Royalty Income Strongest Quarter in Company History

MIDLAND, VA / ACCESSWIRE / August 10, 2021 / Smith-Midland Corporation (NASDAQ:SMID) provider of innovative, high-quality proprietary and patented precast concrete products and systems today announced second quarter results for 2021.

Second Quarter 2021 Highlights

68 percent increase in royalty income, the strongest quarter in Company history
30 percent increase in core fleet barrier rental revenues
Rental barrier fleet expansion to 300,000 linear fleet by year end 2021
Received Platinum Safety Award from Associated Builders and Contractors (ABC)

"I am pleased to announce another great quarter and first half of 2021 as we execute against our long-term growth plans. As stated last quarter, we had a tremendous number of one-time special projects during Q1 which drove stronger than typical results. Moving into Q2, the strength in the rental business remains robust. As we continue driving a higher mix of barrier rental business by increasing our core rental fleet and proactively shifting our customers to barrier rentals versus sales, we will continue to drive higher margins. Our second quarter 2021 royalty income posted historic gains; a notable 68 percent increase compared to last year. We expect to see additional royalty income growth in future quarters related to the approval of our patented JJ-Hooks interlocking highway barrier system in the California market that we announced in February of this year," said Ashley Smith, Chief Executive Officer. Our focus on sales for our lightweight proprietary SlenderWall cladding system is yielding results and we are happy to see those efforts gaining traction. I also wanted to mention how proud I am of our team's receipt of the Platinum Safety Award from Associated Builders and Contractors. Disciplined execution and emphasizing our lean manufacturing methodologies as we grow is key. Management and the Board remain closely aligned with our shareholders and look to continuously drive long term shareholder value," concluded Smith.

Second Quarter 2021 Results

The Company reported 2021 second quarter revenues of $12.3 million compared to $10.5 million for second quarter 2020. Operating income for second quarter 2021 increased to approximately $1.3 million compared to $573,000 in second quarter 2020. Net income increased from $441,000 for the second quarter 2020 compared to $985,000 for the second quarter 2021. Earnings per share increased from $0.09 in second quarter 2020 to $0.19 second quarter 2021.

Six Month 2021 Results

The Company reported $27.5 million in revenue for the six-months ended June 30, 2021 compared to $20.3 million during the same period in 2020. Operating income for the first half of 2021 increased to $5.1 million from $532,000, reflecting an increase of approximately 855 percent over the same period of last year. Net income for the first half of 2021 totaled $3.9 million compared to $403,000 in the first half of 2020, an 856 percent improvement. Earnings per share increased 825 percent to $0.74 for the six months ended June 30, 2021 compared to $0.08 in the same period of 2020.

Product Sales

Smith-Midland reports revenue in two categories: products sales and service revenue. Product sales for second quarter 2021 totaled $7.2 million compared to $6.7 million second quarter 2020. The Company's architectural panel sales for the second quarter 2021 posted an increase of 63 percent year-over-year. Soundwall revenue increased 9 percent from $2.2 million to $2.4 million. Building sales and utility sales saw a 10 percent and 21 percent increase, respectively.

Service Revenue

Barrier rentals posted a solid increase of 30 percent during the second quarter of 2021. The Company is prepared to meet barrier rental demand by increasing the rental fleet to 300,000 linear feet by the end of 2021. Smith-Midland will manufacture the barrier and expects the $1.0 million investment to pay off quickly. Royalty income improved an impressive 68 percent compared to second quarter 2020. The royalty increase is primarily attributed to increases in licensee production of the Company's proprietary, interlocking JJ-Hooks highway barriers. Smith-Midland's licensee expansion into California with the Company's patented and proprietary product offerings is expected to further elevate royalty income moving forward. Service revenues totaled $5.1 million for second quarter 2021 compared to $3.8 million in the prior year reflecting a 35 percent increase overall.

Balance Sheet and Liquidity

As of June 30, 2021, Smith-Midland's cash and investments totaled $14.4 million compared to $5.6 million in the second quarter 2020. Accounts receivable equaled $11.8 million while debt at the end of the second quarter 2021 totaled $4.5 million. Smith-Midland's PPP loan of approximately $2.7 million was forgiven in full subsequent to the end of the second quarter 2021. Capital spending declined year-over-year to $926,000 compared to $2.3 million in 2020.

Macro Environment and Outlook

Smith-Midland is currently experiencing many favorable tailwinds with the transition to MASH TL3 barrier, and certainly the U.S. Infrastructure bill would be impactful for our business; however, the Company is not immune from macro challenges. Many U.S. businesses are being impacted by logistical and supply chain disruption. Overall, Smith-Midland is well positioned and has been proactive by increasing raw material inventories to ensure the Company is able to meet customer demand. The Company's barrier rental business remains very strong, and Smith-Midland is accelerating sales for the light weight, proprietary SlenderWall cladding system. Backlog was approximately $26.0 million recorded as of August 2, 2021, compared to $25.6 million at the same time in 2020. Smith-Midland's innovative, patented proprietary products are well positioned to drive the Company into the future. Smith-Midland will continuously leverage lean manufacturing methodologies to optimize operations.

About Smith-Midland

Smith-Midland develops, manufactures, licenses, rents, and sells a broad array of precast concrete products and systems for use primarily in the construction, transportation, and utilities industries. Management and the board own approximately 20 percent of SMID stock, aligning with shareholder values.

Forward-Looking Statements

This announcement contains forward-looking statements, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors which might cause such a difference include, but are not limited to, the risk that the coronavirus outbreak may adversely affect future operations, product demand, the impact of competitive products and pricing, capacity and supply constraints or difficulties, general business and economic conditions, out debt exposure, the effect of the Company's accounting policies and other risks detailed in the Company's Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

Contact:

Media Inquiries:
AJ Krick, CFO
540-439-3266
investors@smithmidland.com

Investor Relations:
Steven Hooser or Deidra Roy
Three Part Advisors, LLC
214-872-2710

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

	June 30, 2021 (Unaudited)		December 31, 2020
ASSETS
Current assets
Cash	$	13,194	$	8,764
Investment securities, available-for-sale, at fair value		1,243		1,228
Accounts receivable, net
Trade - billed (less allowance for doubtful accounts of approximately $400), including contract retentions		11,826		9,798
Trade - unbilled		636		742
Inventories, net
Raw materials		1,295		643
Finished goods		1,448		1,551
Prepaid expenses and other assets		558		615

Total current assets		30,200		23,341

Property and equipment, net		18,612		18,602

Deferred buy-back lease asset, net		3,818		4,237

Other assets		287		319

Total assets	$	52,917	$	46,499

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

		June 30, 2021			December 31, 2020
		(Unaudited)
	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable - trade		$	2,944		$	1,866
Accrued expenses and other liabilities			577			875
Deferred revenue			2,617			1,774
Accrued compensation			1,496			1,318
Accrued income taxes			1,045			470
Deferred buy-back lease obligation			1,195			1,203
Operating lease liabilities			87			85
Current portion of PPP loan			2,692			-
Current maturities of notes payable			556			740
Customer deposits			833			569

Total current liabilities			14,042			8,900

Deferred revenue			1,423			600
Deferred buy-back lease obligation			3,196			3,790
Operating lease liabilities			167			211
Notes payable - less current maturities			3,959			4,196
PPP loan - less current portion			-			2,692
Deferred tax liability			2,457			2,461

Total liabilities			25,244			22,850

Stockholders' equity
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued and outstanding			-			-
Common stock, $.01 par value; authorized 8,000,000 shares; 5,326,595 and 5,279,411 issued and 5,202,158 and 5,202,158 outstanding, respectively			53			52
Additional paid-in capital			6,576			6,405
Treasury stock, at cost, 40,920 shares			(102	)		(102	)
Retained earnings			21,146			17,294

Total stockholders' equity			27,673			23,649

Total liabilities and stockholders' equity		$	52,917		$	46,499

SMITH-MIDLAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue
Product sales	$	7,243		$	6,699		$	14,662		$	13,550
Barrier rentals		1,182			907			6,958			1,650
Royalty income		692			413			1,112			681
Shipping and installation revenue		3,190			2,431			4,791			4,394

Total revenue		12,307			10,450			27,523			20,275

Cost of goods sold		8,993			8,073			18,488			16,297

Gross profit		3,314			2,377			9,035			3,978

Operating expenses
General and administrative expenses		1,340			1,230			2,665			2,282
Selling expenses		696			574			1,291			1,164

Total operating expenses		2,036			1,804			3,956			3,446

Operating income (loss)		1,278			573			5,079			532

Other income (expense)
Interest expense		(56	)		(57	)		(98	)		(113	)
Interest income		10			9			19			17
Gain on sale of assets		42			30			88			66
Other income		39			16			33			20

Total other income (expense)		35			(2	)		42			(10	)

Income (loss) before income tax expense (benefit)		1,313			571			5,121			522

Income tax expense (benefit)		328			130			1,269			119

Net income (loss)	$	985		$	441		$	3,852		$	403

Basic and diluted earnings (loss) per common share	$	0.19		$	0.09		$	0.74		$	0.08

Weighted average number of common shares outstanding:
Basic		5,202			5,184			5,202			5,184
Diluted		5,218			5,184			5,214			5,184

SMITH-MIDLAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income (loss)	$	3,852		$	403
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,318			1,180
Gain (loss) on sale of assets		(88	)		(66	)
Unrealized (gain) loss on investment securities available for sale		(11	)		(3	)
Allowance for doubtful accounts		15			68
Stock compensation		172			-
Deferred taxes		(4	)		3
(Increase) decrease in
Accounts receivable - billed		(2,043	)		1,898
Accounts receivable - unbilled		106			(192	)
Inventories		(549	)		134
Prepaid expenses and other assets		73			(101	)
Refundable income taxes		-			136
Increase (decrease) in
Accounts payable - trade		1,078			(62	)
Accrued expenses and other liabilities		(298	)		186
Deferred revenue		1,666			(6	)
Accrued compensation		178			(190	)
Accrued income taxes		575			-
Deferred buy-back lease obligation		(602	)		(555	)
Customer deposits		264			(251	)
Net cash provided by (used in) operating activities		5,702			2,582
Cash flows from investing activities:
Purchases of investment securities available-for-sale		(13	)		(15	)
Purchases of property and equipment		(926	)		(2,326	)
Proceeds from sale of fixed assets		88			71
Net cash provided by (used in) investing activities		(851	)		(2,270	)
Cash flows from financing activities:
Proceeds from long-term borrowings		-			5,426
Repayments of long-term borrowings		(421	)		(2,416	)
Dividends paid on common stock		-			(282	)
Net cash provided by (used in) financing activities		(421	)		2,728
Net increase (decrease) in cash		4,430			3,040
Cash
Beginning of period		8,764			1,364
End of period	$	13,194		$	4,404

Supplemental Cash Flow information:
Cash payments for interest	$	98		$	113
Cash payments for income taxes	$	713		$	1

SOURCE: Smith-Midland Corporation

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Smith-Midland Reports Second Quarter 2021 Financial Results