Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2025
For the transition period from ________ to ________
Commission File No. 001-32530
Perma-Pipe International Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
36-3922969
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2445 Technology Forest Blvd, Suite 1010, The Woodlands, Texas
77381
(Address of principal executive offices)
(Zip Code)
(847) 966-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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.
Yes ☒ No ☐
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). Yes ☒ No ☐
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 ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐
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 ☐ No ☒
On December 12, 2025, there were 8,094,045 shares of the registrant's common stock outstanding.
For the fiscal quarter ended October 31, 2025
TABLE OF CONTENTS
Item
Page
Part I
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended October 31, 2025 and 2024
2
Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended October 31, 2025 and 2024
3
Consolidated Balance Sheets as of October 31, 2025 (Unaudited) and January 31, 2025
4
Consolidated Statements of Stockholders' Equity (Unaudited) for the Three and Nine Months Ended October 31, 2025 and 2024
5
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended October 31, 2025 and 2024
6
Notes to Consolidated Financial Statements (Unaudited)
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
24
Item 4.
Controls and Procedures
32
Part II
OTHER INFORMATION
Item 6.
Exhibits
33
SIGNATURES
34
PART I FINANCIAL INFORMATION
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,
2025
2024
Net sales
Cost of sales
Gross profit
Operating expenses
General and administrative expenses
Selling expenses
Total operating expenses
Income from operations
Interest expense
Other expense
Income before income taxes
Income tax expense
Net income
Less: Net income attributable to non-controlling interest
Net income attributable to common stock
Weighted average common shares outstanding
Basic
Diluted
Earnings per share attributable to common stock
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Other comprehensive income
Foreign currency translation adjustments, net of tax
Comprehensive income
Less: Comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to common stock
CONSOLIDATED BALANCE SHEETS
October 31, 2025
January 31, 2025
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade accounts receivable, less allowance for credit losses of $1,065 at October 31, 2025 and $703 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, $.01 par value, authorized 50,000 shares; 8,094 issued and outstanding at October 31, 2025 and 7,983 at January 31, 2025
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
Common Stock
Additional Paid-in Capital
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Loss
Total Stockholders' Equity
Total stockholders' equity at January 31, 2025
Stock-based compensation expense
Amount attributable to non-controlling interest
Foreign currency translation adjustment
Total stockholders' equity at April 30, 2025
Common stock issued under stock plans, net of shares used for tax withholding
Total stockholders' equity at July 31, 2025
Total stockholders' equity at October 31, 2025
Total stockholders' equity at January 31, 2024
Total stockholders' equity at April 30, 2024
Total stockholders' equity at July 31, 2024
Retirement of treasury stock
Total stockholders' equity at October 31, 2024
Shares
Balances at beginning of year
Treasury stock retired
Shares issued, net of shares used for tax withholding
Balances at period end
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Deferred tax expense
Provision on uncollectible accounts
Loss from disposal of fixed assets
Changes in operating assets and liabilities
Accounts receivable
Accounts payable
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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data, or unless otherwise specified)
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 one segment: Piping Systems. The results are presented on a consolidated basis to the Chief Executive Officer who serves as the chief operating decision maker ("CODM"). The CODM regularly reviews consolidated revenues, significant expenses, and consolidated net income attributable to common stock to make operating decisions and assess performance. The CODM uses this information in making company-wide decisions when determining how to allocate resources.
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:
Labor
Materials
Other costs of sales
Total cost of sales
Salaries and wages
Other general and administrative expense
Selling expense
Income before income tax
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, no individual customer accounted for more than 10% of the Company's consolidated net sales.
As of October 31, 2025 and January 31, 2025, no individual customer accounted for more than 10% of the Company's accounts receivable.
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)
2)
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:
the customer owns the material that is being coated, so the customer controls the asset and thus the work-in-process; or
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:
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:
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
The Company anticipates that substantially all costs incurred on uncompleted contracts as of October 31, 2025 will be billed and collected within one year.
The Company has recorded $28.5 million and $18.9 million of unbilled accounts receivable on the consolidated balance sheets as of October 31, 2025 and January 31, 2025, respectively, from revenues generated by certain of its subsidiaries. The Company has fulfilled all performance obligations and has recorded revenue under the respective contracts. The deliverables under these contracts have been accepted by the customer and billings will be made once the customer takes possession of or arranges shipping for the products. The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as of October 31, 2025 will be billed within one year.
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.
Raw materials
Work in process
Finished goods
Subtotal
Less allowance
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 27% and 32%, respectively. The Company's ETR was 29% and 28% for the nine 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.
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 $1.1 million as of October 31, 2025 related to these taxes.
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 50% interest in Perma-Pipe Canada, Ltd., which occurred in 2016.
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:
Foreign exchange change effect
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 197,151 shares for grants and issuances under these incentive plans, including issuances pursuant to unvested or unexercised prior awards.
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.
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:
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 $1.8 million of unrecognized compensation expense related to unvested restricted stock granted under the plans. These costs are expected to be recognized over a weighted average period of 2.2 years.
Note 9 - Earnings per share
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
Note 10 - Debt
Debt consisted of the following:
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 three-year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the “Senior Credit Facility”). The Credit Agreement with PNC was subsequently extended on September 17, 2021, providing for a new five-year $18 million senior secured revolving credit facility, subject to a borrowing base including various reserves (the "Renewed Senior Credit Facility"). The Renewed Senior Credit Facility matures on September 20, 2026.
As of October 31, 2025, the Company had borrowed an aggregate of $10.3 million at a rate of 8.5% and had $3.3 million available under the Renewed Senior Credit Facility. As of January 31, 2025, the Company had borrowed an aggregate of $6.8 million and had $3.7 million available under the Renewed Senior Credit Facility.
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 37.0 million Saudi Riyals (approximately $9.9 million at October 31, 2025). This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia. The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary, and expires in April 2026. As of October 31, 2025, the facility has an interest rate of approximately 9.0%. The Company had borrowed an aggregate of $2.0 million and $1.5 million as of October 31, 2025 and January 31, 2025, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The unused borrowing availability attributable to this credit arrangement at October 31, 2025 and January 31, 2025, was $2.5 million and $3.0 million, respectively.
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 $6.2 million and $4.8 million, respectively.
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 3.0% to 3.5% per annum for the U.A.E. credit arrangements, two of which have a minimum interest rate of 4.5% per annum; (ii) either the Central Bank of Egypt corporate loan rate plus 1.5% to 3.5% per annum or the stated interest rate in the agreements for the Egypt credit arrangements; and (iii) the Saudi Inter-Bank Offered Rate plus 3.5% for the Saudi Arabia credit arrangement. Based on these base rates, as of October 31, 2025, the Company's interest rates ranged from 7.6% to 20.8%, with a weighted average rate of 8.0%, and the Company had facility limits totaling $56.9 million under these credit arrangements. As of October 31, 2025, $25.0 million of availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of October 31, 2025, the Company had borrowed $6.2 million and had an additional $28.5 million of borrowing availability remaining under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of current maturities of long-term debt in the Company's consolidated balance sheets as of October 31, 2025 and January 31, 2025.
In June 2023, the Company assumed a promissory note of approximately $2.8 million in connection with the formation of the joint venture with Gulf Insulation Group (see Note 15). In accordance with the promissory note, all principal is due and payable on the maturity date of April 9, 2026, with the option to prepay, in whole or in part, at any time prior to the maturity date, without premium or penalty. This amount is presented on the Company's consolidated balance sheets as a component of current maturities of long-term debt at October 31, 2025, and as a component of long-term debt, net of current maturities at January 31, 2025.
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 23, 2042. As of October 31, 2025, the remaining balance on the mortgage in Canada is approximately CAD 5.5 million (approximately $3.9 million at October 31, 2025). The interest rate is variable, and was 6.6% at October 31, 2025. The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1 million as of October 31, 2025 and January 31, 2025.
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 0.3 million Qatari Riyals (approximately $0.1 million at October 31, 2025), which is inclusive of certain escalation clauses and other variable consideration contained in the agreement. The agreement has an initial lease term of twenty years, which includes the option to terminate the lease agreement after ten years, and the ability to renew the lease at the end of the initial lease term.
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 three years with annual lease payments of 1.9 million Qatar Riyals (approximately $0.5 million at October 31, 2025), which includes an escalation clause of approximately 10% for each year thereafter. The agreement may be terminated at any time; however, the Company will be obligated to pay any unpaid balance through the remainder of the lease term.
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 one to fifteen 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:
Lease costs
Consolidated Statements of Operations Classification
Finance Lease Costs
Amortization of ROU assets
Interest on lease liabilities
Operating lease costs
Cost of sales, SG&A expenses
Short-term lease costs (1)
151
384
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
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:
Total operating lease liabilities
Weighted-average lease terms and discount rates are as follows:
Weighted-average remaining lease terms (in years):
Operating leases
Weighted-average discount rates:
Supplemental cash flow information related to leases is as follows:
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:
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 $1.2 million and $0.6 million for the three months ended October 31, 2025 and 2024, respectively.
Note 12 - Cash, cash equivalents, and 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 60% controlling financial interest and contributed assets consisting of a building and equipment. The JV is a limited liability company named Perma-Pipe Gulf Arabia Industry LLC and is a closed joint stock company established under the laws of the Kingdom of Saudi Arabia. The JV's capital is comprised of ordinary shares with 60% owned by the Company and the remaining 40% owned by GIG. This collaborative business arrangement results in expanding the Company's market presence in Saudi Arabia, Kuwait, and Bahrain. The primary business activities of the JV include the manufacture and sale of pre-insulated piping systems and pipe coating services.
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 $44.8 million and $21.4 million, respectively, and $39.1 million and $22.1 million, respectively, as of January 31, 2025.
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 $1.6 million and $1.0 million for the three months ended October 31, 2025 and 2024, respectively. Net income attributable to GIG was $2.9 and $2.3 million for the nine months ended October 31, 2025 and 2024, respectively. The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of operations.
The non-controlling interest as measured at fair value was $14.2 million and $11.0 million at October 31, 2025 and January 31, 2025, respectively. The change in non-controlling interest consists of $2.9 million in current year net income attributable to non-controlling interest, and approximately $0.4 million as an adjustment to the carrying value of the redeemable non-controlling interest pertaining to the business arrangement. In addition, there were no dividends or any other form of distributions from non-controlling interest for the periods ended October 31, 2025 and January 31, 2025.
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)
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.
Change favorable (unfavorable)
Amount
Percent of Net Sales
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 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 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 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.
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.
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.
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
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.
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:
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.
PART II OTHER INFORMATION
Item 5.
Other Information
During the three months ended October 31, 2025, none 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).
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
(2) Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Section 1350 Certifications (Chief Executive Officer and Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
101.INS
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
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.
Date:
By: /s/ Saleh N. Sagr
Saleh N. Sagr
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Matthew E. Lewicki
Matthew E. Lewicki
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)