HOUSTON, TX / ACCESSWIRE / August 14, 2019 / SMG Industries, Inc. (the "Company") (OTCQB:SMGI), a growth-oriented oilfield services company operating in the Southwest United States today reported its financial and operational results for its second quarter ended June 30, 2019.
Second Quarter Financial Highlights:
- Completed the Trinity Services acquisition on June 26, 2019, significantly strengthening the Company's presence in the Haynesville and Cotton Valley resource plays adding active new customers,
- For the 3 months ended June 30, 2019, total revenue was $1,094,181, a decrease of approximately 6%, from the 3 months ended June 30, 2018, (which included only three days of sales in the period from the Trinity Services acquisition),
- For the 6 months ended June 30, 2019, total revenue was $2,846,885, an increase of approximately 31%, from the comparable 6 months ended June 30, 2018,
- Net loss was $980,922 for the 3 months ended June 30, 2019, compared to a net loss of $148,115 for the 3 months ended June 30, 2018,
- Total Assets grew 127% to $8,009,002 in the second quarter ended June 30, 2019 compared to $3,526,447 at year end 2018,
- The Company continues to move forward with its buy and build strategy seeking to consolidate oilfield services companies.
Mr. Matt Flemming, Chief Executive Officer of SMG, stated, "The Company roughly doubled its monthly revenues through the accretive acquisition of Trinity Services that closed during the second quarter. Management responded to market softness in our South Texas frac water operations by relocating certain of its equipment and staff to a more active territory in the Haynesville shale in East Texas. Drilling rig focused product and service company, MG Cleaners, saw reduced activity levels with its rig wash service during the quarter, which was partially offset by increases in equipment and product sales driven by new customer wins." Mr. Flemming continued, "The second quarter also included all of the acquisition costs of the late June acquisition but only three days of sales were included given the closing date. Currently, we anticipate an improved third quarter in revenues and margins from cross-selling customers, added service lines acquired and cost reductions made during the second quarter."
Sales for the three months ended June 30, 2019 were $1,094,181, a decrease of approximately 6%, from $1,167,305 for the three months ended June 30, 2018. The decrease in revenues for the three months ended June 30, 2019 was primarily attributable from reduced rig wash revenues in the West Texas market and decreased mechanic service revenues in East Texas partially offset by increased machine and product sales. The Trinity Services acquisition on June 26, 2019 allowed for three days of revenue during the period and is anticipated to provide ongoing revenues for future quarters.
During the three months ended June 30, 2019, cost of sales increased as a percentage of sales to 81.9% of revenues, or $896,600, compared to 55.6% of revenues or $649,394, for the comparable 2018 period. The increase in cost of sales as a percentage of revenues is primarily the result of higher vendor rental expense and equipment repairs and maintenance, higher contract labor in connection with the transition costs related to relocating portions of the frac water operations to East Texas, higher parts costs imposed by federal tariffs, higher third party costs, wage inflation with direct personnel, increased freight, shipping and fuel expenses along with increased depreciation expense from added equipment with our rental fleet.
For the three months ended June 30, 2019, selling, general and administrative expenses increased to $824,814, an increase of $231,674, from $593,140 for the three months ended June 30, 2018. This increase in selling, general and administrative expenses in the second quarter of 2019 over the second quarter of 2018 was primarily due to higher professional fees, one-time acquisition costs, operating lease expense from new accounting treatment, increased wage expense from an M&A advisor, and added insurance coverage and expenses. The remaining increase was attributable to non-cash stock based compensation, and deferred financing costs during the second quarter 2019, partially offset by lower travel and entertainment expenses and truck and auto expense.
Other expense, net was $353,677, an increase of $280,791 for the three months ended June 30, 2019 compared to the second quarter in 2018. The increase in other expense during the three months ended June 30, 2019 resulted from higher interest expense with our revolving line of credit, funding agreements and notes payable, and loss on settlement of liabilities compared to the three months ended June 30, 2018.
During the three months ended June 30, 2019 we incurred a net loss of $980,910, or $0.07 per basic and diluted earnings per share. For the three months ended June 30, 2018 we incurred a net loss of $148,115 or $0.01 per basic and diluted earnings per share. The net loss in the quarter ended June 30, 2019 resulted primarily from lower revenues, lower gross margins from higher cost of sales expenses, increased sales, general and administrative expenses, including higher professional fees and transaction expenses in connection with the late June 2019 acquisition, and increased interest expense, compared to the second quarter 2018. The basic weighted average number of shares of common stock outstanding was 13,935,281 and 10,234,123 for the three months ended June 30, 2019 and 2018, respectively.
Selected Six Months Ended June 30, 2019 data
Sales for the six months ended June 30, 2019 were $2,846,885, an increase of 31%, from $2,165,483 for the six months ended June 30, 2018. The increase in revenue for the six months ended June 30, 2019 is primarily attributable to sales growth in equipment rental income and increased machine and product sales in the West Texas market. Additionally, the frac water operations, acquired in late 2018, contributed revenues in 2019, not included in the comparable six month period ended June 30, 2018.
During the six months ended June 30, 2019 we incurred a net loss of $1,691,172, or $0.13 per basic and diluted earnings per share. For the six months ended June 30, 2018 we incurred a net loss of $128,372 or $0.01 per basic and diluted earnings per share. The net loss in the six month period ended June 30, 2019 resulted primarily from lower gross margins from higher cost of sales expenses, increased sales, general and administrative expense, and increased interest expense, compared to the comparable period in 2018. The basic weighted average number of shares of common stock outstanding was 13,068,921 and 9,808,914 for the six months ended June 30, 2019 and 2018, respectively.
As of June 30, 2019, our total assets were $8,009,002, comprised of $112,046 in cash, $2,179,419 in accounts receivable, $139,526 in inventory, $30,000 in assets held for sale, other current assets of $206,609, $4,464,336 in net property and equipment, and $315,157 in net intangible assets. This is an increase in total assets of $4,482,555 over the total assets at December 31, 2018 of $3,526,447. As of June 30, 2019, we have a working capital deficit of $2,607,918, compared to a working capital deficit of $1,421,715 at December 31, 2018.
The net increase in cash for the six months ended June 30, 2019 was $110,438, as compared to a net cash increase of $42,714 in the six months ended June 30, 2018.
At June 30, 2019 and December 31, 2018, the Company had cash and cash equivalents of $112,046 and $1,608, respectively. Based on the company's recent acquisition, current revenue, and anticipated gross margin improvement, along with anticipated new growth from cross selling our customers, we believe cash flow will improve during the remainder of 2019. The Company's total outstanding shares of common stock were 14,451,372 as of August 14, 2019.
Additional information including the Company's financial statements, footnotes and management's discussion and analysis can be found in the second quarter 2019 report filed on Form 10-Q August 14, 2019.
Currently, the Company is pursuing additional and accretive acquisitions in 2019 with a plan to further diversify across the drilling, completions and production market segments of the business and cross-sell acquired new customers.
About SMG Industries, Inc.: SMG Industries is a rapidly growing oilfield services company that operates throughout the Southwest United States. Through its wholly-owned operating subsidiaries, the Company offers an expanding suite of products and services across the market segments of drilling, completions and production. MG Cleaners LLC, serves the drilling market segment with proprietary branded products including detergents, surfactants and degreasers (such as Miracle Blue®) as well equipment and services crews that perform on-site repairs, maintenance and drilling rig wash services. SMG's rental division includes an inventory of over 800 bottom hole assembly (BHA) oil tools such as stabilizers, drill collars, crossovers and bit subs rented to oil companies and their directional drillers. SMG's frac water management division, known as Momentum Water Transfer, focuses in the completion or fracing market segment providing high volume above ground equipment and temporary infrastructure to route water used on location for fracing. SMG's Trinity Services LLC division provides building of drilling locations, heavy equipment, workover and well site services. SMG Industries, Inc. headquartered in Houston, Texas has facilities in Carthage, Odessa, Alice and Waskom Texas. Read more at www.SMGindustries.com and www.MGCleanersllc.com and www.MomentumWTS.com.
SOURCE: SMG Industries, Inc.
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