SMG Industries, Inc. Announces First Quarter 2018 Financial Results
Oilfield Services Company Reports Net Profit Driven by West Texas Permian Basin Customer Activity Increases
First Quarter 2018 Highlights:
- Revenue increased 79% to $998,178 for the quarter ended March 31, 2018, from $556,505 during the same period a year ago, up 50%, sequentially from last quarter.
- Gross profit increased over 100% to $488,063 for the quarter ended March 31, 2018, from $234,692 the same period a year ago.
- Gross margin grew from an average of 42% for all of 2017 to 49% for the first quarter 2018, driven by a favorable sales mix and higher service revenues.
- EBITDAX was $81,872 for the first quarter, (a non-GAAP measure; see reconciliation chart below).
- Net income was $19,743 for the first quarter ended March 31, 2018, as higher sales and higher gross margins generated improved results, compared to a net loss of $388,664 reported in Q4 2017.
- The company is aggressively moving forward with its announced acquisition strategy.
HOUSTON, May 10, 2018 (GLOBE NEWSWIRE) -- SMG Industries, Inc. (formerly SMG Indium Resources Ltd.) (OTCQB:SMGI) an oilfield services company headquartered in Houston, Texas announced their financial results today for the first quarter ended March 31, 2018.
As stated in the Company’s Quarterly Report on Form 10-Q filed May 10, 2018 with the Securities and Exchange Commission, revenues for the three months ended March 31, 2018 were $998,178, an increase of $441,673, or 79%, from $556,505 for the comparable three months ended March 31, 2017, and sequentially up 50% from the previous fourth quarter 2017. These revenues included product sales of our degreasers, detergents and surfactants, service revenues from drilling rig wash crews, mechanical repair services, equipment and parts sales and rental equipment revenues. Each of these revenue streams increased for the first quarter 2018 when compared to the same period in 2017, driven by increased customer activity from increased numbers of active drilling rigs operating in our market.
During the three months ended March 31, 2018, gross margins increased to 49% of sales, or $488,063, compared to $234,692, or 42% of revenues for the comparable 2017 period. The improvement in gross margins is primarily the result of operational efficiencies from higher sales volumes, a more favorable sales mix driven by higher margin, rig wash service revenues and improved supply chain economies.
For the three months ended March 31, 2018, selling, general and administrative expenses increased to $421,842, an increase of $333,623, from $88,219 for the three months ended March 31, 2017. The increase in selling, general and administrative expenses in 2018 was primarily due to higher costs associated with being a public reporting company including accounting and legal fees, higher wages from added managerial and service crew personnel in West Texas and increased insurance expense. Additionally, amortization of deferred financing costs was $24,505 during the first quarter 2018. No public reporting costs or related professional fees were present in the first quarter of 2017.
During the three months ended March 31, 2018, we realized a net income of $19,743, or $0.00 per basic and diluted earnings per share. For the three months ended March 31, 2017 we realized a net income of $136,794 or $0.10 per basic and $0.09 diluted earnings per share. The net income for the quarter ended March 31, 2018 resulted from higher revenues generating higher gross margin and operating leverage partially offset by higher selling, general and administrative expenses associated with becoming a publicly-traded entity and wage increases from West Texas expansion present during the first quarter 2018 not present in the first quarter 2017. The basic weighted average number of shares of common stock outstanding was 9,387,325 and 1,408,276 for the three months ended March 31, 2018 and 2017, respectively.
As of May 10, 2018, the Company had 10,255,190 shares outstanding, no preferred shares, no warrants, or convertible securities and approximately 500,000 options outstanding which held an average exercise price of $0.47 per share.
Matthew Flemming, Chief Executive Officer of SMGI stated, “The investments made in 2017 have shown results during the first quarter 2018. Our West Texas’ Permian Basin expansion and the move to a new larger facility in Odessa, Texas have contributed to our growth. Our first quarter revenues grew almost 50% sequentially from the previous quarter in 2017 in large part from the Permian Basin customer activity. Gross margins also improved from last year’s 42% to 49% for the first quarter 2018 benefiting from increased revenue and a favorable sales mix.” Mr. Flemming added, “We continue to actively pursue plans for acquisitions with an accretive profile and prospects for future growth with our team.”
Mr. Stephen Christian, President of MG Cleaners LLC and EVP of SMG stated, “Miracle Blue™ and other proprietary degreasers, surfactants and detergents sales were up in the first quarter 2018 as geographic distribution expanded in West Texas and New Mexico. However, we are most pleased with our service crews’ expansion utilized by customers for drilling rig wash and onsite service repairs which drove a more favorable margin mix. We anticipate other growth and expansion plans in the second quarter of 2018 in South Texas targeting Eagle Ford Shale activity.”
First Quarter 2018 Financial Tables
| SMG INDUSTRIES INC. | ||||||||||
| (FORMERLY: SMG INDIUM RESOURCES LTD.) | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (unaudited) | ||||||||||
| March 31, | December 31, | |||||||||
| 2018 | 2017 | |||||||||
| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 42,573 | $ | 85,570 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $10,695 | 655,444 | 441,359 | ||||||||
| Inventory | 128,904 | 142,053 | ||||||||
| Assets held for sale | 42,300 | 42,300 | ||||||||
| Prepaid expenses and other current assets | 20,243 | 25,352 | ||||||||
| Total current assets | 889,464 | 736,634 | ||||||||
| Property and equipment, net of accumulated depreciation of $ 232,197 and $300,155 | 171,453 | 118,779 | ||||||||
| Other assets | 13,048 | - | ||||||||
| Intangible assets, net of accumulated amortization $1,100 | 148,900 | - | ||||||||
| Total assets | $ | 1,222,865 | $ | 855,413 | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 311,424 | $ | 395,423 | ||||||
| Accounts payable - related party | 40,000 | 95,585 | ||||||||
| Accrued expenses and other liabilities | 103,288 | 69,578 | ||||||||
| Secured line of credit | 478,783 | 353,975 | ||||||||
| Current portion of note payable - related party | 48,182 | - | ||||||||
| Current portion of secured notes payable | 215,475 | 264,615 | ||||||||
| Total current liabilities | 1,197,152 | 1,179,176 | ||||||||
| Long term liabilities: | ||||||||||
| Note payable - related party | 88,932 | - | ||||||||
| Notes payable - secured, net of current portion | 273,118 | 258,361 | ||||||||
| Total liabilities | 1,559,202 | 1,437,537 | ||||||||
| Commitments and contingencies | ||||||||||
| Stockholders' deficit | ||||||||||
| Preferred stock - $0.001 par value; authorized 1,000,000 shares as of March 31, 2018 and | ||||||||||
| December 31, 2017; issued and outstanding none at March 31, 2018 and December 31, 2017 | - | |||||||||
| Common stock - $0.001 par value; authorized 25,000,000 shares as of March 31, 2018 and | ||||||||||
| December 31, 2017; issued and outstanding 10,005,190 and 8,865,190 at March 31, 2018 and December 31, 2017 | 10,005 | 8,865 | ||||||||
| Additional paid in capital | 167,964 | (56,940 | ) | |||||||
| Accumulated deficit | (514,306 | ) | (534,049 | ) | ||||||
| Total stockholders' deficit | (336,337 | ) | (582,124 | ) | ||||||
| Total liabilities and stockholders' deficit | $ | 1,222,865 | $ | 855,413 | ||||||
| The accompanying notes are an integral part of these consolidated unaudited financial statements | ||||||||||
| SMG INDUSTRIES INC. | ||||||||||||||||||||
| (FORMERLY: SMG INDIUM RESOURCES LTD.) | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| For the three months ended March 31, 2018 and 2017 | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||
| REVENUES | $ | 998,178 | $ | 556,505 | ||||||||||||||||
| COST OF REVENUES | 510,115 | 321,813 | ||||||||||||||||||
| GROSS PROFIT | 488,063 | 234,692 | ||||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||
| Selling, general and administrative | 421,842 | 88,219 | ||||||||||||||||||
| Total operating expenses | 421,842 | 88,219 | ||||||||||||||||||
| INCOME FROM OPERATIONS | 66,221 | 146,473 | ||||||||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||||
| Interest expense, net | (46,478 | ) | (9,679 | ) | ||||||||||||||||
| NET INCOME | $ | 19,743 | $ | 136,794 | ||||||||||||||||
| Net Income Per Share | ||||||||||||||||||||
| Basic | $ | 0.00 | $ | 0.10 | ||||||||||||||||
| Diluted | $ | 0.00 | $ | 0.09 | ||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||||||
| Basic | 9,387,325 | 1,408,276 | ||||||||||||||||||
| Diluted | 9,651,888 | 1,443,350 | ||||||||||||||||||
| The accompanying notes are an integral part of these consolidated unaudited financial statements | ||||||||||||||||||||
| SMG INDUSTRIES INC. | |||||||||||
| (FORMERLY: SMG INDIUM RESOURCES LTD.) | |||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| For the three months ended March 31, 2018 and 2017 | |||||||||||
| (unaudited) | |||||||||||
| 2018 | 2017 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 19,743 | $ | 136,794 | |||||||
| Adjustments to reconcile net income to net | |||||||||||
| cash used in operating activities: | |||||||||||
| Depreciation and amortization | 15,386 | 19,102 | |||||||||
| Amortization of deferred financing costs | 24,505 | - | |||||||||
| Bad debt expense | 622 | - | |||||||||
| Changes in: | - | ||||||||||
| Accounts receivable | (214,707 | ) | 12,716 | ||||||||
| Inventory | 13,149 | - | |||||||||
| Prepaid expenses and other current assets | (7,939 | ) | 2,698 | ||||||||
| Accounts payable | (83,999 | ) | 64,469 | ||||||||
| Accounts payable related party | (55,585 | ) | - | ||||||||
| Accrued expenses and other liabilities | 33,710 | (75,746 | ) | ||||||||
| Net cash provided by (used in) operating activities | (255,115 | ) | 160,033 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Cash paid for purchase of property and equipment | (25,479 | ) | - | ||||||||
| Net cash used in investing activities | (25,479 | ) | - | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from secured line of credit, net | 124,808 | - | |||||||||
| Proceeds from notes payable | - | 25 | |||||||||
| Payments on notes payable | (100,369 | ) | (25,200 | ) | |||||||
| Payments on notes payable, related party | (12,886 | ) | - | ||||||||
| Proceeds from member contributions | - | 9,839 | |||||||||
| Payments for member distributions | - | (79,578 | ) | ||||||||
| Proceeds from sales of common stock | 226,044 | - | |||||||||
| Net cash provided by (used in) financing activities | 237,597 | (94,914 | ) | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (42,997 | ) | 65,119 | ||||||||
| CASH AND CASH EQUIVALENTS, beginning of period | 85,570 | 22,461 | |||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | 42,573 | $ | 87,580 | |||||||
| Supplemental disclosures: | |||||||||||
| Cash paid for income taxes | $ | - | $ | - | |||||||
| Cash paid for interest | $ | 21,792 | $ | 5,778 | |||||||
| Noncash investing and financing activities | |||||||||||
| Intangible assets acquired from issuance of note payable, related party | $ | 150,000 | $ | - | |||||||
| Purchase of fixed assets with note payable | 41,481 | - | |||||||||
| The accompanying notes are an integral part of these consolidated unaudited financial statements | |||||||||||
| SMG Industries, Inc. | ||||
|
EBITDAX Reconciliation Table | ||||
| For the Quarter ended March 31, 2018 |
||||
| Net Income | $ | 19,743 | ||
| Add Back: | ||||
| Interest | $ | 46,743 | ||
| Taxes | $ | 0 | ||
| Depreciation | $ | 15,386 | ||
| One time, non-recurring items | $ | 0 | ||
| EBITDAX | $ | 81,872 | ||
About SMG Industries Inc.: SMGI is an oilfield services company that operates throughout Texas and adjacent states of New Mexico and Louisiana. The Company, through its wholly-owned subsidiary MG Cleaners LLC., is focused on selling proprietary branded products including detergents, surfactants and degreasers (such as Miracle Blue™) to oilfield drilling rig contractors, E&P operators and oilfield companies. In addition to the Company's proprietary products, SMGI sells equipment and parts and has service crews that perform on-site repairs, maintenance and drilling rig wash services for customers such as Nabors Industries, Patterson-UTI, Helmrich & Payne, Cactus Drilling and others. SMGI has facilities in Houston, Carthage, and Odessa, Texas. Read more at www.SMGIndustries.com and www.mgcleanersllc.com.
Forward-Looking Statements:
This news release contains information that is “forward-looking” in that it describes events and conditions SMGI reasonably expects to occur in the future. Expectations for the future performance of SMGI are dependent upon a number of factors and there can be no assurance that SMGI will achieve the results as contemplated herein. Certain statements contained in this release using the terms “may”, “expects to”, “anticipated” and other terms denoting future possibilities, are forward-looking statements. The accuracy of these statements cannot be guaranteed as they are subject to a variety of risks, which are beyond SMGI’s ability to predict, or control and which may cause actual results to differ materially from the projections or estimates contained herein. Forward-looking statements in this news release that are subject to risk include the ability to achieve and continue revenue, net income and adjusted EBITDA improvements. It is important that each person reviewing this release understand the significant risks attendant to the operation of SMGI. SMGI disclaims any obligation to update any forward-looking statement made herein.
Source: Matthew Flemming, SMG Industries, Inc. +1-713-821-3153
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