SMITH MIDLAND CORP

(Unaudited)

** **1. INTERIM FINANCIAL REPORTING

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we have condensed or omitted certain information and footnote disclosures that are included in our annual consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. The condensed consolidated December 31, 2025 balance sheet was derived from the audited financial statements included in the Form 10-K. Dollar amounts in the footnotes are stated in thousands, except for per share data.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of income are not necessarily indicative of the results to be expected in any future periods.

Recent Accounting Pronouncements

Effective January 1, 2026, the Company adopted ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The Company elected the practical expedient permitting entities to assume that current conditions as of the balance sheet date remain unchanged for the remaining life of certain short-term financial assets when estimating expected credit losses under ASC 326. The amendments were adopted prospectively. Adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606,Revenue from Contracts with Customers for product sales, royalty income and shipping and installation revenue. Revenue from barrier rentals is accounted for under ASC 842,Leases. Revenue accounted for (in thousands) under ASC 606 amounted to $19,372 and $14,273 during the quarters ended March 31, 2026 and 2025, respectively. Revenue accounted for (in thousands) under ASC 842 amounted to $2,201 and $8,425 during the quarters ended March 31, 2026 and 2025, respectively.

Product Sales - Over Time

The Company recognizes revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services provided. Revenue associated with contracts with customers for customized products is recognized over time when the Company’s performance (i) creates or enhances an asset that the customer controls, or (ii) creates or enhances an asset that has no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date, as defined in the contract.

To determine the amount of revenue to recognize over time, the Company measures progress toward complete satisfaction of its performance obligations using an output method based on units produced, which depicts the value transferred to the customer relative to the remaining value to be transferred. Costs associated with the units produced are recognized as incurred.

If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss is first determined, and the amount of the loss is updated in subsequent reporting periods. Revenue recognition includes amounts related to contract assets and contract liabilities. If recognized revenue exceeds amounts billed, a contract asset is recorded in Accounts receivable, trade — unbilled. Conversely, if amounts billed exceed recognized revenue, a contract liability is recorded in Customer deposits. Changes in job performance, job conditions, and final contract settlements are factors that influence management’s assessment of total contract value and, therefore, profit and revenue recognition.

Revenue recognized for product sales – over time (in thousands) are recorded in product sales under revenue in the consolidated financial statements which amounted to $5,479 and $4,733 during the quarters ended March 31, 2026 and 2025, respectively.

Product Sales - Point in Time

For certain product sales that do not meet the criteria for recognition over time, the Company recognizes revenue at a point in time, generally upon shipment or delivery (as specified in the contract), when control of the product transfers to the customer and the Company has a present right to payment.

Revenue recognized for product sales – point in time (in thousands) are recorded in product sales under revenue in the consolidated financial statements which amounted to $6,307 and $4,379 during the quarters ended March 31, 2026 and 2025, respectively.

Accounts Receivable and Contract Balances

The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided or products are shipped.

Accounts receivable, net includes the following components on the consolidated balance sheets:

The Company’s Accounts receivable trade – billed (in thousands), arising from Topic 606 is $24,785 and $26,618 as of March 31, 2026 and December 31, 2025, respectively.

Certain contracts include retention provisions, generally up to 10%, that are withheld from progress billings until the related work has been completed and approved. Contract retentions that have been invoiced are included within Trade – billed. The Company considers these amounts to be contract balances because collection may be contingent upon contractual completion and approval provisions.

At March 31,2026 and December 31, 2025, accounts receivable included contract retentions (in thousands) of approximately $1,465 and $1,135, respectively, which are considered contract assets.

For contracts recognized over time, contract assets arise when revenue recognized to date exceeds cumulative billings. Contract assets are presented as Trade – unbilled on our consolidated financial statements. When the Company subsequently invoices the customer, the related amounts are reclassified from Trade – unbilled to Trade – billed.

Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimate earnings recognized to date, are reported on our Consolidated Balance Sheets as "Customer deposits" (contract liabilities). The Company’s Customer deposits (i.e. contract liabilities) balances are as follows:

For contracts where the Company has billed or received consideration in advance of transferring goods or services to the customer, the Company records a contract liability, deferred revenue, within accrued liabilities or other liabilities, as applicable, and recognizes revenue when the Company satisfies its performance obligations under the terms of the contract, which generally occurs over time as services are rendered or at a point in time upon delivery of the promised goods or services. Deferred revenue includes the non-lease components of barrier rental arrangements.

The Company’s deferred revenue (i.e. contract liabilities) balances (in thousands) related to Topic 606 are as follows:

Any uncollected billed amounts for our performance obligations recognized over time, including contract retentions, are the difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s performance and billings. The changes in the contract assets and contract liabilities balances during the quarters ended March 31, 2026 and 2025 were not materially affected by any other factors.

Our billed and unbilled revenue is subject to credit risk if our customers should encounter financial difficulties. The Company maintains an allowance for estimated expected credit losses on Trade-billed (and evaluates Trade-unbilled for expected credit losses, as applicable). A considerable amount of judgment is required when determining expected credit losses. Estimates of such expected losses are recorded based on historical losses experienced by the Company and current and future economic conditions. Management also considers when a specific customer may not be able to meet its financial obligations due to deterioration in financial condition or credit rating. Factors relevant to our assessment include our prior collection history with our customers, the related aging of past due balances, projections of credit losses based on historical trends or past events, and forecasts of future economic conditions.

At March 31, 2026 and March 31, 2025, total allowances for credit losses were $651 and $1,222, respectively (in thousands). The decrease in the allowance for credit losses was primarily attributable to improved collection trends, a reduction in aged receivable balances, particularly within accounts previously identified as having elevated credit risk, and a decline in customer accounts with specific credit concerns that had contributed to higher reserves in the prior year. Management will continue to monitor receivable aging, customer creditworthiness, project-specific risks, and broader economic conditions affecting the construction and infrastructure markets in which the Company operates when estimating expected credit losses.

The rollforward of our allowance for credit losses (in thousands) for the quarters ended March 31, 2026 and 2025, was as follows:

Barrier Rentals - Lease Income

Barrier Rental revenue historically comprises Standard Barrier Rental and Special Barrier Projects.

Standard Barrier Rental

The Company leases barriers to customers under operating leases in accordance with ASC 842,Leases. Customers are invoiced at lease commencement for the full lease term. The Company’s standard barrier rentals arrangements are generally for periods less than five years and may include provisions for additional charges if the barriers remain on rent beyond the contractual lease term. The Company evaluates the enforceable term in determining the lease tease term used for revenue recognition and in preparing its disclosure of future fixed lease payments. Amounts billed in advance of the related lease periods are recorded as deferred lease income within Deferred revenue on the balance sheet and recognized as lease income on a straight-line basis over the lease term. Lease income is presented in Barrier Rentals within Revenue in the consolidated financial statements. The Company recognizes operating lease income only to the extent collection is probable. If collectability is not probable, lease income is limited to amounts collected until collectability becomes probable.

Standard Barrier Rental arrangements also include non-lease components (accounted for under ASC 606,Revenue from Contracts with Customers), including delivery/shipping, installation, and removal/pickup services. These non-lease components are distinct from the lease component because: (i) the lease commences upon shipment from the Company’s facility, and delivery and installation occur after lease commencement; (ii) the components are separately priced with observable standalone selling prices; and (iii) the services can be performed by third parties. The Company allocates consideration between lease and non-lease components based on their relative stand-alone selling prices. Revenue allocated to delivery and installation services is recognized when the services are performed (generally upon delivery to the customer’s site, which occurs after lease commencement), and revenue allocated to removal/pickup services is recognized when performed (generally at the end of the lease term). Amounts billed in advance of performance related to the non-lease components are recorded as deferred revenue within Deferred revenue on the balance sheet and recognized as the related services are performed and is recognized within shipping and installation revenue on the consolidated statements of income.

The Company’s deferred lease revenue balances (in thousands) related to Topic 842,Leases are as follows:

Special Barrier Projects

The Company provides barrier rentals as part of integrated Special Barrier Projects, which include deployment and 24/7 concierge-type services. These arrangements are evaluated under ASC 842,Leases. The Company contracts with a third-party event services firm, with the end-user also a party to the arrangement. Projects are delivered as a single bundled engagement, typically over a one- to two-week period.

The Company’s personnel manage and execute all barrier movements under direction of customer authorized staff and officials. Based on this structure, the customer is considered to direct the use of the identified asset, indicating that a lease exists. The non-lease components are not distinct from the lease component, as they are highly interdependent and interrelated and not separately identifiable. Accordingly, the lease and non-lease components are not separated and are accounted for as a single combined component under ASC 842. Revenue is recognized on a straight-line basis over the project term, which reflects the continuous transfer of benefit over the duration of the engagement.

Royalty Income

The Company licenses certain products to other precast companies to produce the Company's products in accordance with the Company’s engineering specifications. Licensing agreements are typically for five-year terms and require royalty payments of 4% to 6% of the licensee’s total sales of licensed products. Royalty income is recognized in accordance with ASC 606 as the licensee’s sales of the licensed products occur in the period the licensees’ sales are earned and reported. Royalty income is presented under Royalty Income within Revenue in the consolidated financial statements

Shipping and Installation

Shipping, installation and removal services are distinct performance obligations and are accounted for under ASC 606,Revenue from Contracts with Customers. Revenue is recognized in the period the shipping, installation, and removal services are provided to the customer. When shipping and installation services are billed in advance of performance, the Company records a contract liability and recognizes the revenue when the services are performed. Shipping, installation and removal revenue is presented as Shipping and Installation within Revenue in the consolidated financial statements.

Disaggregation of Revenue

the following table, revenue is disaggregated by primary sources of revenue (in thousands):

The revenue items: soundwall sales, architectural sales, SlenderWall® sales, miscellaneous wall sales, miscellaneous sales, barrier rentals, and royalty income are recognized as revenue over time. The revenue items: barrier sales, Easi-Set and Easi-Span building sales, utility sales, and shipping and installation revenue are recognized as revenue at a point in time.

Warranties

Smith-Midland products are typically sold pursuant to an implicit warranty of merchantability only. Warranty claims are reviewed and resolved on a case-by-case method. Although the Company does incur costs for warranty claims, historically such amounts are minimal.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Concentration of Risk

Historically, various customers have comprised greater than 10% of revenue during a given quarter or year. These customers are typically not the same quarter to quarter or year to year. The Company views revenue details by jobs, and not by customers. In the event a customer were to go out of business during a project, it is likely that the owner of the project would assign a new contractor to the job, and the Company would complete its scope of work. Therefore, the Company believes that it does not have a short-term vulnerability of severe impact to operations. In cases where customers are less than 10% of revenue, the Company assesses if there is a near term severe impact. The Company has determined that no customer, if lost, would result in a near term severe impact to the Company’s operations.

For the quarter ended March 31, 2026, the Company derived 16% and 10% of its revenue from each of two customers. For the quarter ended March 31, 2025, the Company derived 33% of its revenue from one customer. As of March 31, 2026, each of two customers’ outstanding receivable balance exceeded 10% of the total outstanding receivable balance. As of March 31, 2025, each of two customers’ outstanding receivable balance exceeded 10% of the total outstanding receivable balance.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and assess performance. The Company currently operates in one operating and reportable business segment for financial reporting purposes (the “Precast Concrete Segment”). The Company’s CODM is the Chief Executive Officer (“CEO”) and President.

The Precast Concrete Segment derives revenues from customers by providing products and services to customers. The accounting policies of the precast concrete segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the Precast Concrete Segment based on consolidated net income as reported on the consolidated statements of income and measures segment assets as total consolidated assets as reported on the consolidated balance sheets. The CODM uses consolidated net income and consolidated assets to allocate resources and assess performance. Significant segment expenses provided to the CODM are based on the expense breakout shown on the consolidated statements of income. The Precast Concrete Segment’s results are the same as reported on the consolidated statements of income and there are no adjustments or reconciling items.

2. EARNINGS PER SHARE

Earnings per share are calculated as follows (in thousands, except earnings per share):

There was no restricted stock excluded from the diluted earnings per share calculation for the three month periods ended March 31, 2026 and March 31, 2025.

3. NOTES PAYABLE

The Company has a mortgage note payable to Burke & Herbert Bank & Trust Company, formerly Summit Community Bank (the “Bank”) for the construction of its North Carolina facility. The note carries a ten-year term at a fixed interest rate of 3.64% annually per the Promissory Note Rate Conversion Agreement, with monthly payments of $22, and is secured by all of the assets of Smith-Carolina and a guarantee by the Company. The balance of the note payable at March 31, 2026 and December 31, 2025 was $884 and $942 respectively.

The Company also has a note payable to the Bank in the amount of $1,211 and $1,279 as of March 31, 2026 and December 31, 2025 respectively. The loan is collateralized by a first lien position on the Midland, VA plant, building, and assets. The interest rate per the Promissory Note is fixed at 3.99% per annum, with principal and interest payments payable monthly in the amount of $27. The loan matures on March 27, 2030.

On February 10, 2022, the Company completed the financing for its acquisition of certain real property in Midland, VA from the fourth quarter of 2021, totaling approximately 29.8 acres, with a note payable to the Bank. The loan is collateralized by a first lien position on the related real property. The interest rate is fixed at 4.09% per annum, with principal and interest payments payable monthly over 180 months for $21. The loan matures on February 10, 2037. The balance of the note payable on March 31, 2026 and December 31, 2025 was $2,186 and $2,226 respectively.

Under the loan covenants with the Bank, the Company must maintain tangible net worth of $25,000. The previous covenant in which the Company was limited to annual capital expenditures of $5,000 has been discontinued effective January 1, 2026. The Company is in compliance with all covenants pursuant to the loan agreements as of March 31, 2026.

In addition to the notes payable discussed above, the Company has a revolving line of credit evidenced by promissory note with the Bank, with the available amount of $5,000 with no balance outstanding as of March 31, 2026 and December 31, 2025. The line of credit is evidenced by a commercial revolving promissory note, which carries a variable interest rate of prime, with a floor of 4.99%. The line of credit was renewed on January 1, 2026 and matures May 1, 2027. The line of credit renewal excluded the previous limitation on annual capital expenditures. The amount available is based on the lower of the maximum $5,000 or 50% of eligible cash, inventory, and accounts receivable balances at the financial statement date. Key provisions of the line of credit require the Company to maintain a (i) Minimum Debt Service Coverage Ratio of 1.25x, tested annually,(ii) Minimum tangible net worth of $25 million and (iii) Debt-to-tangible net worth not greater than 3 to 1 tested annually. The line of credit is collateralized by a first lien position on the Company's accounts receivable, inventory, and equipment. The Company is in compliance with all covenants as of March 31, 2026.

4. STOCK COMPENSATION

The fair value of restricted stock awards is estimated to be the market price of the Company's common stock at the close of the date of grant. Restricted stock activity during the three months ended March 31, 2025, is as follows:

During the three months ended March 31, 2026, the Company granted 408 fully vested service-based restricted stock awards to the Company’s Chief Financial Officer with a grant-date fair value of $36.77 per share, resulting in total stock compensation expense of approximately $15 thousand recognized during the period.