Name: SMITH MIDLAND CORP Q3 2023 Earnings Call
Start: 2023-11-09T00:00:00.000Z

Executive Summary

Q3 2023 delivered strong top-line and margin performance: revenue rose 31% to $15.7M, gross margin expanded 550 bps to 22.9%, and net income reached $1.3M ($0.24 diluted EPS) as proprietary product mix improved .
Product sales grew 54% YoY to $10.9M with outsized contributions from SlenderWall ($2.3M) and soundwall ($2.4M), while service revenue held at $4.8M; backlog remained robust at $60.2M .
Sequential recovery from Q2’s one-time issues (remade panels ~$0.4M and wire fraud ~$0.34M) and a barrier rental slowdown: Q3 showed higher shipping/installation and late-quarter rental project activity .
Management reiterated constructive industry tailwinds (infrastructure spend) and confidence in continued top/bottom-line growth; preliminary guide from Q2 (>20% YoY for Q3 revenue) was exceeded at +31% .

What Went Well and What Went Wrong

Proprietary product mix drove margin expansion: gross margin rose to 22.9% (from 17.4% YoY), attributed “primarily to greater proprietary product sales” .
Strong product categories: SlenderWall ($2.3M) and soundwall ($2.4M) increased sharply from prior-year levels due to project timing and higher volumes across NC/SC plants .
Backlog and awards: backlog stood at $60.2M; notable wins included a $6.8M architectural panel project (Baltimore Harbor Tunnel) and a $1.6M J-J Hook barrier rental for I-64 .
CEO tone: “fourth consecutive quarter of double-digit, year-over-year revenue growth… highest quarterly net income since Q3 2021” and “highly optimistic” about next year given tailwinds and internal initiatives .

Barrier rental revenue fell YoY to $0.8M (from $1.4M), though late-quarter activity improved; shipping/installation rose to $3.1M, partially offsetting mix headwinds .
Royalty income remained flat YoY at $0.8M; earlier in Q2, royalties were pressured by licensee project delays and barrier rentals slowed materially vs prior-year .
Q2 headwinds (now in rear-view) weighed on YTD trends: ~$0.4M remade panel costs and ~$0.34M wire fraud hit Q2 G&A and gross profit; Q3’s rebound highlights normalization but underscores execution and controls importance .

Metric	Q1 2023	Q2 2023	Q3 2023
Revenue ($USD Millions)	$12.842	$14.698	$15.651
Gross Margin %	16.9%	12.2%	22.9%
Operating Income ($USD Millions)	$0.054	$(0.981)	$1.502
Net Income ($USD Millions)	$0.080	$(0.782)	$1.266
Diluted EPS ($USD)	$0.02	$(0.15)	$0.24

Category ($USD Millions)	Q1 2023	Q2 2023	Q3 2023
Soundwall	$1.0	$1.7	$2.4
SlenderWall	$1.3	$1.5	$2.3
Miscellaneous Wall	$1.2	$2.9	$1.4
Barrier Sales	$2.8	$1.8	$1.4
Easi-Set / Easi-Span Buildings	$1.0	$1.4	$1.2
Total Product Sales	$8.242	$10.702	$10.898

Category ($USD Millions)	Q1 2023	Q2 2023	Q3 2023
Shipping & Installation	$3.069	$2.702	$3.147
Royalty Income	$0.411	$0.594	$0.822
Barrier Rentals	$1.120	$0.700	$0.784
Total Service Revenue	$4.6	$4.0	$4.8

KPI ($USD Millions)	Q1 2023	Q2 2023	Q3 2023
Backlog	$51.4	$60.9	$60.2
Cash	$3.9	$4.7	$5.8
Total Debt	$6.2	$6.0	$5.9
Capital Expenditure	$1.2	$1.8	$1.1

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue growth YoY (Q3 actual vs Q2 preliminary)	Q3 2023	“Preliminary third quarter year-over-year revenue growth in excess of 20%”	Actual +31% YoY revenue to $15.7M	Exceeded
Full-year sales volume vs prior year	FY 2023	“Anticipated increased sales volumes for remainder of 2023 and into 2024”	“Anticipates increased sales volume for full year 2023 vs 2022”	Maintained
Backlog fulfillment timeline	Ongoing	Majority within 12 months; some multi-year	Majority within 12 months; some multi-year	Maintained

Note: No Q3 2023 earnings call transcript could be located; themes reflect management communications in quarterly releases.

Topic	Previous Mentions (Q1, Q2)	Current Period (Q3)	Trend
Infrastructure tailwinds & bidding activity	Strong tailwinds; increased bidding and backlog to $51.4M (Q1); record backlog $60.9M (Q2)	Backlog $60.2M; continued strong demand and conversions	Stable/Strong
Cost inflation & labor	Ongoing material/labor inflation; mitigation efforts (Q1–Q2)	Inflationary pressures remain; managing input costs and skilled labor attraction	Stable headwind
Barrier rentals	Q1 rentals $1.1M; Q2 rentals slowed to $0.7M	Q3 rentals $0.8M with late-quarter activity uptick	Modest improvement
Licensing royalties	Weather/project delays weighed in Q1–Q2	Flat YoY at $0.8M	Stabilizing
Product mix & margins	Q1 margin 16.9%; Q2 margin dip to 12.2% on one-offs	Margin up to 22.9% on proprietary mix	Improving
Cybersecurity/wire fraud issue	One-time ~$0.342M in Q2 G&A; partial insurance recovery	Not referenced in Q3 release	Resolved/Not recurring (per disclosures)

“This quarter represents our fourth consecutive quarter of double-digit, year-over-year revenue growth, and our highest quarterly net income since the third quarter of 2021.” — Ashley Smith, Chairman & CEO .
“Demand for our specialized, innovative product offerings remains high… our success in converting increased levels of bidding activity into secured contracts has expanded and continues to drive our strong backlog of $60.2 million.” — Ashley Smith .
“We are highly optimistic about our prospects for next year thanks to our internal initiatives to increase our sales funnel and the multiple tailwinds across our industry.” — Ashley Smith .

No Q3 2023 earnings call transcript was found across our sources; Q&A themes are unavailable. Company disclosures were provided via the 8-K press release and exhibit financials .

Wall Street consensus estimates from S&P Global were unavailable due to access limits at the time of retrieval; as such, we cannot provide a direct comparison of revenue/EPS vs consensus for Q3 2023. The company’s preliminary indication in Q2 of “>20%” YoY revenue growth for Q3 was exceeded with actual +31% YoY, suggesting stronger-than-indicated performance .

Proprietary product mix is a key earnings driver: gross margin expanded to 22.9% as SlenderWall and soundwall volumes rose, supporting operating income of $1.5M and diluted EPS of $0.24 .
Recovery from Q2 one-offs and rental slowdown: Q3 normalized with improved shipping/installation activity and late-quarter barrier rental uptick; watch for continued rental momentum into future quarters .
Backlog supports near-term visibility: $60.2M backlog (majority within 12 months) underpins production scheduling and revenue cadence across 2024, aided by infrastructure spend .
Working capital and liquidity improved sequentially: cash increased to $5.8M; debt trimmed to $5.9M; capex moderated to $1.1M, balancing growth investments with cash preservation .
Segment monitoring: barrier rentals and royalties are swing factors; proprietary product strength offers margin insulation, but barrier rental mix can materially impact quarterly profitability .
Estimate comparison unavailable: absence of S&P Global consensus limits beat/miss assessment; nevertheless, actual revenue growth exceeded Q2’s preliminary guide (>20% vs actual +31%) .
Near-term trading implication: narrative momentum around margin recovery and backlog strength, coupled with visibility from awarded projects (e.g., Baltimore Harbor Tunnel), are likely focal points for price action and positioning .