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SI

SCHMITT INDUSTRIES INC (SMIT)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 FY2022 revenue was $3.76M, up 149.4% year over year, with gross margin expanding to 64.1% from 49.8% in Q3 FY2021 and 32.7% in Q4 FY2021; net loss was $(1.05)M and diluted EPS was $(0.28) .
  • Ice Cream segment drove the quarter with $2.96M revenue (+489.5% YoY), while Measurement segment declined to $0.80M (-20.1% YoY) .
  • Adjusted EBITDA loss narrowed to $(0.87)M versus $(2.15)M in Q4 FY2021, aided by higher factory utilization, production efficiencies, and mix; management highlighted Prospect Park West as the highest-performing retail location .
  • No earnings call transcript was available and the company did not issue formal guidance; S&P Global Wall Street consensus estimates were unavailable for SMIT this quarter.
  • Near-term stock narrative catalysts: outsized margin expansion on ice cream manufacturing efficiency and strong retail performance, balanced by continued measurement segment headwinds and elevated operating expenses (including ~$0.5M one-time systems costs) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 64.1% on higher factory utilization and production efficiencies in Ice Cream, plus favorable mix in Measurement .
  • Ice Cream segment revenue surged to $2.96M (+489.5% YoY); management noted, “our newest location, Prospect Park West, [is] becoming our highest performing location” .
  • Sequential profitability trends improved: Adjusted EBITDA loss narrowed to $(0.87)M from $(2.15)M in Q4; management emphasized “factory equipment upgrades and co-packer volume” supporting progress .

What Went Wrong

  • Measurement segment revenue fell 20.1% YoY to $0.80M due to declines in Acuity and Xact product sales, partially offset by a 3.2% increase in Xact monitoring revenue .
  • Operating expenses remained elevated at $4.14M (+85.7% YoY), with ~$0.5M one-time costs to stabilize financial and IT systems .
  • The company remained loss-making (net loss $(1.05)M; $(0.28) diluted EPS), though improved sequentially versus Q4’s $(3.45)M loss and $(0.92) EPS .

Financial Results

MetricQ3 FY2021 (3 months ended Feb 28, 2021)Q4 FY2021 (3 months ended May 31, 2021)Q1 FY2022 (3 months ended Aug 31, 2021)
Revenue ($USD)$1,668,444 $2,658,709 $3,759,175
Gross Margin (%)49.8% 32.7% 64.1%
Operating Expenses ($USD)$3,335,650 $4,482,514 $4,139,951
Net (Loss) Income ($USD)$(2,419,797) $(3,454,065) $(1,045,039)
Diluted EPS ($USD)$(0.64) $(0.92) $(0.28)
Adjusted EBITDA ($USD)$(2,390,971) $(2,146,466) $(865,059)
Segment Revenue ($USD)Q3 FY2021Q4 FY2021Q1 FY2022
Ice Cream Segment$621,730 $1,761,297 $2,955,755
Measurement Segment$1,046,714 $897,412 $803,420
KPIsQ3 FY2021Q4 FY2021Q1 FY2022
Cash and Equivalents ($USD)$4,166,364 $4,032,690 (fiscal year-end) $2,725,643
Xact Monitoring Revenue Growth (%)+9.4% YoY (Q3) N/A+3.2% YoY (Q1)
Estimates vs Actual (Q1 FY2022)ConsensusActual
Revenue ($USD)N/A (consensus unavailable)$3,759,175
Diluted EPS ($USD)N/A (consensus unavailable)$(0.28)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2022/Q2+None providedNone providedMaintained (no formal guidance)
Gross MarginFY2022/Q2+None providedNone providedMaintained (no formal guidance)
Operating ExpensesFY2022/Q2+None providedNone providedMaintained (no formal guidance)
EPSFY2022/Q2+None providedNone providedMaintained (no formal guidance)
Capital Actions / Real EstateFY2022Listed 28th Street building for sale (Dec 2020) “Continue to make progress on the sale of the 28th Avenue property,” timing uncertain Ongoing effort

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2021)Previous Mentions (Q4 FY2021)Current Period (Q1 FY2022)Trend
COVID environment / operationsNavigated winter months safely; preparing for ice cream season Fiscal year was a year of investments; continued pandemic overhang expected “Although there is still a COVID environment and some persistent overhangs, the Company has performed well and most importantly remained safe” Ongoing, manageable
Ice Cream retail performanceNew location opening soon in Brooklyn Ice Cream segment drove FY revenue growth Prospect Park West “highest performing location”; margin gains from factory utilization Improving retail + manufacturing
Measurement segment demand/mixFocus on business development; improved customer experience Expanding IoT offerings; legacy customer CAPEX constraints Planning new product launches; “constrained environment... more difficult than anticipated” Challenged near-term
Manufacturing/Capex/SystemsRed Hook factory capex, new packaging launch $3.1M non-recurring cash outflows (acquisition, capital improvements, ERP, buybacks) ~$0.5M one-time costs to stabilize financial and IT systems Near-term cost headwind
Real estate monetizationListed 28th Street for sale; no timing certainty No timing certainty reiterated “Moving forward... real estate as a main asset to be monetarized... timing is uncertain” Ongoing, timing unclear

Management Commentary

  • “This summer has provided a glimpse into the operating ability of the Company as margins and profitability improvements are seen in the retail and factory divisions... factory equipment upgrades and co-packer volume have further supported the progress.”
  • “Our SMS Measurement segment has taken the past months to plan and prepare for new product launches... constrained environment is proving to be more difficult than anticipated...”
  • “We invested $3.1 million in non-recurring cash outflows for Fiscal 2021, including the acquisition of Ample Hills, capital improvements for the Ice Cream segment, ERP implementation costs and stock repurchases.”
  • “Please also keep an eye out for our new location opening soon in Brooklyn.”

Q&A Highlights

  • No earnings call transcript was filed for Q1 FY2022; Q&A highlights and analyst clarifications are unavailable.

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2022 revenue and EPS was unavailable for SMIT; consequently, beats/misses versus consensus could not be assessed this quarter.
  • Given the significant gross margin expansion and improved adjusted EBITDA, sell-side models may need to reassess ice cream manufacturing throughput and retail productivity assumptions; however, without consensus, magnitude of revisions cannot be quantified from S&P Global data.

Key Takeaways for Investors

  • Margin inflection: Gross margin of 64.1% represents a material sequential and YoY improvement driven by manufacturing efficiencies and mix; this is a key near-term narrative driver .
  • Segment divergence: Ice Cream growth remains robust ($2.96M), while Measurement faces demand/product headwinds ($0.80M); portfolio exposure is increasingly skewed to Ice Cream .
  • Operating expense discipline is a focus: Elevated OpEx includes ~$0.5M one-time systems costs; investors should monitor normalization and incremental efficiencies to sustain EBITDA improvement .
  • Cash trend: Cash declined to $2.73M from $4.03M at FY2021 year-end and $4.17M in Q3; liquidity trajectory bears watching as growth initiatives continue .
  • Real estate optionality: Monetization of the 28th Avenue/28th Street property remains a potential funding catalyst, but timing is uncertain .
  • Measurement segment pipeline: New product launches are planned, but management acknowledges a tougher environment; risk to near-term top-line from legacy CAPEX constraints persists .
  • Trading lens: Positive setup around continued margin execution in Ice Cream and strong retail performance; balanced against OpEx normalization risks and Measurement softness. Watch for updates on product launches and real estate sale to sustain momentum .

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