Executive Summary

Q3 FY2022 revenue was $1.85M, gross margin 50.7%, and diluted EPS was ($0.24); year-over-year revenue rose 10.8% and gross margin improved, but results declined sequentially versus Q2 due to seasonality and higher unit costs in retail operations .
Management announced a strategic shift to focus on Ample Hills Creamery as the core business and initiated a strategic review of the Schmitt Measurement Systems (Acuity and Xact) lines, targeting completion of the transition in calendar 2022 .
Non-GAAP loss improved year-over-year; Adjusted EBITDA was ($0.74M) vs ($2.38M) in Q3 FY2021, reflecting margin improvements and cost controls, though profitability remains a challenge .
Potential stock reaction catalysts: clarity on SMS strategic alternatives (sale/partnership), pace of Ample Hills new store openings (four leases signed), and evidence of sustained same-store sales growth in the seasonally stronger periods .

What Went Well and What Went Wrong

What Went Well

Ice Cream segment revenue increased 56.5% year-over-year to $0.97M; consolidated revenue up 10.8% YoY; gross margin improved to 50.7% YoY .
Strategic focus: “The Board and I are excited about the potential for Ample Hills…we believe a strategic focus on the Ample Hills business will allow us to accelerate growth” — Michael R. Zapata, Executive Chairman, President and CEO .
New growth initiatives: four leases signed (including Upper West Side Manhattan), indicating tangible footprint expansion and future revenue drivers .

What Went Wrong

Sequential pressure: revenue fell from $2.96M in Q2 to $1.85M in Q3, and gross margin declined sequentially (54.2% → 50.7%), reflecting seasonal softness and mix .
Operating scale: Operating expenses remained high at $3.32M, driving operating loss of ($2.39M); net loss was ($0.89M) vs net income of $2.19M in Q2, highlighting limited operating leverage in seasonally slow periods .
Liquidity drawdown: quarter-end cash decreased to $2.00M from $4.57M in Q2; while Q2 benefited from a property sale, the lower cash underscores the importance of capital discipline amid expansion plans .

Financial Results

Headline Metrics vs Prior Quarters

Metric	Q1 FY2022 (Aug 31, 2021)	Q2 FY2022 (Nov 30, 2021)	Q3 FY2022 (Feb 28, 2022)
Revenue ($USD)	$3,759,175	$2,961,965	$1,848,913
Gross Margin %	64.1%	54.2%	50.7%
Operating Expenses ($USD)	$4,139,951	$4,167,470	$3,323,159
Operating Income (Loss) ($USD)	—	—	($2,386,322)
Net Income (Loss) ($USD)	($1,045,039)	$2,187,912	($893,244)
Diluted EPS ($USD)	($0.28)	$0.57	($0.24)
Cash & Equivalents ($USD)	$2,725,643	$4,572,774	$1,999,241

Year-over-Year Comparison (Q3 FY2022 vs Q3 FY2021)

Metric	Q3 FY2021	Q3 FY2022	YoY Change
Revenue ($USD)	$1,668,444	$1,848,913	+10.8% ($180,469)
Gross Margin %	49.8%	50.7%	+90 bps
Operating Expenses ($USD)	$3,335,650	$3,323,159	(0.4%)
Net Income (Loss) ($USD)	($2,419,797)	($893,244)	+63.1% improvement
Diluted EPS ($USD)	($0.64)	($0.24)	+63.3% improvement

Segment Breakdown

Segment Revenue ($USD)	Q1 FY2022	Q2 FY2022	Q3 FY2022
Ice Cream (Ample Hills)	$2,955,755	$1,979,616	$972,920
Measurement (Acuity + Xact)	$803,420	$982,349	~$875,993 (derived: $1,848,913 − $972,920)

Note: Q3 Measurement segment revenue is derived from consolidated revenue minus Ice Cream segment revenue; company operates two reportable segments .

Non-GAAP Metrics

Metric	Q1 FY2022	Q2 FY2022	Q3 FY2022
Adjusted EBITDA ($USD)	($865,059)	($2,219,848)	($744,246)
Adjusted Net Loss ($USD)	($1,011,380)	($3,506,654)	($874,009)
Non-GAAP EPS ($USD)	($0.27)	($0.92)	($0.23)

Guidance Changes

No formal quantitative guidance (revenue/margins/OpEx/tax) was issued. Management announced a strategic focus on Ample Hills and a strategic review of SMS, with full transition targeted in calendar 2022 .

Metric	Period	Previous Guidance	Current Guidance	Change
Strategic focus (business mix)	CY2022	None	Focus core on Ample Hills; strategic review of SMS	Strategic update (no financial ranges)

Earnings Call Themes & Trends

No earnings call transcript for Q3 FY2022 was available in our document set. Themes below reflect management communications across press releases.

Topic	Previous Mentions (Q1 FY2022)	Previous Mentions (Q2 FY2022)	Current Period (Q3 FY2022)	Trend
Business strategy	Emphasis on factory upgrades and retail unit economics at Ample Hills	Expansion plans; Upper West Side lease; wholesale expansion	Strategic pivot to focus on Ample Hills; SMS strategic review	Sharpening focus on consumer retail; portfolio rationalization
Retail expansion	Prospect Park West highest-performing store; selective future locations	Upper West Side lease; spring opening; wholesale channels grow	Four new leases signed; details forthcoming	Accelerating footprint growth
Measurement segment	Preparing new product launches; constrained environment	New product launches; stronger environment aiding revenue	Strategic review of Acuity and Xact lines	From optimization to potential divestiture/realignment
Cash/real estate	~$500k one-time costs; exploring property sale	$5.1M property sale; considering sale/leaseback	Cash down to $2.0M; focus on cost savings	Liquidity actions executed; maintain discipline amid expansion
Macro/COVID	COVID overhang acknowledged; safety prioritized	Noted stronger customer environment	Seasonally slow months cited for Ample Hills	Seasonal and macro factors influencing mix/throughput

Management Commentary

“The Board and I are excited about the potential for Ample Hills…we believe a strategic focus on the Ample Hills business will allow us to accelerate growth.” — Michael R. Zapata, Executive Chairman, President and CEO .
“Ample Hills continues to perform well with increased revenue performance on a same store basis…we are excited to continue to open new locations this year.” — Michael R. Zapata .
“For our SMS business lines…new product launches by Acuity and Xact combined with a stronger customer environment is showing a positive impact on revenue…we were pleased to complete the $5.1m sale of the 28th Street building…exploring the sale/leaseback for our Nicolai Street building.” — Michael R. Zapata (Q2 release) .
“This summer has provided a glimpse into the operating ability…margins and profitability improvements…stores continue to perform well with our newest location, Prospect Park West, becoming our highest performing location.” — Management (Q1 release) .

Q&A Highlights

No earnings call transcript or Q&A session was available for Q3 FY2022 in our document set.

Estimates Context

Wall Street consensus (S&P Global) for Q3 FY2022 EPS and revenue was unavailable via our data connector at the time of analysis; therefore, we cannot assess beats/misses versus consensus.
Implication: Investors should focus on sequential trends and strategic milestones (store openings, SMS review outcomes) until formal coverage/consensus is re-established.

Key Takeaways for Investors

Seasonal trough: Sequential declines in revenue and margin from Q2 to Q3 align with seasonality; monitor Q4/Q1 for recovery in retail throughput and factory utilization .
Strategic pivot to consumer retail: Concentration on Ample Hills could simplify the story and unlock growth; resolution of SMS strategic review (sale/partner/spin) may be a catalyst .
Non-GAAP improvement YoY: Adjusted EBITDA and Non-GAAP EPS improved materially vs prior year, indicating operational progress despite scale constraints .
Liquidity watch: Cash fell to $2.0M; with expansion underway, watch for additional financing actions (e.g., sale/leaseback) and capex cadence .
Execution bar: Four leases signed provide visible growth pipeline; unit economics and same-store performance in peak seasons will be critical to sustain margin gains .
Near-term trading setup: Headlines around SMS strategic alternatives and store opening timelines are likely to move the stock; absence of consensus complicates beat/miss trading — focus on operational KPIs and disclosure cadence.

Appendix: Source Documents Read

FY22 Q3 8-K and press release (Item 2.02, Exhibit 99.1)
FY22 Q2 8-K and press release
FY22 Q1 8-K and press release

SCHMITT INDUSTRIES INC (SMIT)·Q3 2022 Earnings Summary