SEC Form 10-Q filed by Perma-Pipe International Holdings Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission File No.
Perma-Pipe International Holdings, Inc.
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
On December 12, 2025, there were
Perma-Pipe International Holdings, Inc.
FORM 10-Q
For the fiscal quarter ended October 31, 2025
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Consolidated Balance Sheets as of October 31, 2025 (Unaudited) and January 31, 2025 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Part II |
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| Item 5. | Other Information | 33 |
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| Financial Statements |
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended October 31, |
Nine Months Ended October 31, |
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| 2025 |
2024 |
2025 |
2024 |
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| Net sales |
$ | $ | $ | $ | ||||||||||||
| Cost of sales |
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| Gross profit |
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| Operating expenses |
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| General and administrative expenses |
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| Selling expenses |
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| Total operating expenses |
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| Income from operations |
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| Interest expense |
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| Other expense |
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| Income before income taxes |
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| Income tax expense |
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| Net income |
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| Less: Net income attributable to non-controlling interest |
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| Net income attributable to common stock |
$ | $ | $ | $ | ||||||||||||
| Weighted average common shares outstanding |
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| Basic |
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| Diluted |
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| Earnings per share attributable to common stock |
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| Basic |
$ | $ | $ | $ | ||||||||||||
| Diluted |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| Three Months Ended October 31, |
Nine Months Ended October 31, |
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| 2025 |
2024 |
2025 |
2024 |
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| Net income |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income |
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| Foreign currency translation adjustments, net of tax |
( |
) | ( |
) | ( |
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| Comprehensive income |
$ | $ | $ | $ | ||||||||||||
| Less: Comprehensive income attributable to non-controlling interests |
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| Total comprehensive income attributable to common stock |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| October 31, 2025 | January 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Trade accounts receivable, less allowance for credit losses of $ at October 31, 2025 and $ at January 31, 2025 | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Unbilled accounts receivable | ||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Property, plant and equipment, net of accumulated depreciation | ||||||||
| Operating lease right-of-use asset | ||||||||
| Deferred tax assets | ||||||||
| Goodwill | ||||||||
| Other long-term assets | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued compensation and payroll taxes | ||||||||
| Commissions and management incentives payable | ||||||||
| Current maturities of long-term debt | ||||||||
| Customers' deposits | ||||||||
| Operating lease liability short-term | ||||||||
| Other accrued liabilities | ||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | ||||||||
| Income taxes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Long-term debt, less current maturities | ||||||||
| Deferred compensation liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Operating lease liability long-term | ||||||||
| Other long-term liabilities | ||||||||
| Total long-term liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Non-controlling interest | ||||||||
| Stockholders' equity | ||||||||
| Common stock, $ par value, authorized shares; issued and outstanding at October 31, 2025 and at January 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||
| Total stockholders' equity at January 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Net income attributable to common stock | ||||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||
| Amount attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||
| Total stockholders' equity at April 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Net income attributable to common stock | ||||||||||||||||||||||||
| Common stock issued under stock plans, net of shares used for tax withholding | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||
| Amount attributable to non-controlling interest | ||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||||||
| Total stockholders' equity at July 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Net income attributable to common stock | ||||||||||||||||||||||||
| Common stock issued under stock plans, net of shares used for tax withholding | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||
| Amount attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||||||||||
| Total stockholders' equity at October 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock |
Accumulated Other Comprehensive Loss |
Total Stockholders' Equity |
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| Total stockholders' equity at January 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Net income attributable to common stock |
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| Common stock issued under stock plans, net of shares used for tax withholding |
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| Stock-based compensation expense |
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| Amount attributable to non-controlling interest |
( |
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| Foreign currency translation adjustment |
( |
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| Total stockholders' equity at April 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Net income attributable to common stock |
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| Common stock issued under stock plans, net of shares used for tax withholding |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Amount attributable to non-controlling interest |
( |
) | ( |
) | ||||||||||||||||||||
| Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||||||||||
| Total stockholders' equity at July 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||
| Net income attributable to common stock |
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| Common stock issued under stock plans, net of shares used for tax withholding |
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| Retirement of treasury stock |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Amount attributable to non-controlling interest |
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| Foreign currency translation adjustment |
( |
) | ( |
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| Total stockholders' equity at October 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| Shares |
2025 |
2024 |
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| Balances at beginning of year |
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| Treasury stock retired |
( |
) | ||||||
| Shares issued, net of shares used for tax withholding |
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| Balances at period end |
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See accompanying notes to consolidated financial statements.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended October 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Deferred tax expense | ||||||||
| Stock-based compensation expense | ||||||||
| Provision on uncollectible accounts | ||||||||
| Loss from disposal of fixed assets | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued compensation and payroll taxes | ( | ) | ||||||
| Customers' deposits | ( | ) | ||||||
| Income taxes payable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Unbilled accounts receivable | ( | ) | ( | ) | ||||
| Other assets and liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing activities | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Proceeds from revolving credit lines | ||||||||
| Payments of debt on revolving credit lines | ( | ) | ( | ) | ||||
| Payments of principal on finance obligations | ( | ) | ( | ) | ||||
| Payments of other debt | ( | ) | ( | ) | ||||
| Decrease in drafts payable | ( | ) | ||||||
| Payments on finance lease obligations | ( | ) | ( | ) | ||||
| Stock options exercised and taxes paid related to restricted shares vested | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ) | ( | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash - beginning of period | ||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash interest paid | $ | $ | ||||||
| Cash income taxes paid | ||||||||
| Fixed assets acquired under finance leases - non-cash | ||||||||
| Fixed assets acquired - non-cash | ||||||||
See accompanying notes to consolidated financial statements.
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data, or unless otherwise specified)
(Unaudited)
Note 1 - Basis of presentation
The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", "we", "our", or the "Registrant") are unaudited, but include all adjustments that the Company's management considers necessary to fairly state the financial position and results of operations for the periods presented. These adjustments consist of normal recurring adjustments. Certain information and footnote disclosures have been omitted pursuant to Securities and Exchange Commission ("SEC") rules and regulations. The consolidated balance sheet as of January 31, 2025 is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. The Company's fiscal year ends on January 31. Years and balances described as 2025 and 2024 are for the fiscal year ending January 31, 2026 and for the fiscal year ended January 31, 2025, respectively.
Note 2 - Business segment reporting
The Company operates under
Significant expenses represent amounts that are regularly provided to the CODM and included in consolidated net income attributable to common stock.
The following table summarizes the Company's revenues, net income attributable to common stock, and significant expenses:
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Labor | ||||||||||||||||
| Materials | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Other costs of sales | ||||||||||||||||
| Total cost of sales | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Other general and administrative expense | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Selling expense | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income from operations | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Other expense | ||||||||||||||||
| Income before income tax | ||||||||||||||||
| Income tax expense | ||||||||||||||||
| Net income | ||||||||||||||||
| Less: Net income attributable to non-controlling interest | ||||||||||||||||
| Net income attributable to common stock | $ | $ | $ | $ | ||||||||||||
The CODM regularly reviews asset information by our reporting segment in a manner that is consistent with the presentation on the Company's accompanying consolidated balance sheets.
Note 3 - Accounts receivable
The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition. In the United States, collateral is not generally required. In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt and India, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated as amounts due from customers net of an allowance for claims and credit losses. Standard payment terms are generally net 30 to 60 days. The Company maintains an allowance for credit losses for accounts receivable. The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company may also establish an allowance for credit losses for specific receivables when it is probable that a specific receivable will not be collected and the loss can be reasonably estimated. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write off is recorded against the allowance for credit losses.
For the three and nine months ended October 31, 2025 and 2024,
As of October 31, 2025 and January 31, 2025,
Note 4 - Revenue recognition
The Company accounts for its revenues under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.
Revenue from contracts with customers
The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured.
The Company’s standard revenue transactions are classified into two main categories:
| 1) | Specialty Piping Systems and Coating - which include all bundled products in which the Company engineers, and manufactures pre-insulated specialty piping systems mainly relating to the district heating and cooling and oil & gas markets. |
| 2) | Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract. |
In accordance with ASC 606-10-25-27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exists:
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| 1) | the customer owns the material that is being coated, so the customer controls the asset and thus the work-in-process; or |
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| 2) | the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured, which has no alternative future use, and there is a right to payment for work performed to date plus profit margin. |
Products revenue is recognized when goods are shipped or services are performed (ASC 606-10-25-30).
A breakdown of the Company's revenues by revenue class for the three and nine months ended October 31, 2025 and 2024 are as follows:
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| Sales | % of Total | Sales | % of Total | Sales | % of Total | Sales | % of Total | |||||||||||||||||||||||||
| Products | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| Specialty Piping Systems and Coating | ||||||||||||||||||||||||||||||||
| Revenue recognized under input method | % | % | % | % | ||||||||||||||||||||||||||||
| Revenue recognized under output method | % | % | % | % | ||||||||||||||||||||||||||||
| Total | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
The input method as noted in ASC 606-10-55-20 is used by certain operating entities to measure revenue by the costs incurred to date relative to the estimated costs to satisfy the contract over time. Generally, these contracts are considered a single performance obligation satisfied over time and due to the custom nature of the goods and services, the "over time" method is the most faithful depiction of the Company’s performance as it measures the value of the goods and services transferred to the customer. Costs include all material, labor, and other direct costs incurred to satisfy the performance obligations of the contract. Revenue recognition begins when projects costs are incurred.
The output method as noted in ASC 606-10-55-17 is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance under the contract. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped.
Contract assets and liabilities
Contract assets represent revenue recognized in excess of amounts billed for work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs for work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impact the period end balances in these accounts. In addition, contract assets include receivables or amounts that are billable beyond the passage of time.
The following table shows the reconciliation of costs in excess of billings and billings in excess of costs:
| October 31, 2025 | January 31, 2025 | |||||||
| Costs incurred on uncompleted contracts | $ | $ | ||||||
| Estimated earnings | ||||||||
| Earned revenue | ||||||||
| Less billings to date | ||||||||
| Costs in excess of billings, net | $ | $ | ||||||
| Balance sheet classification | ||||||||
| Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts | $ | $ | ||||||
| Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts | ( | ) | ( | ) | ||||
| Costs in excess of billings, net | $ | $ | ||||||
The Company anticipates that substantially all costs incurred on uncompleted contracts as of October 31, 2025 will be billed and collected within year.
Unbilled accounts receivable
The Company has recorded $
Note 5 - Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method for all inventories.
| October 31, 2025 | January 31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Subtotal | ||||||||
| Less allowance | ||||||||
| Inventories | $ | $ | ||||||
The Company conducts periodic reviews of its inventory and records allowances for slow moving and obsolete items to reflect their net realizable value, which is primarily attributable to finished goods.
Note 6 - Income taxes
The determination of the consolidated provision for income taxes, deferred tax assets and liabilities and related valuation allowances requires management to make judgments and estimates. As a company with subsidiaries in foreign jurisdictions, the process of calculating income taxes involves estimating current tax obligations and exposures in each jurisdiction as well as making judgments regarding the future recoverability of deferred tax assets. The relative proportion of taxable income earned domestically versus internationally can fluctuate significantly from period to period. Changes in the estimated level of annual pre-tax income, tax laws, and the results of tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the Company's projections and assumptions are inherently uncertain; therefore, actual results could differ materially from projections.
The Company's worldwide effective tax rates ("ETR") for the three months ended October 31, 2025 and 2024 were
The Company expects that future distributions from foreign subsidiaries will not be subject to incremental U.S. federal tax as they will be excludible from U.S. taxable income either as remittances of previously taxed earnings and profits or eligible for a full dividends received deduction. Current and future earnings in the Company's subsidiaries in Canada and Egypt are not permanently reinvested. The earnings from these subsidiaries are subject to tax in their local jurisdiction and withholding taxes in these jurisdictions are considered. As such, the Company has accrued a liability of $
On July 4, 2025, new tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. The Company has undergone efforts in the third quarter to reasonably estimate the impact of the provisions effective during 2025 on our consolidated financial statements and there were no material impacts. We are currently evaluating the potential impact of the OBBBA provisions effective after 2025 on our consolidated financial statements.
Note 7 - Goodwill
All identifiable goodwill as of October 31, 2025 and January 31, 2025, is attributable to the purchase of the remaining
The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur that could indicate that it is more likely than not that the fair value of the reporting unit did not exceed its carrying value, resulting in an impairment.
The following table provides a reconciliation of changes in the carrying amount of goodwill:
| January 31, 2025 | Foreign exchange change effect | October 31, 2025 | ||||||||||
| Goodwill | $ | $ | $ | |||||||||
There were no triggering events identified during the three and nine months ended October 31, 2025.
Note 8 - Stock-based compensation
The Company has prior incentive plans under which previously granted awards remain outstanding, but under which no new awards may be granted, including the Company's 2021 Omnibus Stock Incentive Plan, which expired in May 2024. At October 31, 2025, the Company had reserved a total of
The Company's 2024 Omnibus Stock Incentive Plan, dated May 28, 2024, was approved by the Company's stockholders in July 2024 ("2024 Plan"). The 2024 Plan will expire in July 2027. The 2024 Plan authorizes awards to officers, employees, consultants, and independent directors. The 2024 Plan provides for the grant of deferred shares, non-qualified stock options, incentive stock options, restricted shares, restricted stock units, and performance-based restricted stock units intended to qualify under section 422 of the Internal Revenue Code.
Grants were made in connection with the 2024 Plan and the prior incentive plans to employees, officers, and independent directors, as further described below.
Stock-based compensation expense
The Company has granted stock-based compensation awards to eligible employees, officers and independent directors. The Company recognized the following stock-based compensation expense for the periods presented:
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Restricted stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
Restricted stock
The following table summarizes the Company's restricted stock activity for the nine months ended October 31, 2025:
| Restricted Shares | Weighted Average Price (Per share) | Aggregate Intrinsic Value | ||||||||||
| Outstanding at January 31, 2025 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Vested and issued | ( | ) | ||||||||||
| Forfeited or retired for taxes | ( | ) | ||||||||||
| Outstanding at October 31, 2025 | $ | $ | ||||||||||
As of October 31, 2025, there was $
Note 9 - Earnings per share
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic weighted average common shares outstanding at October 31, 2025 | ||||||||||||||||
| Dilutive effect of equity compensation plans | ||||||||||||||||
| Weighted average common shares outstanding assuming full dilution | ||||||||||||||||
| Stock options and restricted stock not included in the computation of diluted earnings per share of common stock because the option exercise prices or grant date prices exceeded the average market prices of the common shares | ||||||||||||||||
| Stock options and restricted stock with exercise prices or grant date prices below the average market prices | ||||||||||||||||
| Net income attributable to common stock | $ | $ | $ | $ | ||||||||||||
| Earnings per share attributable to common stock | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
Note 10 - Debt
Debt consisted of the following:
| October 31, 2025 | January 31, 2025 | |||||||
| Revolving credit agreement - North America, due September 2026 | $ | $ | ||||||
| Revolving credit agreements - United Arab Emirates, due November 2025 | ||||||||
| Revolving credit agreement - Saudi Arabia, due April 2026 | ||||||||
| Revolving credit agreement - Egypt, due November 2025 | ||||||||
| Finance obligation - buildings and land, due April 2036 | ||||||||
| Mortgage payable, due December 2042 | ||||||||
| Loan payable to GIG | ||||||||
| Finance leases | ||||||||
| Less: debt issuance costs | ( | ) | ( | ) | ||||
| Total debt | ||||||||
| Less: current maturities of long-term debt | ||||||||
| Long-term debt, net of current maturities | $ | $ | ||||||
Revolving lines - North America. On September 20, 2018, and as amended, extended, or renewed subsequently thereafter, the Company and certain of its U.S. and Canadian subsidiaries (collectively the “North American Loan Parties”) entered into a Revolving Credit and Security Agreement (the “Credit Agreement”) with PNC Bank, National Association ("PNC"), as administrative agent and lender, providing for a -year $
As of October 31, 2025, the Company had borrowed an aggregate of $
The Company was in compliance with respect to the covenants under the Credit Agreement as of October 31, 2025.
Revolving lines - foreign. The Company also has credit arrangements used by its Middle Eastern subsidiaries in the U.A.E., Egypt and Saudi Arabia as discussed further below.
Egypt
Saudi Arabia
In March 2022, the Company's Saudi Arabian subsidiary entered into a credit arrangement with a bank in Saudi Arabia for a revolving line of
These credit arrangements are in the form of overdraft facilities and project financing at rates competitive in the countries in which the Company operates. The lines are secured by certain equipment, certain assets (such as accounts receivable and inventory), and in some cases, a guarantee by the Company. Some credit arrangement covenants require a minimum tangible net worth to be maintained, including maintaining certain levels of intercompany subordinated debt. In addition, some of the revolving credit facilities restrict payment of dividends or undertaking of additional debt. The Company guarantees only a portion of the subsidiaries' debt, including foreign debt. As of October 31, 2025 and January 31, 2025, the amount of foreign subsidiary debt guaranteed by the Company was approximately $
The Company was in compliance with respect to the covenants under the credit arrangements in the U.A.E., Egypt, and Saudi Arabia as of October 31, 2025. Although certain arrangements have expired or are set to expire and the borrowings could be required to be repaid immediately by the bank, the Company is in regular communication with the bank throughout the renewal process and the arrangements have continued without interruption or penalty. On October 31, 2025, interest rates were based on (i) the Emirates Inter Bank Offered Rate plus
In June 2023, the Company assumed a promissory note of approximately $
Mortgages. On July 28, 2016, the Company entered into a mortgage agreement secured by the Company's manufacturing facility located in Alberta, Canada that matures on December 2042. As of October 31, 2025, the remaining balance on the mortgage in Canada is approximately CAD
Note 11 - Leases
The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheets, with the exception of leases with an initial term of 12 months or less in accordance with an accounting policy election, for which rent expense is recognized on a straight-line basis over the lease term.
Operating Leases.
Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets.
In January 2025, the Company entered into a lease in Qatar for land upon which the Company intends to build a facility. The agreement provides for annual lease payments of
In July 2025, the Company entered into an additional lease agreement in Qatar for land and a building. The agreement has an initial lease term of years with annual lease payments of
Finance Leases.
Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets.
The Company has several lease agreements, with lease terms of to years, which consist of real estate, vehicles and office equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and ROU assets as the Company is not reasonably certain to exercise these options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement, which is not material.
Total lease costs consist of the following:
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||
| Lease costs | Consolidated Statements of Operations Classification | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Finance Lease Costs | |||||||||||||||||
| Amortization of ROU assets | Cost of sales | $ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities | Interest expense | ||||||||||||||||
| Operating lease costs | Cost of sales, SG&A expenses | ||||||||||||||||
| Short-term lease costs (1) | Cost of sales, SG&A expenses | | | ||||||||||||||
| Total Lease costs | $ | $ | $ | $ | |||||||||||||
(1) Includes variable lease costs, which are not material.
Supplemental balance sheet information related to leases is as follows:
| Operating and Finance leases | October 31, 2025 | January 31, 2025 | ||||||
| Finance leases assets: | ||||||||
| Property and Equipment - gross | $ | $ | ||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property and Equipment - net | $ | $ | ||||||
| Finance lease liabilities: | ||||||||
| Finance lease liability short-term | $ | $ | ||||||
| Finance lease liability long-term | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Operating lease assets: | ||||||||
| Operating lease ROU assets | $ | $ | ||||||
| Operating lease liabilities: | ||||||||
| Operating lease liability short-term | $ | $ | ||||||
| Operating lease liability long-term | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
Weighted-average lease terms and discount rates are as follows:
| October 31, 2025 | ||||
| Weighted-average remaining lease terms (in years): | ||||
| Finance leases | ||||
| Operating leases | ||||
| Weighted-average discount rates: | ||||
| Finance leases | % | |||
| Operating leases | % | |||
Supplemental cash flow information related to leases is as follows:
| Nine Months Ended October 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Financing cash outflows from finance leases | $ | $ | ||||||
| Operating cash outflows from finance leases | ||||||||
| Operating cash outflows from operating leases | ||||||||
| ROU assets obtained in exchange for new lease obligations: | ||||||||
| Operating leases liabilities | $ | $ | ||||||
Maturities of lease liabilities as of October 31, 2025, are as follows:
| Operating Leases | Finance Leases | |||||||
| Fiscal 2025 (remainder of fiscal year) | $ | $ | ||||||
| Fiscal 2026 | ||||||||
| Fiscal 2027 | ||||||||
| Fiscal 2028 | ||||||||
| Fiscal 2029 | ||||||||
| Fiscal 2030 | ||||||||
| Thereafter | ||||||||
| Total lease payments | $ | $ | ||||||
| Less: amount representing interest | ( | ) | ( | ) | ||||
| Total lease liabilities at October 31, 2025 | $ | $ |
Rent expense attributable to operating leases was $
Note 12 - Cash, cash equivalents, and restricted cash
| October 31, 2025 | January 31, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash, cash equivalents and restricted cash shown in the statement of cash flows | $ | $ | ||||||
Note 13 - Fair value
The carrying values of cash and cash equivalents, accounts receivable and accounts payable are considered reasonable estimates of fair value due to their short-term nature. The carrying amount of the Company's short-term debt, revolving lines of credit and long-term debt approximate fair value because the majority of the amounts outstanding accrue interest at variable market rates.
Note 14 - Recent accounting pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Pursuant to this standard update, companies are required to provide additional information, which is primarily attributable to the rate reconciliation and income taxes paid. The standard update is to be applied prospectively, with retrospective application permitted. The new income tax disclosures are effective for fiscal years beginning after December 15, 2024. The Company is still evaluating this standard update but does not expect it to have a material impact on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In accordance with this standard update, companies are required to disclose specified information about certain costs and expenses in the notes to the financial statements at each interim and annual reporting period. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard update on its consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, aimed at modernizing the guidance for internal-use software development. This guidance removes reference to "development stages" and introduces a "probable-to-complete" recognition threshold to determine when to begin capitalizing software costs. This guidance will be effective starting with our quarterly report ending April 30, 2028, with prospective, retrospective, or modified transition methods allowed and early adoption permitted. We are currently evaluating the impact of this ASU, including our timing and method of adoption.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 is intended to update the guidance in Topic 270 by improving navigability of the required interim disclosures, clarifying when that guidance is applicable and adding a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. This standard update will be effective for the interim reporting periods within annual reporting periods beginning after December 15, 2027, with the option to early adopt at any time prior to the effective date and should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of the standard on our consolidated financial statements and related disclosures.
Note 15 - Noncontrolling interest
On June 1, 2023, the Company closed on its formation of a joint venture (the "JV", and the agreement governing the JV, the "JV Agreement") with Gulf Insulation Group ("GIG"), a leading provider of pre-insulated piping systems and pipe fabrication, in which the Company acquired a
The balance sheets and operating activities of this investment are included in the Company's consolidated financial statements. As of October 31, 2025, the carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $
The Company adjusts net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to the non-controlling interest. Additionally, the Company presents the proportionate share that is attributable to the non-controlling interest as temporary equity within the consolidated balance sheets. This temporary equity presentation is the result of the non-controlling interest being subject to certain redemption rights that are not entirely within the Company's control. Due to these redemption rights, at each balance sheet date, the Company is required to adjust the carrying value attributable to the non-controlling interest to fair value, which is limited to its original carrying value at the formation of the business arrangement. Adjustments made to reflect the change in the value of the redeemable non-controlling interest are offset against permanent equity within the Company's consolidated balance sheets.
Net income attributable to GIG was $
The non-controlling interest as measured at fair value was $
| Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") |
The statements contained in this MD&A and other information contained elsewhere in this quarterly report, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "continue," "remains," "intend," "aim," "should," "prospects," "could," "future," "potential," "believes," "plans," "likely" and "probable" or the negative thereof or other variations thereon or comparable terminology, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected as a result of many factors, including, but not limited to, those under the heading Item 1A. Risk Factors included in the Company's latest Annual Report on Form 10-K. The Company's fiscal year ends on January 31. Years and balances described as 2025 and 2024 are for the fiscal year ending January 31, 2026 and the fiscal year ended January 31, 2025, respectively.
This MD&A should be read in conjunction with the Company’s consolidated financial statements, including the notes thereto, contained elsewhere in this report. Percentages set forth below in this MD&A have been rounded to the nearest percentage point.
CONSOLIDATED RESULTS OF OPERATIONS
(In thousands, except per share data, or unless otherwise specified)
(Unaudited)
The Company is engaged in the manufacture and sale of products in one reportable segment. Since the Company focuses on discrete projects, operating results can be significantly impacted as a result of large variations in the level of project activity in reporting periods.
| Three Months Ended October 31, |
Nine Months Ended October 31, |
|||||||||||||||||||||||||||||||||||||||
| 2025 |
2024 |
Change favorable (unfavorable) |
2025 |
2024 |
Change favorable (unfavorable) |
|||||||||||||||||||||||||||||||||||
| Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
|||||||||||||||||||||||||||||||
| Net sales |
$ | 61,148 | $ | 41,563 | $ | 19,585 | $ | 155,796 | $ | 113,397 | $ | 42,399 | ||||||||||||||||||||||||||||
| Gross profit |
21,005 | 34 | % | 14,086 | 34 | % | 6,919 | 52,151 | 33 | % | 38,077 | 34 | % | 14,074 | ||||||||||||||||||||||||||
| General and administrative expenses |
8,346 | 14 | % | 7,330 | 18 | % | (1,016 | ) | 26,127 | 17 | % | 19,457 | 17 | % | (6,670 | ) | ||||||||||||||||||||||||
| Selling expenses |
1,256 | 2 | % | 1,170 | 3 | % | (86 | ) | 3,545 | 2 | % | 3,757 | 3 | % | 212 | |||||||||||||||||||||||||
| Interest expense |
497 | 468 | (29 | ) | 1,318 | 1,489 | 171 | |||||||||||||||||||||||||||||||||
| Other expense |
6 | 50 | 44 | 72 | 156 | 84 | ||||||||||||||||||||||||||||||||||
| Income before income taxes |
10,900 | 5,068 | 5,832 | 21,089 | 13,218 | 7,871 | ||||||||||||||||||||||||||||||||||
| Income tax expense |
2,986 | 1,615 | (1,371 | ) | 6,058 | 3,692 | (2,366 | ) | ||||||||||||||||||||||||||||||||
| Net income |
7,914 | 3,453 | 4,461 | 15,031 | 9,526 | 5,505 | ||||||||||||||||||||||||||||||||||
| Less: Net income attributable to non-controlling interest |
1,599 | 962 | (637 | ) | 2,913 | 2,303 | (610 | ) | ||||||||||||||||||||||||||||||||
| Net income attributable to common stock |
6,315 | 2,491 | 3,824 | 12,118 | 7,223 | 4,895 | ||||||||||||||||||||||||||||||||||
Gross profit:
Gross profit was $21.0 million and $14.1 million in the three months ended October 31, 2025 and 2024, respectively. The increase of $6.9 million was driven primarily by increased volume of activity in the quarter.
General and administrative expenses:
General and administrative expenses were $8.3 million and $7.3 million in the three months ended October 31, 2025 and 2024, respectively. The increase of $1.0 million was mainly due to higher payroll expenses and, to a lesser extent, professional fees in the quarter.
Selling expenses:
Interest expense:
Net interest expense remained consistent and was $0.5 million in the three months ended October 31, 2025 and 2024, respectively.
Income tax expense:
The Company's ETR was 27% and 32% in the three months ended October 31, 2025 and 2024, respectively. The lower ETR for the three months ended October 31, 2025 is due to the mix of income and loss in various jurisdictions.
For further information, see Note 6 - Income taxes, in the Notes to Consolidated Financial Statements.
Net income attributable to common stock:
Net income attributable to common stock was $6.3 million and $2.5 million in the three months ended October 31, 2025 and 2024, respectively. The increase of $3.8 million was mainly due to increased sales activity in the quarter, and better project execution.
Nine months ended October 31, 2025 vs. Nine months ended October 31, 2024
Net sales:
Net sales were $155.8 million and $113.4 million in the nine months ended October 31, 2025 and 2024, respectively. The increase of $42.4 million was a result of increased sales volumes in the Middle East and in North America.
Gross profit:
Gross profit was $52.2 million and $38.1 million in the nine months ended October 31, 2025 and 2024, respectively. The increase of $14.1 million was driven primarily by increased volume of activity.
General and administrative expenses:
General and administrative expenses were $26.1 million and $19.5 million in the nine months ended October 31, 2025 and 2024, respectively. The increase of $6.6 million was due to higher payroll expenses and professional fees. This includes a one-time charge of approximately $2.0 million due to an acceleration of certain executive compensation expense as a result of a departure from the organization.
Selling expenses:
Selling expenses remained consistent and were $3.5 million and $3.8 million in the nine months ended October 31, 2025 and 2024, respectively. The decrease of $0.3 million was primarily attributable to lower payroll expenses.
Interest expense:
Net interest expense was $1.3 million and $1.5 million in the nine months ended October 31, 2025 and 2024, respectively. The decrease of $0.2 million was the result of an overall reduction in interest rates during the current year.
Income tax expense:
The Company's ETR was 29% and 28% in the nine months ended October 31, 2025 and 2024, respectively. The change in the ETR is due to the mix of income and loss in various jurisdictions.
For further information, see Note 6 - Income taxes, in the Notes to Consolidated Financial Statements.
Net income attributable to common stock:
Net income attributable to common stock was $12.1 million and $7.2 million in the nine months ended October 31, 2025 and 2024, respectively. The increase of $4.9 million was mainly due to increased sales volumes and better project execution during the current year.
Liquidity and capital resources
Cash and cash equivalents as of October 31, 2025 were $27.2 million compared to $15.7 million on January 31, 2025. On October 31, 2025, $0.3 million was held in the United States, and $26.9 million was held at the Company's foreign subsidiaries. The Company's working capital was $65.3 million on October 31, 2025 compared to $54.7 million on January 31, 2025. Of the working capital components, accounts receivable increased by $13.5 million and cash and cash equivalents increased by $11.5 million as the result of the movements discussed below. As of October 31, 2025, the Company had $3.3 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $28.5 million of borrowing capacity under its foreign revolving credit agreements. The Company had $10.3 million borrowed under the Renewed Senior Credit Facility and $3.4 million borrowed under its foreign revolving credit agreements at October 31, 2025.
Net cash provided by operating activities was $16.0 million and $7.9 million in the nine months ended October 31, 2025 and 2024, respectively. The increase of $8.1 million was primarily attributable to net income, customer deposits, and changes in accounts payable and other assets and liabilities, partially offset by increases in accounts receivable, unbilled receivables, inventories, prepaid expenses and other current assets, and inventories.
Net cash used in investing activities in the nine months ended October 31, 2025 and 2024 was $8.4 million and $1.6 million, respectively. The increase of $6.8 million was primarily due to increases in the amount of capital expenditures during the year.
Net cash provided by financing activities in the nine months ended October 31, 2025 and 2024 was $4.1 million and $1.3 million, respectively. Debt totaled $29.9 million and $24.5 million as of October 31, 2025 and January 31, 2025, respectively. See Note 10 - Debt, in the Notes to Consolidated Financial Statements for further discussion relating to this topic.
As of October 31, 2025, Perma-Pipe had $27.2 million of cash and cash equivalents on hand and committed debt facility agreements with commercial banks aggregating $74.9 million, for which $31.8 million was available. The Company believes these amounts are sufficient to meet future business requirements for at least the next 12 months and beyond.
Debt
| October 31, 2025 |
January 31, 2025 |
|||||||
| Revolving credit agreement - North America, due September 2026 |
$ | 10,289 | $ | 6,765 | ||||
| Revolving credit agreements - United Arab Emirates, due November 2025 |
1,112 | 465 | ||||||
| Revolving credit agreement - Saudi Arabia, due April 2026 |
2,042 | 1,545 | ||||||
| Revolving credit agreement - Egypt, due November 2025 |
258 | - | ||||||
| Finance obligation - buildings and land, due April 2036 |
8,853 | 9,023 | ||||||
| Mortgage payable, due December 2042 |
3,921 | 3,956 | ||||||
| Loan payable to GIG |
2,753 | 2,753 | ||||||
| Finance leases |
631 | 75 | ||||||
| Less: debt issuance costs |
(115 | ) | (116 | ) | ||||
| Total debt |
29,744 | 24,466 | ||||||
| Less: current maturities of long-term debt |
17,083 | 9,246 | ||||||
| Long-term debt, net of current maturities |
$ | 12,661 | $ | 15,220 | ||||
Accounts receivable:
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies are described in Item 7. MD&A and in the Notes to the Consolidated Financial Statements for the year ended January 31, 2025 contained in the Company's latest Annual Report on Form 10-K. Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been discussed in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The application of critical accounting policies may require management to make assumptions, judgments and estimates about the amounts reflected in the Consolidated Financial Statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.
| Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of October 31, 2025. The Company's disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of October 31, 2025, our disclosure controls and procedures were not effective because of the material weaknesses in internal control over financial reporting, as described below.
Material Weaknesses in Internal Control Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.
The material weaknesses are as follows:
| • |
We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in financial reporting. This contributed to the following material weaknesses; |
|
| • |
We did not design and maintain effective controls over financial reporting relating to the review and approval of manual journal entries, review of the financial close process, including the statement of cash flows, and review of certain financial policies and procedures; and |
|
| • |
We did not design and maintain effective controls at operating locations in the Middle East and North Africa ("MENA"), including not maintaining sufficient documentation to support an evaluation that controls over business processes were designed and operating effectively. |
These material weaknesses resulted in adjustments to property, plant, and equipment, net of accumulated depreciation, trade accounts payable, trade accounts receivable, and the statement of cash flows. These adjustments resulted in a revision of the unaudited consolidated financial statements as of and for the period ended April 30, 2024, a restatement as of and for the period ended July 31, 2024 and material adjustments as of and for the period ended October 31, 2024.
In addition, we have the following additional material weaknesses:
| • | We did not design and maintain effective information technology general controls ("ITGCs"), specifically controls over the timely review of user access and administrative access to adequately restrict access, program change management, computer operations, and program development; and | |
| • | We did not design and maintain effective controls over management's review of the completeness and accuracy of certain system-generated reports. |
These material weaknesses did not result in a misstatement to the Company's annual or interim financial statements. However, each of these material weaknesses could result in a material misstatement of substantially all accounts and disclosures in the Company's annual or interim financial statements that would not be prevented or detected on a timely basis.
Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting
To address these matters, the Company has initiated a plan to remediate these material weaknesses. Our ongoing remediation plans include:
(i) performing an entity wide risk assessment to identify relevant risks and changes to those relevant risks to our financial reporting; ii) designing and implementing controls to identify and evaluate changes in our business and the impact on our internal control over financial reporting; (iii) engaging outside consultants with expertise relating to ITGCs to document processes, assist in addressing the design and operation of ITGCs, monitoring and testing reviews focusing on systems supporting our financial reporting process (iv) designing and maintaining controls and documentation evidencing those ITGCs for knowledge transfer and function changes, including access and program control and change management, computer operations, and program development, (v) designing and maintaining effective controls to review the completeness and accuracy of certain system-generated reports; and (vi) outsourcing certain functions to third-party providers.
Our remediation plans related to entity level controls, financial reporting controls, and business process controls include:
(i) enhancing the design of controls for the review of and posting of journal entries, including manual journal entries; (ii) evaluating and updating documented formal accounting policies, financial reporting, processes and procedures, and overall internal control procedures and (iii) updating the design of controls for the preparation and review of the financial close process, including the statement of cash flows.
In addition to the items noted above, our remediation plans related to our MENA locations include: (i) evaluating and updating the Company's evidence of internal control policies and procedures; (ii) enhancing the design of controls over business processes that are relevant to our MENA locations; and (iii) formalizing our financial reporting processes and procedures.
During the fiscal quarter ended October 31, 2025, we have taken actions to improve our control over financial reporting relating to the review and approval of manual journal entries, review of the financial close process, and review of certain financial policies and procedures. This also includes controls at our MENA operating locations, ITGCs, and controls over management's review of the completeness and accuracy of certain system-generated reports.
The Company anticipates the actions described above will strengthen the Company's internal control over financial reporting and will address the related material weaknesses described above. However, the material weaknesses cannot be considered fully remediated until the necessary controls have been appropriately designed and implemented. The remediation process and procedures will also need to be in operation for a period of time and management conclude through testing, that these controls are operating effectively. As we continue to evaluate and improve our internal control over financial reporting, we may design or modify additional controls or certain of the remediation procedures described above.
Changes in Internal Control over Financial Reporting
As described in the "Remediation Plan for the Material Weaknesses in Internal Control over Financial Reporting" above, there were changes to our internal control over financial reporting which were identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange during the fiscal quarter ended October 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| Other Information |
During the three months ended October 31, 2025, of the Company's directors or executive officers adopted or terminated any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement" (as those terms are defined in Regulation S-K, Item 408).
| Exhibits |
| 3.1 | Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.3 to Registration Statement No. 33-70298] |
| 3.2 | Certificate of Amendment to Certificate of Incorporation of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on March 20, 2017] |
| 3.3 | Seventh Amended and Restated By-Laws of Perma-Pipe International Holdings, Inc. [Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on April 4, 2025] |
| 31.1 |
Rule 13a - 14(a)/15d - 14(a) Certifications (1) Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 |
Rule 13a - 14(a)/15d - 14(a) Certifications (2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32 |
|
| 101.INS |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition |
| 101.LAB |
Inline XBRL Taxonomy Extension Labels |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Perma-Pipe International Holdings, Inc. | ||
| Date: |
December 12, 2025 | By: /s/ Saleh N. Sagr |
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Saleh N. Sagr |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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| Date: |
December 12, 2025 | By: /s/ Matthew E. Lewicki |
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Matthew E. Lewicki |
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Vice President and Chief Financial Officer |
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(Principal Financial and Accounting Officer) |