SCHMITT INDUSTRIES INC (SMIT)·Q3 2021 Earnings Summary

Executive Summary

• Q3 FY2021 revenue was $1.67M (+52.4% Y/Y) with gross margin of 49.8%; net loss from continuing operations widened to ($2.42M), or ($0.64) per diluted share . Sequentially, revenue declined from $2.03M in Q2 and $1.51M in Q1, while gross margin improved versus both prior quarters .
• Ice Cream (Ample Hills) contributed $0.62M in Q3, while Measurement delivered $1.05M; Measurement product sales declined Y/Y, partly offset by 9.4% growth in Xact monitoring revenue . Operating expenses surged 222% Y/Y to $3.34M due to inclusion of Ample Hills, higher stock comp, professional fees, and IT investments, driving a larger loss .
• Cash fell to $4.17M from $7.34M in Q2 and $9.47M in Q1, reflecting ongoing investment and operating losses; management reiterated a real estate monetization initiative (28th Street building listed for sale) .
• No formal numerical guidance was provided; management emphasized execution at Ample Hills (factory capex, packaging, new location opening) and continued progress in Measurement (Acuity/Xact) as potential near-term catalysts .

What Went Well and What Went Wrong

What Went Well

• Gross margin improved sequentially to 49.8% (Q3) from 47.4% (Q2) and 40.3% (Q1), demonstrating better mix/efficiency as Ample Hills operations scaled through the year .
• Xact monitoring recurring revenue grew 9.4% Y/Y in Q3 (and 10.3% in Q2; 5.6% in Q1), partially offsetting weaker product sales in Measurement .
• Management execution commentary: “We continue to make progress as a Company across our three business units… [Ample Hills] successfully launched new packaging… excited for the coming months… new location opening soon in Brooklyn,” and “our Portland team continues to make great progress… in both our Acuity and Xact business lines” .

What Went Wrong

• Operating expenses spiked 222.2% Y/Y to $3.34M, driven by Ample Hills inclusion, stock comp, professional fees, and IT, pressuring profitability .
• Measurement segment revenue declined 4.4% Y/Y to $1.05M as Acuity and Xact product revenue fell; the monitoring growth could not fully offset the product declines .
• Liquidity trended down through the year as cash decreased to $4.17M (from $7.34M in Q2 and $9.47M in Q1), underscoring continued investment and losses .

Financial Results

Non-GAAP metrics

Liquidity and selected KPIs

Segment revenue (current quarter)

Notes:

• Q2 segment revenue: Ice Cream $1,158,989; Measurement $870,723 .

Guidance Changes

No formal numerical guidance was provided in the Q3 FY2021 earnings press release (no revenue, margin, EPS, or segment targets were disclosed) .

Other corporate updates:

• Real Estate: 28th Street building listed for sale (no certainty on timing) .
• Prior quarter governance: Section 382 Rights Plan removed effective Jan 14, 2021 .

Earnings Call Themes & Trends

Management Commentary

• “We continue to make progress as a Company across our three business units… [Ample Hills] has overseen the capital expenditures for our Red Hook factory… launched new packaging for our Ample Hills pints… We are excited for the coming months… Please also keep an eye out for our new location opening soon in Brooklyn.” — Michael Zapata, Chairman & CEO .
• “In our SMS Measurement segment, our Portland team continues to make great progress… as they focus on business development and improved customer experiences in both our Acuity and Xact business lines.” — Michael Zapata .
• “We approved a capital project to upgrade our equipment and improve production efficiencies at our iconic Red Hook factory… building our brand, expanding our wholesale and e-commerce presence…” — Michael Zapata (Q2 commentary) .
• “Ample Hills adds another strong brand with great potential… the team has done an incredible job… opening our nine New York and New Jersey locations, opening our first California location, restocking our channels and launching our e-commerce site.” — Michael Zapata (Q1 commentary) .

Q&A Highlights

No earnings call transcript was located for Q3 FY2021; the company did not furnish a call transcript in our document set. As a result, no Q&A items or guidance clarifications were available from a call [ListDocuments: earnings-call-transcript returned none].

Estimates Context

Wall Street consensus estimates (EPS and revenue) from S&P Global were unavailable for SMIT for Q1–Q3 FY2021; therefore, we cannot provide a beat/miss analysis versus consensus. Management did not provide formal guidance in the quarter, limiting external benchmarking to reported trends .

Key Takeaways for Investors

• Revenue mix shift underway: Ice Cream is now a material contributor ($0.62M in Q3), but Measurement remains the larger segment ($1.05M) with recurring Xact monitoring growth helping offset weaker product sales .
• Sequential margin improvement suggests operational progress (GM 49.8% vs 47.4% vs 40.3% in Q2/Q1), but elevated opex (Ample Hills integration, stock comp, professional fees, IT) keeps profitability out of reach near term .
• Liquidity runway narrowed (cash $4.17M from $7.34M in Q2 and $9.47M in Q1), increasing the importance of real estate monetization and disciplined cash management while scaling Ample Hills .
• Recurring revenue momentum (Xact monitoring up ~9–10% Y/Y through Q2–Q3) is a positive indicator for Measurement segment durability amid product revenue variability .
• Near-term catalysts: Ample Hills seasonal uptick, new Brooklyn location, packaging refresh, and Red Hook factory capex benefits; lack of formal guidance means print-to-print execution will drive stock narrative .
• Risk factors: continued opex intensity, measurement product softness, and cash drawdown; watch for updates on property sale and any external financing or asset actions .
• Without consensus estimates, trading may key off reported sequential trends and qualitative updates (store openings, factory efficiency, recurring revenue growth) rather than beat/miss optics .