highest quarterly revenue” — Ashley Smith .
  • “I look forward to working with AJ again in the interim as we conduct a full executive search for our next CFO… will provide strong continuity” — Ashley Smith (CFO transition) .

Q&A Highlights

  • No earnings call transcript was available in our document set for Q3 2024; therefore, analyst Q&A highlights and any on-call guidance clarifications are unavailable from filings.

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 revenue and EPS was unavailable due to SPGI retrieval error; as a result, formal beat/miss vs consensus cannot be assessed. Estimates would have been retrieved from S&P Global if accessible.

Key Takeaways for Investors

  • Mix shift toward services, particularly barrier rentals, is materially accretive to margins; rentals spiked to $7.1M on special projects, helping lift GM to 27.9% .
  • Product sales were flat YoY; watch category mix (soundwall down YoY in Q3 vs strength earlier in the year) as a potential swing factor on margins .
  • Backlog remains robust ($62.8M) with near-term conversion expected; trajectory suggests continued revenue growth into 2025 on IIJA-funded projects and data-center demand .
  • Operating leverage evident: OI rose to $3.8M and net income to $3.2M; further scaling of rentals and installation could sustain margin expansion .
  • Watch inflation and labor/materials costs; management continues to actively manage inputs — a key risk to margins if special projects normalize .
  • Technical differentiation: Provisional patent and crash-tested low-profile barrier could underpin pricing power and rental utilization in future periods .
  • Near-term trading: Positive momentum from record results and backlog; medium-term thesis hinges on sustained rentals, category mix, and backlog conversion pace under IIJA tailwinds .