Smith-Midland(SMID) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Smith-Midland Corporation as of June 30, 2025, reflect significant growth in revenue and net income, with total assets increasing and net income more than doubling to $7.5 million, though cash decreased slightly due to working capital and capital investments Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $81.2 million, primarily driven by a significant rise in accounts receivable, while total liabilities also grew, and stockholders' equity strengthened to $49.2 million reflecting strong net income | Balance Sheet Items (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $47,447 | $35,849 | +$11,598 | | Accounts receivable, net (billed) | $30,312 | $19,420 | +$10,892 | | Total Assets | $81,176 | $67,991 | +$13,185 | | Total Current Liabilities | $16,485 | $15,010 | +$1,475 | | Total Liabilities | $31,931 | $26,252 | +$5,679 | | Total Stockholders' Equity | $49,245 | $41,739 | +$7,506 | Condensed Consolidated Statements of Income (Loss) For the six months ended June 30, 2025, the company reported significant year-over-year growth, with total revenue increasing 34% to $48.9 million and net income more than doubling to $7.5 million, driven by substantial increases in barrier rentals and product sales | Metric (in thousands, except EPS) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $48,884 | $36,394 | +34.3% | | Gross Profit | $14,761 | $9,045 | +63.2% | | Operating Income | $9,905 | $4,182 | +136.8% | | Net Income | $7,498 | $3,129 | +139.6% | | Diluted EPS | $1.41 | $0.59 | +139.0% | - Barrier rentals were a key growth driver, increasing from $2.3 million to $14.2 million for the six months ended June 30, 2025, compared to the same period in 2024[17] Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $41.7 million at year-end 2024 to $49.2 million as of June 30, 2025, primarily due to the $7.5 million in net income earned during the first six months - Retained earnings grew from $34.1 million at December 31, 2024, to $41.6 million at June 30, 2025, driven by the $7.5 million net income for the six-month period[20] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $2.4 million, significantly impacted by an $11.1 million increase in accounts receivable, leading to an overall $0.4 million decrease in cash despite strong net income | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | | :--- | :--- | | Net cash provided by operating activities | $2,400 | | Net cash used in investing activities | ($2,515) | | Net cash used in financing activities | ($332) | | Net decrease in cash | ($447) | | Cash at beginning of period | $7,548 | | Cash at end of period | $7,101 | - A significant use of cash in operations was the increase in billed accounts receivable, which consumed $11.1 million[23] Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, including revenue recognition and disaggregation, showing strong growth in Soundwall Sales and Barrier Rentals, and describe the company's debt structure and undrawn $5 million revolving line of credit Disaggregation of Revenue (Six Months Ended June 30, in thousands) | Revenue by Type | 2025 | 2024 | | :--- | :--- | :--- | | Soundwall Sales | $8,985 | $5,170 | | Easi-Set Building Sales | $4,985 | $2,540 | | Total Product Sales | $22,548 | $23,868 | | Barrier Rentals | $14,205 | $2,250 | | Royalty Income | $2,216 | $1,445 | | Shipping and Installation | $9,915 | $8,831 | | Total Service Revenue | $26,336 | $12,526 | | Total Revenue | $48,884 | $36,394 | - The company has several notes payable with fixed interest rates ranging from 2.90% to 4.09%, and is subject to loan covenants requiring a tangible net worth of $25 million and limiting annual capital expenditures to $5 million[52][53][57] - The company has a $5 million revolving line of credit with a variable interest rate, which had no outstanding balance as of June 30, 2025[58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong financial performance in the first half of 2025 to special barrier rental projects and increased sales, resulting in a 34% revenue growth to $48.9 million and a 140% surge in net income to $7.5 million, despite a cash decrease due to increased accounts receivable - The increase in revenue was mainly from special barrier project sales in Q1 and Q2 2025, increased soundwall sales, Easi-Set building sales, royalty income, and shipping and installation revenue[69] - Cost of sales as a percentage of revenue (excluding royalties) decreased from 78% to 72% for the six-month period, primarily due to higher-margin special barrier projects[71] - The company's sales backlog was approximately $54 million as of August 1, 2025, compared to $59 million in the prior year[74][115] Results of Operations For the first six months of 2025, total revenue increased by $12.5 million to $48.9 million, primarily driven by a surge in barrier rentals and soundwall sales, leading to a 63% increase in gross profit and a doubling of operating income - Barrier rentals increased significantly due to two special barrier projects in Q1 and Q2 2025[85] - Soundwall sales were significantly higher due to increased production volumes at all three plants to execute on an increased backlog[77] - Utility sales decreased significantly compared to 2024, when there was a surge in demand to support data center growth in Northern Virginia[83] Liquidity and Capital Resources As of June 30, 2025, cash decreased slightly to $7.1 million, primarily due to an $11.1 million increase in accounts receivable, with capital spending at $2.5 million for the first half and a full-year budget of $5 million, which the company believes is sufficient to fund operations - Cash decreased from $7.5 million to $7.1 million, primarily due to an increase in accounts receivable from $19.4 million to $30.3 million[104][105] - Capital spending totaled $2.5 million for the first six months of 2025, with a full-year budget of approximately $5 million, focused on expanding the barrier rental fleet and manufacturing facilities[106] - The company has a $5 million revolving line of credit with no balance outstanding as of June 30, 2025[102] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company - This section is not applicable[116] Item 4. Controls and Procedures As of June 30, 2025, management concluded that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting, with remediation efforts underway including new personnel and enhanced policies - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses[116] - Identified material weaknesses include deficiencies in the control environment, risk assessment, lack of formal accounting policies, and inadequate IT general controls related to user access and segregation of duties[118][119][124] - Remediation efforts are underway, including hiring a new CFO, pursuing additional finance personnel, designing new entity-level controls, and enhancing policies and procedures[125] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently involved in any litigation of a material nature - The Company is not presently involved in any litigation of a material nature[128] Item 1A. Risk Factors Disclosure of risk factors is not required for this filing - Disclosure of risk factors is not required for this filing[129] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds during the period[129] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - There were no defaults upon senior securities during the period[129] Item 4. Mine Safety Disclosures This section is not applicable to the company - This section is not applicable[129] Item 5. Other Information The company reports no other information for this period - There is no other information to report for this period[129] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files