Smith-Midland(SMID) - 2025 Q3 - Quarterly Report

Financial Performance - For the three months ended September 30, 2025, the Company reported a net income of $2,877, compared to $3,150 for the same period in 2024, while for the nine months ended September 30, 2025, net income was $10,375, up from $6,278 in 2024[70]. - Total revenue for the three months ended September 30, 2025, was $21,451, a decrease of $2,131 from $23,582 in the same period of 2024; however, revenue for the nine months increased to $70,335 from $59,977 in 2024, primarily due to special barrier project sales[70]. - Operating income for the three months ended September 30, 2025, was $3,854, slightly up from $3,848 in 2024; for the nine months, it increased to $13,759 from $8,031[72]. - Income tax expense for the three months ended September 30, 2025, was $994, with an effective tax rate of 26%, compared to $694 and 18% in 2024; for the nine months, the tax expense was $3,325 at a 24% rate, up from $1,683 at 21%[73]. - Operating income for the nine-month period ended September 30, 2025, was $13,759, compared to $8,031 for the same period in 2024[91]. - Net income for the nine months ended September 30, 2025, was $10,375, compared to $6,278 for the same period in 2024[94]. Sales and Revenue Breakdown - Soundwall sales increased significantly for the three and nine months ended September 30, 2025, with sales of $2,846 for the quarter and $11,832 for the nine months, compared to $1,873 and $7,043 in 2024, respectively[76]. - SlenderWall sales for the three and nine months ended September 30, 2025, were $1,146 and $2,634, respectively, as the Company focused on sales initiatives for this product[79]. - Easi-Set® and Easi-Span building sales increased for both the three and nine-month periods ended September 30, 2025, due to increased sales at all manufacturing plants[82]. - Utility sales decreased significantly for both the three and nine-month periods ended September 30, 2025, but are expected to trend higher for the remainder of 2025[83]. - Royalty income increased for both the three and nine-month periods ended September 30, 2025, driven by higher barrier production volumes from licensees[86]. - Miscellaneous wall sales decreased for the nine-month period ended September 30, 2025, due to lower production volumes compared to 2024[80]. - Barrier sales decreased slightly for the nine-month period ended September 30, 2025, as the company shifted marketing efforts to higher margin barrier rentals[81]. Costs and Expenses - Cost of sales as a percentage of revenue increased to 77% for the three months ended September 30, 2025, compared to 75% in 2024, while it decreased to 74% for the nine months from 77% in 2024[71]. - General and administrative expenses decreased to $1,100 for the three months ended September 30, 2025, from $1,720 in 2024, and to $4,198 for the nine months from $4,938[89]. Cash and Inventory - The company's cash position increased to $13,376 on September 30, 2025, from $7,548 on December 31, 2024[101]. - Inventory increased to $7,890 on September 30, 2025, from $6,677 on December 31, 2024, primarily due to increased finished goods inventory[106]. Sales Backlog - The Company's sales backlog as of November 1, 2025, was approximately $54.8 million, down from $62.8 million a year ago, with most projects expected to be produced within 12 months[74]. - The Company anticipates that the majority of projects in the sales backlog will be produced within 12 months, with some extending several years[110]. Operational Challenges - The Company experienced a ransomware incident in the first quarter of 2025, which is being addressed with network security changes, and no ransom payment was made[66]. - The Company may experience reduced revenues from December through February due to seasonal impacts on the construction industry, necessitating sufficient working capital to fund operations during winter months[108]. Internal Controls and Management - Management identified material weaknesses in internal control over financial reporting, which have not been remediated as of September 30, 2025[112]. - The Company did not maintain appropriately designed entity-level controls impacting the control environment, risk assessment, and monitoring activities[113]. - Management has committed to remediation efforts, including hiring a new Chief Financial Officer with relevant experience in financial reporting and internal controls[117]. - The Company’s consolidated financial statements are believed to present fairly its financial position and results of operations in accordance with U.S. GAAP, despite identified material weaknesses[115]. - There were no changes in the Company's internal control over financial reporting that materially affected its controls during the quarter ended September 30, 2025[117]. - Management did not design and maintain effective processes to ensure all journal entries are properly reviewed and approved prior to posting[116]. Raw Material Costs - Raw material costs used in production have slightly increased for the first nine months of 2025, with expectations of further slight increases for the remainder of 2025[109].