It's a manufacturer of precast concrete barriers, utility vaults. They have some architectural items as well. Had a very, very good quarter here for the third quarter, some record revenue thanks to some special projects that are very beneficial. Here today to present on behalf of the company is Ashley Smith. Ashley?
All right. Thank you, John. Good morning, everybody. Appreciate y'all being here. Again, my name's Ashley Smith, CEO of Smith-Midland Corporation. I'm the third family member to run the company. My grandfather started the company in 1960. My dad was then president, CEO, and I've been CEO for seven years now. So excited to be with y'all today. As I'm going through the presentation, if you have any questions, just, you can ask as we go through, and then I'll leave some time at the end also for questions. So I'd like to start with this teaser, and then we'll talk more about it later. And that is that all of the concrete barrier in the United States, all the concrete barrier, the barrier you see along the highway, is in the process of being replaced.
And we'll talk a little bit more later about why that is and what it means for Smith-Midland Corporation. So again, our company was founded in 1960. The share price ticked up nice at the end of last week. Our earnings were released on Thursday. So we had a Friday was nice, and the first part of this week has been nice as well. Our backlog is continuing to grow. The third quarter was a record for income. And as John said, that was driven quite a bit by just the increased revenue across all of our product lines and then some special security projects as well. So one thing that's very interesting or unique about our company and our industry, we have a lot of patented proprietary products. That is very, very unusual in the precast concrete industry.
Typically, a producer would just make whatever was on a set of plans that somebody else had developed. We do that kind of work, but we also have proprietary products that are covered by trademarks, patents, crash tests, approvals at the federal level and the state level, which they take time and they're hard to do. So we have a lot of technology and intellectual property that other companies don't have, and then we license that technology, so our company is divided into a manufacturing division. We have three plants, one in Virginia, one in North Carolina, one in South Carolina. We also have a division where we rent the highway barriers up in Delaware, Maryland, Virginia, West Virginia, and DC, and then we also license our technology to other producers outside of the area where we're making them.
We have 75 licensed producers around the country and overseas that pay us to make our proprietary products. The four products that you see up here, the J-J Hooks highway barrier, the Easi-Set concrete buildings, the SlenderWall Class A cladding system, and the SoftSound absorptive noise wall, those are all the number one branded product in North America in those categories. If you were to ask any producer that makes barrier across the country, what's the most popular brand of connection, connecting barriers together, they would say J-J Hooks. Some of the investment highlights are, we just talked about the proprietary patented products. In Virginia, we're shifting away from selling barrier and we're moving all of our customers towards rental. We've been renting barrier in the Northern Virginia market since the mid-70s, but we never had more than about 50,000 ft.
We couldn't really do a lot. Most of our customers had to buy the barrier. We're moving away from a model where we sell it to the rental model. The Infrastructure and Jobs Act, which was passed a few years ago by Congress, that money is finally coming out. We're finally seeing it. Some of the papers and research that we're reading are showing that there's going to be tremendous growth now through 2027 with a lot of infrastructure. Our J-J Hooks is the most widely used barrier across the country. We're approved in 42 states. We're growing licensees across the U.S. and also overseas. Our backlog is continuing to grow as well. We also produce customized products, precast concrete or concrete in general.
Any way you form it, you pour the wet concrete into that form and it takes the shape of that form. So we do a lot of work for the government and a lot of utility work. Very versatile product. On the manufacturing side, we have three strategically located plants, Virginia, North Carolina, and South Carolina. The Virginia plant, we just in the last couple of years bought 30 acres next door to us. So we've already developed that for storage and we're getting ready to develop more storage that we need for increased production. Our North Carolina plant, we built it in 2020. We've been down there since the 1970s. We had an old facility. We built a brand new one in 2020. We realized it was too small. We just doubled the size of that plant this summer.
And so we're in the process now of increasing our production. One other thing I'll point out right now, this summer in July, we attended a bankruptcy auction. It was a precast concrete or it was a company, private equity that owned about six plants, one of which was in West Virginia. The private equity didn't know how to run a precast business. It went bankrupt. So we bought $2.5 million worth of forms and just other parts for about $500,000. We're moving those bridge forms down to the plant in North Carolina. So the company in West Virginia was sending 90% of the bridge beams that they made in West Virginia. They were shipping them down to North Carolina. So we've moved those forms right down to our plant in the middle of North Carolina near Greensboro.
So we expect that plant. We expected it with doubling the size to double revenue at the North Carolina plant with these additional forms. Over the next few years, we expect that to go from two times to three times where we were before. Our South Carolina plant, we just finished installing a new batch plant that increases our capacity. We did that, got that online in March of this year. We're now in the process of developing additional 10 acres of storage. The backlog at that plant is the highest it's ever been. We have a project where we're making 7,500 panels for sound wall for Georgia DOT. We need somewhere to store that. So North Carolina, South Carolina are two of the fastest growing states in the country. And we're seeing increase in spend on infrastructure. We just finished making panels for the BMW expansion.
It was a two, I think, $2 billion expansion of their plant in South Carolina. We made the exterior panels for that, so just a lot of growth in that part of our market. I wanted to talk a little bit about the concrete safety barrier division, so I was talking about we've been renting barrier in Virginia, Northern Virginia, DC, Maryland since the 70s. We had about 50,000 ft of barrier. We were maybe a little too conservative. We didn't have cash back in the 1980s to really grow that business, but we've, over the years, been increasing the amount of barrier that we have, and in the last two or three years, we've doubled the amount of barrier in our inventory for rent. We had about 50 mi of barrier before, so we added in the last two or three years another 50 mi of barrier.
And the question you're asking is, well, how did you do that? So we sold the second 50 mi of barrier to a highway contractor that was working in Northern Virginia, expanding Interstate 66. When we sold that barrier to them, we put a clause in the contract at the end of the job, we'll buy the barrier back, all of it back for a predetermined price. That project was a public-private partnership. Typically, at the end of those jobs, the partners would liquidate all the assets and then distribute the money, whatever's left over to the partners. So they didn't want to own all that barrier. We brought it back. We doubled our inventory from 50 mi to 100 mi. We expected to pay that off in three to four years.
We're probably 18 months ahead of paying off that because the amount that we paid to buy it back was very, very low. It was good for us. And in the next three or four months, we're going to have all of that additional 50 mi of barrier that we bought back, will be out on rent. So what we thought would take three or four years to pay back, three or four years to get out on the road and deployed, we're going to have it deployed in about two years, two and a half years. So we have 100 mi of barrier. In three or four months, it's all going to be rented. So the question might be, what are you going to do next? So right now, we're building new inventory, new barrier that we make ourselves to put into our rental fleet.
Where we rent the barrier is basically Delaware to Virginia. We don't even quote sale. We only quote rental. Now, we do have some customers that they say, "Ashley, we don't want to rent. We know the benefits, but we want to own it." So if it comes to losing the order, we will make it. But we're transitioning all of our old customers from buying barrier to renting barrier. A couple of things that are really driving that. One, if they need 50,000 ft, in the past, I didn't have that. I couldn't rent that. Today, if they need 50,000, 60,000, 70,000 ft of barrier, we'll rent that. We have it or we'll make more. Also, what's driving, and this is probably a good time, as any, to talk about the switch to why all the barrier in the U.S. is being replaced.
The Federal Highway Administration, every 10 or 15 years, introduces new crash tests for anything on the side of the highway, concrete barriers, signs, light posts, guardrails. The reason they do this is because the type of cars on the road change. Back in the 1970s, we had the small cars. Then the cars got bigger. Now the cars are bigger again. Everybody's driving an SUV. If you're in Texas, you drive a pickup truck. In 2020, the Federal Highway Administration had a new level called MASH, M-A-S-H. We knew this was coming years before that because we go to all the committee meetings. We started crash testing to the new higher level. In 2020, Federal Highway said any new barrier has to be new barrier. You can use the old barrier up to whenever your state says you can.
So in Virginia, Maryland, the old barrier can be used up through 2030. Then it has to switch. So right now, and that's how most states are. We just found out a couple of months ago. California, they're saying at the end of 2026, you can't use the old style at all. So we have a licensee that we signed up a couple of years ago in California. They haven't been selling a lot of barrier. The contractors have been trading it back and forth. That's going to come to an end, and California is going to take off. So those are some of the things that are driving. That's why contractors, if they own barrier, their barrier is becoming obsolete. We now have an option. They don't have to go back and buy a new barrier.
So the J-J Hook connection system is by far the fastest, most efficient connection system out there. You only need one piece of equipment, one operator. We can unload a truck. It takes about 10 minutes to offload a truck. So besides our manufacturing in the Mid-Atlantic, besides our barrier rental in the Mid-Atlantic, yeah, I'm sorry, go ahead. You mean as far as the design itself? So the new MASH, our J-J Hook, the old one used to be a 12-inch tall hook. The new one is 18-inch tall, so it's a little bit stronger. And then we have more reinforcing bar inside of the concrete barrier itself. But even with that, our system is much easier than any of the other competing systems. The best thing about the J-J Hooks is you don't need any extra hardware.
So that hook that sticks out of the end, that hooks to the next piece of barrier, that's all you need. All the other connection systems would have maybe some loops that stick out of the end. You have to slide a bolt down through it. When scrap steel prices were really, really high, contractors would come back to their job on a Monday morning and find out that all the bolts disappeared over the weekend. Another thing that happens with the bolts is after two or three years on the job, you can't even get the nut off, and they'll just come through and they'll just cut them and have to buy them again. One thing that we found, we introduced a new style low-profile barrier in Texas. And this was interesting. We started developing it about three years ago.
We came down, we looked at the state standard for Texas. It was good. Once the barrier system was in place, it was very stout, very stiff. But you had to line up the barriers on the end. You had to put these big bolts through. You actually had to hammer with a sledge hammer to get the bolts through. And what we saw, a crew of nine and two pieces of equipment do in a whole day with J-J Hooks, you could do it in less than half a day with two people, one piece of equipment and one person, maybe two on the ground. So we just received approval from Texas. And we're just now, this year, for the first time, starting to see royalties from the low-profile barrier in Texas.
We expect, because how much easier J-J Hooks is to the existing low-profile barrier, we expect to take 90% of market share in Texas. What's exciting about that, in the state of Texas, they use as much low-profile barrier as they do the taller barrier. Low-profile is used not on the interstate, but on secondary roads.
Here in Texas, we see a lot of three-cable barrier systems on the highway.
Yes.
Could you explain that dynamic of how that works, three cables versus concrete barrier?
Right. Typically, you would see concrete barrier during the construction phase. And really, what they're trying to do is protect the workers from a car or truck going off into the construction site. And typically, you'll see the three. You're talking about like a cable barrier. Typically, that would be in a permanent, and they just put it down the middle of the road. And that just so one car or truck doesn't go from one side of the highway across to the other side and hit head-on. Sure. So again, all the barrier that's out there is in the process of being replaced. The closer we get to these deadlines, the more barrier is going to be produced by all of our licensees. So we're already starting. The last few years, we've seen higher royalty income because of this switch, and our barrier licensees are busy.
We're also right in the middle of testing a new barrier system, so we do all the research and development at our plant in Virginia. We do static testing on all the connection systems. Out in the back, we also do our own limited testing. Each time we run a test, it costs $250,000, and that's just another barrier to entry. An individual precast producer is not going to spend. They don't know how to do the research and development or the testing. They're not going to spend $250,000 on a test that may or may not pass, and we can do that because we've been through the cycle of testing new systems. This is the fourth time since the late 1970s, and we have a base, the licensees. We can spread the cost out across all the licensees.
So the investment in the low-profile barrier, the royalties, we're probably going to have that investment paid off in less than two years just because of how fast the low-profile J-J Hooks is being adopted in Texas. So we're very excited about that. So some of the tailwinds, obviously, all the federal highway money. So the Infrastructure Act, there's more money by a factor of probably 50% more that was approved by the Infrastructure and Jobs Act for infrastructure in the United States. So that's highways, that's rails, bridges, ports, airports. All of these places use precast concrete. So we're seeing this really, really being a huge tailwind for the industry, our licensees, and for our plants as well. We talked about California. With their sunset date of 2026, we expect our license income or royalty income in California to take off.
We have a new low-profile or limited deflection barrier that we're testing and developing right now, and we're doing something for the first time ever. We're actually, before we go out and spend that $250,000 on the crash test, investing $20,000 in a computer-simulated model, so we have engineers at our plant that are experts in crash testing, and so we're modeling this, and what this also allows us to do going forward is we'll be able to develop different connection systems faster. Instead of having to go out in the back and then put in these together and we have a crane with a big block of concrete that we hit, now we can do this on the computer, so we expect our ability to be able to develop new connection systems to be faster. Yes.
Are contractors at all trying to get ahead of the mandate to change to a more robust safety barrier, or are they just kind of waiting for the last minute? In other words, what I'm thinking is, that potentially driving some business for you in getting these newer, more efficient barriers around?
I would say both, and what we're seeing right now, typically, is the contractor, their first choice would be to go find some used barrier somewhere. If they can pay nothing for it, that might be, even though they know at the end of the job, it's not going to be very valuable, so we see some of that. We also see some contractors that are buying barrier, and then what we're seeing in our market is the adoption of rental, so it seems like they don't even want to fool with it. They have their old obsolete barrier that's becoming obsolete. They're going to use that until they can't, and then they're going to figure out what to do with it, but we have an option, so in the past, we made them go buy a new barrier. Now they can rent it.
So we're seeing customers that over the past 20 years bought. They didn't rent anything. They bought it all. And they're now becoming some of our biggest rental companies. So that's kind of all these parts, the fact that we have a bunch of barrier we can rent. We own, like I said, 600,000 ft, 100 mi . If the market needs a million feet, we're going to make another 400,000 ft and put it on rental because we see just on a construction site, you'll see a lot more rental, even the equipment. They used to own all their own equipment. Contractors now rent a lot more equipment. So all these little pieces are flowing to us through the rental division. Also, we're seeing a lot of extra money coming in, flowing into construction through the public-private partnerships.
So the project in Northern Virginia. It was a $2.3 billion project funded totally private, private money that came from Europe. And that is extra investment in infrastructure on top of what the state of Virginia typically is doing. So we see these public-private partnerships. Texas uses a lot of them. Virginia uses quite a bit. We're seeing other parts. We're seeing some in North Carolina as well. Just one thing I did want to say, it doesn't really fit on any particular slide, but another thing, another trend that we're seeing with AI, the demand there, even before that, just the data center market, as everybody in this room, I'm sure you know, is exploding. Just the number of data centers being built. Northern Virginia is probably the top one or two places in the United States for new data center construction.
The way we fit into that is underground, we have to make concrete boxes that bring the cables, the electric cables, the communication cables onto the site, so in a typical year, our plant in Virginia may do $2 million of these utility vaults. Now we're doing two or three times the number of utility vaults just from the data centers. Also, with our architectural panels, the SlenderWall panel in particular, which is a high-end precast concrete panel with the steel stud backup frame. We pre-insulated at the factory. We can even pre-install the windows, so right now, there's not enough construction workers to get all the buildings built. You even heard some of the big housing companies are having a hard time finding enough workers to make as many houses as we need, and there is a housing crisis in the country.
So off-site construction is being used by contractors, owners, and architects. And so we're in a great position on the East Coast. It's probably one of the best construction markets in the country. So off-site construction, particularly our architectural panels, we're seeing a lot more demand because of off-site modular construction. I was at a conference not too long ago, and they had a contractor, a banker, a developer. The developer was saying, "If anybody in the audience has any ideas to help us build our buildings faster, I want to know about it." I couldn't stand up in the middle of the conference and say, "Here we are." But we have a solution to that problem. So the Easi-Set buildings, we have, I think we're at 13 or 14 licensed producers. This is the number one brand of small transportable precast concrete buildings.
So we make them at all of our three manufacturing plants on the East Coast, plus we have 13 producers making those across the U.S. I was just down at Fort Jackson outside of Columbia, South Carolina, last Thursday, and I got on base, and I was driving around, and this is where they do the training of the new recruits, so they put them out in the field, and what I saw when I drove around, I saw 10 places where there was a row of like 10 or 12 old-fashioned Porta-Johns. Some were falling apart. I went to use one, and the hinges were broken, so we're going to get over there. We can plop a restroom down. Everything comes on the inside. We have all the mirrors, the handicap. We have all the sinks and the toilets. We bring it in.
We can set it right down and hand the keys to them. So they probably need 20 or 30 of our restroom buildings, at least at Fort Jackson. So you can see the revenue. Four years ago, we said we're going to set a goal to double the size of the company from around $40 million to $80 million. We're on track to do that. We'll be planning the next five-year strategic plan early next year. You can see our backlog has grown. The target I set for the sales department, I said I want a $100 million backlog. We need that. We have to have a big backlog to get drawings approved, to get forms set up to keep our factories busy. So with more capacity coming online at the factories, we've challenged the sales team to get out and increase that backlog.
You can see earnings per share, EBITDA. This is the Q3 summary. We had our highest quarterly revenue in company history. Q2 was the highest. To that point, Q1 was the highest. So we've had three record-breaking quarters. Service revenue in the third quarter increased. You can see 170%. That was from the special security projects that we worked on. Obviously, with revenue going up, that helped with the gross margin and also a nice earnings per share. So that's everything I have prepared, and I've left a little bit of time for some questions. Yes, sir.
Explain what made your stock price last year?
Right.
What would you expect for?
If I knew the answer to that, I wouldn't be standing here right now. I'm sorry.
Because you said it should be lower left, upper right.
Yes. Right.
There's such an inconsistency between that price and last year, when I heard your presentation. I'm going, "This is a no-brainer," and then I'm trying to understand what I didn't understand.
Yeah. I don't know. I mean, we are very small. The stock has been thinly traded. We have more volume. This summer, we got on the Russell 2000. We're putting more money on the bottom line. So there's a lot of little things, a lot of little pieces to the story that I think would tell you where we are now and kind of where we're going. But we don't make any predictions.
Yes, sir.
Apologies if I missed this, but on your licensing program, is that more of a distribution model, or are they actually fabricating the barriers? And if they are, is there any risk that they're doing it wrong? How do you run through that?
Sure. Yeah, sure. So the question was around the licensing model and if it's a distribution or manufacturing. So each one of our licensed producers makes the product themselves. So we have protection in our license agreement. If there were a crash or something, we're a separate entity. But we also monitor and go out, visit the licensees. We have a checklist. They have to send us certification of the materials that they use. Also, they have to buy the hooks from manufacturers that we have pre-approved. And we get reports from them every month. So we know how many hooks are being purchased by each licensee, which gives us a little visibility into how much the royalties are going to be in the future. And then also, if they're paying what they're supposed to pay or not. There's another question here. Right. Yeah.
Of our rental fleet of the 100 mi, before the buyback, the first 50 mi, we made that ourselves. We've been buying some used barriers back, but most of that we made. Going forward, right now, we're making new barrier because our 100 mi of inventory is going to be out on the road in probably three or four months. It's very expensive. Let's just say we need to do about 100,000 ft and multiply that by about $40 a foot. That would be the start. If we need more than that, we're going to continue to make new barrier. Does that answer the question?
Yes, sir.
Are the licensees set up for rental model? Are they adopting this as well?
No. We only have two or three of our producers' licensees that rent barrier. We've made a pitch to them to do it, but most of them just want to make the product and sell it.
Follow-up question on licensees. Given the coming wave of demand in California, is it attractive economically to build up your own presence in some of these areas, or are you going to keep it with your current licensee structure?
Yeah, we're going to keep it with the current structure. We did talk about and consider in Texas, specifically for the low profile, is starting a rental division down here. And we talked to one of our licensees down here. They were interested in it, but right now, we don't have any plans going forward to do that.
Time for one more?
Talk about the special security project. Can you give us some color of what it was and repeatability?
Sure, so typically, when they're designated a special security event by Secret Service, so when there's an event in DC or anywhere in the country where there's a high-profile politician or folks coming in, leaders from other countries, there would be a fence that's set up, then there would be concrete barriers to prevent truck bombs from coming through into a protected area.
So that was questions.
Yes. Yeah, there's special events that happen on a fairly regular basis. Yes. Yeah. We're close to DC, and that helps. Sure. Yep. All right. Thank you very much. Appreciate it.