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 April 30, 2026
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)
(281) 941-2445
(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 June 8, 2026, there were 8,125,713 shares of the registrant's common stock outstanding.
For the fiscal quarter ended April 30, 2026
TABLE OF CONTENTS
Item
Page
Part I
FINANCIAL INFORMATION
2
Item 1.
Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended April 30, 2026 and 2025
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended April 30, 2026 and 2025
3
Condensed Consolidated Balance Sheets as of April 30, 2026 (Unaudited) and January 31, 2026
4
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended April 30, 2026 and 2025
5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended April 30, 2026 and 2025
6
Notes to Condensed Consolidated Financial Statements (Unaudited)
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
26
Item 4.
Controls and Procedures
35
Part II
OTHER INFORMATION
Item 6.
Exhibits
37
SIGNATURES
38
PART I FINANCIAL INFORMATION
PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended April 30,
2026
2025
Net sales
Cost of sales
Gross profit
Operating expenses
General and administrative expenses
Selling expenses
Total operating expenses
Income from operations
Interest expense, net
Other expense, net
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 condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax
Comprehensive income
Less: Comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to common stock
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, 2026
January 31, 2026
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Trade accounts receivable, less allowance for credit losses of $1,564 at April 30, 2026 and $1,571 at January 31, 2026
Inventories
Prepaid expenses
Unbilled accounts receivable
Costs and estimated earnings in excess of billings on uncompleted contracts
Other current assets
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
Short-term borrowings and 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
Long-term finance obligations
Deferred compensation liabilities
Deferred tax liabilities
Operating lease liability long-term
Other long-term liabilities
Total long-term liabilities
Commitments and contingencies (See Part II, Item 1)
Non-controlling interest
Stockholders' equity
Common stock, $.01 par value, authorized 50,000 shares; 8,123 issued and outstanding at April 30, 2026 and 8,122 at January 31, 2026
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share data)
Common Stock
Additional Paid-in Capital
Retained Earnings
Total Stockholders' Equity
Total stockholders' equity at January 31, 2026
Stock-based compensation expense
Amount attributable to non-controlling interest
Foreign currency translation adjustment
Total stockholders' equity at April 30, 2026
Total stockholders' equity at January 31, 2025
Total stockholders' equity at April 30, 2025
Shares
Opening balances at beginning of year (February 1)
Shares issued, net of shares used for tax withholding
Closing balances at period end (April 30)
CONDENSED 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
Non-cash interest expense
Provision on uncollectible accounts
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
Debt issuance costs
Change in drafts payable
Proceeds from other financing activities
Payments of other financing activities
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands, except per share data, or unless otherwise specified)
Note 1 - Basis of presentation
The interim Condensed Consolidated Financial Statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", the "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 Condensed Consolidated Balance Sheet as of January 31, 2026 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 2026 and 2025 are for the fiscal year ending January 31, 2027 and for the fiscal year ended January 31, 2026, respectively. Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on previously reported totals.
Amounts reported in thousands within this Quarterly Report on Form 10-Q are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in thousands due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.
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. Additionally, the CODM regularly reviews asset information by our reporting segment in a manner that is consistent with the presentation on the Company's accompanying Condensed Consolidated Balance Sheets.
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
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 North America, collateral is not generally required. In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt, Qatar 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.
As of April 30, 2026, no individual customer accounted for more than 10% of the Company's accounts receivable. For the three months ended April 30, 2026, one customer represented approximately 14% of total net sales. The Company monitors the creditworthiness of this customer on an ongoing basis. As of April 30, 2026, no allowance for credit losses was deemed necessary as the Company expects to collect the full carrying value of the outstanding balance due from this customer. As of April 30, 2025, and for the three months then ended, no single customer accounted for more than 10% of total accounts receivable or net sales.
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 systems and coating revenue over time as the manufacturing process progresses if 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 at a point in time when control of the promised goods is transferred to the customer, generally upon shipment, or as services are performed (ASC 606-10-25-30).
A breakdown of the Company's revenues by revenue class for the three months ended April 30, 2026 and 2025 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 is used by certain operating entities to measure revenue by the costs incurred to date relative to the total estimated costs to satisfy the performance obligation. Generally, these contracts are considered a single performance obligation satisfied over time. Due to the custom nature of the goods and services, the Company believes this method is the most faithful depiction of the transfer of goods and services to the customer as it measures progress toward satisfaction of the performance obligation. Costs include all material, labor, and direct costs incurred to satisfy the contract. Revenue recognition begins when project costs are initially incurred. Estimates of total contract costs are reviewed and revised periodically as work progresses.
The output method is used by all other operating entities to measure revenue based on the direct measurement of the value of goods or services transferred to date relative to the total goods or services promised under the contract. Due to the requirements of certain customers, these contracts often require formal inspection protocols or specific export documentation for units produced. Therefore, the Company believes the output method provides the most faithful depiction of the transfer of goods or services to the customer. Depending on the terms of the contract, revenue is recognized upon the transfer of control, which may occur when units are produced, inspected, and held by the Company at the customer’s request, or when units are produced, inspected, and shipped.
Contract assets and liabilities
Contract assets represent revenue recognized in excess of amounts billed for which the right to payment is conditional upon something other than the passage of time (such as the completion of additional performance milestones). Contract liabilities represent billings or payments received in excess of revenue recognized to date, reflecting the Company's obligation to transfer remaining goods or services to the customer.
Both customer billings and the satisfaction of performance obligations occur throughout the contract term, thus impacting the period-end balances of these accounts. Receivables are recorded separately when the Company’s right to consideration becomes unconditional, requiring only the passage of time before payment is due.
The following table shows the reconciliation of contract assets and contract liabilities:
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 April 30, 2026 will be billed and collected within one year. Substantially all of the $2.2 million contract liability balance at January 31, 2026 is expected to be recognized in revenue during the 2026 fiscal year.
The Company has recorded $31.4 million and $28.8 million of unbilled accounts receivable on the Condensed Consolidated Balance Sheets as of April 30, 2026 and January 31, 2026, respectively, from revenues generated by certain of its subsidiaries. In these instances, 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 the Company has an unconditional right to payment; however, 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 April 30, 2026 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 effective tax rates ("ETR") for the three months ended April 30, 2026 and 2025 were 34% and 21%, respectively. The change in the ETR is due to changes in 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 $1.4 million as of April 30, 2026 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 evaluated the provisions of the OBBBA and incorporated the initial impacts into its financial statements; however, the adoption of this legislation did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows.
Note 7 - Goodwill
All identifiable goodwill as of April 30, 2026 and January 31, 2026, 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 months ended April 30, 2026.
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 April 30, 2026, the Company had reserved a total of 20,465 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
Total stock-based compensation expense
Restricted stock
The following table summarizes the Company's restricted stock activity for the three months ended April 30, 2026:
Restricted Shares
Weighted Average Price (Per share)
Aggregate Intrinsic Value
Outstanding at January 31, 2026
Granted
Vested and issued
Outstanding at April 30, 2026
As of April 30, 2026, there was $1.2 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 2.0 years.
Note 9 - Earnings per share
Basic weighted average common shares outstanding
Dilutive effect of equity compensation plans
Weighted average common shares outstanding assuming full dilution
Note 10 - Debt
Debt consisted of the following:
Short-term debt
Revolving credit agreement - North America
Revolving credit agreement - United Arab Emirates
Revolving credit agreement - Egypt
Revolving credit agreement - Saudi Arabia
Current maturities of long-term debt
Loan payable to GIG
Total short-term debt
Long-term debt
Finance obligation - buildings and land
Mortgage note
Finance lease obligation
Unamortized debt issuance costs
Total long-term debt
Revolving lines - North America. On April 8, 2026, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, as borrower, the other loan parties thereto, and JPMorgan Chase Bank, N.A., as lender (the “Lender”). The Credit Agreement effectively replaced the Company’s previous credit facility (the "PNC Credit Facility") with PNC Bank, National Association ("PNC"). On April 9, 2026, the Company drew $15.3 million under the Credit Agreement to pay off the remaining $15.2 million outstanding balance under the PNC Credit Facility and to fund $0.1 million of cash collateral required for cash management and purchasing card solutions. As of January 31, 2026, the Company had borrowed an aggregate of $10.7 million at a rate of 7.8% and had $2.7 million available under the PNC Credit Facility.
The Credit Agreement provides for a senior secured asset-based revolving credit facility with aggregate revolving commitments of $18.0 million, including a sublimit of up to $1.5 million for letters of credit. The revolving credit facility matures on October 7, 2027, unless earlier terminated in accordance with its terms.
As of April 30, 2026, the outstanding balance under the Credit Agreement was $15.3 million with a weighted-average interest rate of 8.8% and there were no outstanding letters of credit under the sublimit. Borrowings under the Credit Agreement are limited to the lesser of the revolving commitment and a borrowing base calculated as (i) 80% of eligible North American accounts receivable, plus (ii) 25% of eligible North American inventory (valued at the lower of cost or market), in each case subject to customary eligibility criteria and reserves established by the Lender. As of April 30, 2026, the borrowing base calculation limited the maximum availability under the facility to an amount below the aggregate revolving commitment. As a result, $0.7 million has been classified as current debt as of April 30, 2026.
Loans under the Credit Agreement bear interest, at the Company’s election, at either (i) a rate based on the CB Floating Rate (as defined in the Credit Agreement) or (ii) an adjusted term SOFR rate, in each case plus an applicable margin determined by the Company’s leverage ratio. The applicable margin for CB Floating Rate loans ranges from 1.50% to 2.00%, and for SOFR loans ranges from 2.50% to 3.00%. In addition, the Company is required to pay a commitment fee ranging from 0.20% to 0.30% on the unused portion of the revolving commitment.
The Company maintains a letter of credit facility with a financial institution in the U.A.E. totaling 100.0 million AED (approximately $27.2 million at April 30, 2026), portions of which expire in July 2026, and a portion of which expired in April 2026. The portion that expired in April 2026 remains in effect under the same terms. The Company is in the process of renewing this credit arrangement with substantially the same terms and conditions and is in regular communication with the bank throughout this process ensuring the facility continues without interruption or penalty. The facility is non-interest bearing; however, the Company incurs a commission ranging from 0.8% to 1.0% per annum on the face value of issued instruments and is required to maintain cash collateral (margins) ranging from 10% to 15% depending on the type of instrument utilized. As of April 30, 2026, the Company had outstanding guarantees under this facility of 39.3 million AED (approximately $10.7 million). The remaining available balance under the facility was approximately $16.5 million as of April 30, 2026.
In March 2022, the Company’s Saudi Arabian subsidiary entered into a credit arrangement with a financial institution in Saudi Arabia for a revolving line totaling 37.0 million Saudi Riyals (“SAR”) (approximately $9.9 million at April 30, 2026). The credit arrangement provides project-based financing at interest rates competitive in Saudi Arabia and is secured by certain assets of the subsidiary including accounts receivable. While the credit arrangement had a scheduled expiration date of April 27, 2026, the subsidiary continues to access the facility under the same terms while formal documentation of a renewal is being finalized with the lender.
As of April 30, 2026, the facility bore interest at a rate of approximately 8.5%. As of April 30, 2026 and January 31, 2026, the Company had outstanding borrowings of 8.3 million SAR (approximately $2.2 million) and 10.9 million SAR (approximately $2.9 million), respectively, which are included in “Short-term borrowings and current maturities of long-term debt” on the Condensed Consolidated Balance Sheets. Additionally, as of April 30, 2026 and January 31, 2026, the Company had issued guarantees totaling 0.4 million SAR (approximately $0.1 million) and 6.3 million SAR (approximately $1.7 million), respectively. After accounting for outstanding borrowings and issued guarantees, the Company had unused availability of approximately $7.6 million and $5.3 million under the credit facility as of April 30, 2026 and January 31, 2026, respectively.
Foreign credit facilities - overall
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 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 April 30, 2026 and January 31, 2026, the amount of foreign subsidiary debt guaranteed by the Company was approximately $8.5 million and $8.4 million, respectively.
The Company was in compliance with respect to the covenants under the foreign credit arrangements as of April 30, 2026. Certain of these arrangements are subject to periodic renewal; while such renewals are being processed, the Company remains in regular communication with the lenders, and the arrangements have historically continued without interruption or penalty. On April 30, 2026, interest rates were based on (i) the EIBOR plus 3.5% per annum for the U.A.E. credit arrangements, which have minimum interest rates ranging from 4.5% to 8.0% per annum; (ii) interest rates ranging from 15.0% to 20.8% for the Egypt credit arrangements; and (iii) an interest rate of 8.5% for the Saudi Arabia credit arrangement. Based on these base rates, as of April 30, 2026, the Company's interest rates ranged from 7.3% to 20.8%, with a weighted average rate of 7.9%, and the Company had facility limits totaling $57.2 million under these credit arrangements. As of April 30, 2026, $19.5 million of the facility limits were utilized to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of April 30, 2026, the Company had borrowed $5.7 million and had an additional $32.0 million of borrowing availability remaining under the foreign revolving credit arrangements. The foreign revolving lines balances were included as a component of "Short-term borrowings and current maturities of long-term debt" on the Condensed Consolidated Balance Sheets as of April 30, 2026 and January 31, 2026.
Loan Payable to GIG. In June 2023, in connection with the formation of a joint venture with Gulf Insulation Group (“GIG”), the Company assumed a promissory note with an aggregate principal amount of approximately $2.8 million, which matured on April 9, 2026. The note that expired in April 2026 remains in effect under the same terms as of April 30, 2026. Through the date of this filing, the Company and GIG are engaged in constructive discussions to reach an agreement on renewal or settlement of the promissory note. Because a definitive agreement has not been executed as of the balance sheet date, the Company did not possess a contractual, unconditional right to defer settlement of the obligation for at least twelve months following April 30, 2026. Accordingly, the full obligation is classified within “Short-term borrowings and current maturities of long-term debt” on the Condensed Consolidated Balance Sheets as of April 30, 2026.
Note 11 - Leases
The Company enters into lease agreements for real estate, including office space, production buildings, and land, as well as non-real estate assets such as heavy machinery, office equipment, and vehicles. Our leases are classified as either operating or finance leases at the commencement date. Operating leases consist of each of the above asset types, which have lease terms of 2 years to 30 years. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term on the Condensed Consolidated Balance Sheets. Finance leases consist primarily of heavy machinery with lease terms of 4 to 5 years. Finance leases are included in property, plant, and equipment, net, current maturities of long-term debt, and long-term debt, less current maturities on the Condensed Consolidated Balance Sheets. Our lease agreements may include options to extend or terminate the lease, as well as options to purchase the underlying asset. These options are factored into the lease term and the measurement of right-of-use ("ROU") assets and lease liabilities when it is reasonably certain that the Company will exercise them. These decisions are based on an assessment of economic incentives, such as the strategic importance of the underlying asset to our regional operations and the expected fair market value of the assets at the end of the lease term.
As most of our leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate ("IBR") to determine the present value of lease payments at lease commencement. The IBR is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. In determining the ROU asset and corresponding lease liability, we evaluate whether a contract contains a lease by assessing if we have the right to control the use of an identified asset for a period of time in exchange for consideration. For arrangements involving multiple components, we have elected the practical expedient to combine lease and non-lease components (such as common area maintenance and utility charges) into a single lease component for all underlying asset classes.
Certain of our real estate lease agreements include variable lease payments based on inflation rates, which are contractually capped. These payments are not included in the measurement of the lease liability and are recognized in the period in which the obligation is incurred. Our lease agreements do not typically include material residual value guarantees or restrictive covenants; where present, they are not expected to result in material payments. Furthermore, the Company has elected the short-term lease exception for all asset classes, whereby we do not recognize ROU assets or lease liabilities for leases with an initial term of 12 months or less that do not include a purchase option we are reasonably certain to exercise.
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
Interest expense
Operating lease costs
Cost of sales, SG&A expenses
Short-term lease costs (1)
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 lease 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):
Finance leases
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:
Finance leases liabilities
Operating leases liabilities
Maturities of lease liabilities as of April 30, 2026, are as follows:
Fiscal 2026 (remainder of fiscal year)
Fiscal 2027
Fiscal 2028
Fiscal 2029
Fiscal 2030
Fiscal 2031
Thereafter
Total lease payments
Less: amount representing interest
Total lease liabilities at April 30, 2026
Rent expense attributable to operating leases was $1.5 million and $0.9 million for the three months ended April 30, 2026 and 2025, respectively.
Note 12 - Cash, cash equivalents, and restricted cash
Restricted cash primarily relates to fixed deposits utilized as security deposits and financial guarantees.
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 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 for the fiscal quarter 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 interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted 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 Condensed Consolidated Financial Statements. As of April 30, 2026, the carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $42.3 million and $10.3 million, respectively, and $44.2 million and $18.6 million, respectively, as of January 31, 2026.
The Company adjusts net income in the Condensed 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 Condensed 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 Condensed Consolidated Balance Sheets.
Net income attributable to GIG was $0.8 million and $0.9 million for the three months ended April 30, 2026 and 2025, 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 Condensed Consolidated Statements of Operations.
The following table summarizes 2026 activity for the redeemable non-controlling interest:
Redeemable non-controlling interest balance at January 31, 2026
Net income attributable to redeemable non-controlling interest
Fair value adjustment (accretion to redemption value)
Distributions to redeemable non-controlling interest holders
Redeemable non-controlling interest balance at April 30, 2026
Note 16 - Accumulated other comprehensive loss
Accumulated other comprehensive loss represents the change in equity from non-owner transactions and consists of foreign currency translation.
Foreign Currency Translation Adjustments
Total Accumulated Other Comprehensive Loss
Balance as of January 31, 2026
Currency translation adjustments
Tax effect of currency translation adjustments
Balance as of April 30, 2026
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 2026 and 2025 are for the fiscal year ending January 31, 2027 and the fiscal year ended January 31, 2026, respectively.
This MD&A should be read in conjunction with the Company’s Condensed 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.
CONDENSED 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 $14.6 million and $16.7 million in the three months ended April 30, 2026 and 2025, respectively. The decrease of $2.1 million was primarily attributable to product mix across various jurisdictions, particularly in Canada due to seasonal factors, together with start-up and ramp-up costs associated with the Company's new Ohio manufacturing facility as well as ongoing project ramp-up costs in Qatar.
General and administrative expenses:
General and administrative expenses were $8.8 million and $7.7 million in the three months ended April 30, 2026 and 2025, respectively. The increase of $1.1 million was mainly due to higher payroll expenses and professional fees relating to Sarbanes-Oxley 404 compliance in connection with our transition from a non-accelerated filer to an accelerated filer.
Selling expenses:
Interest expense:
Net interest expense was $0.6 million and $0.4 million in the three months ended April 30, 2026 and 2025, respectively. The increase of $0.2 was due to an increase in debt.
Income tax expense:
The Company's ETR was 34% and 21% in the three months ended April 30, 2026 and 2025, respectively. The higher ETR for the three months ended April 30, 2026 is due to the mix of income and loss in various jurisdictions.
For further information, see Note 6 - Income taxes, in the Notes to Condensed Consolidated Financial Statements.
Net income attributable to common stock:
Net income attributable to common stock was $1.8 million and $5.0 million in the three months ended April 30, 2026 and 2025, respectively. The decrease of $3.2 million was the result of the changes discussed above, net of amounts attributable to non-controlling interest.
Liquidity and capital resources
Cash and cash equivalents as of April 30, 2026, were $28.3 million, compared to $18.7 million as of January 31, 2026. As of April 30, 2026, $0.6 million of this total was held in the United States, and $27.7 million was held by the Company's foreign subsidiaries. The Company's working capital increased to $83.0 million as of April 30, 2026, from $66.9 million on January 31, 2026. This $16.1 million increase in working capital was primarily driven by a $16.4 million decrease in current liabilities, largely attributable to the reclassification of $11.1 million from current to long-term liabilities in connection with the new J.P. Morgan Chase Credit Agreement (as further described below). This increase was partially offset by a $14.8 million decrease in accounts receivable; however, the decrease in accounts receivable reflected improved collection activity during the quarter, driving the $9.6 million increase in cash and cash equivalents. Remaining changes in working capital components resulted from smaller, customary quarterly fluctuations.
Net cash provided by operating activities was $6.1 million and $0.7 million in the three months ended April 30, 2026 and 2025, respectively. The increase of $5.4 million was primarily attributable to favorable changes in operating assets and liabilities, partially offset by lower net income.
Net cash used in investing activities in the three months ended April 30, 2026 and 2025 was $1.3 million and $0.9 million, respectively. The increase of $0.4 million was primarily due to increases in the amount of capital expenditures during the year.
Net cash provided by financing activities in the three months ended April 30, 2026 and 2025 was $4.8 million and $3.2 million, respectively. Debt totaled $38.0 million and $32.5 million as of April 30, 2026 and January 31, 2026, respectively. See Note 10 - Debt, in the Notes to Condensed Consolidated Financial Statements for further discussion relating to this topic.
The Company believes it will have the ability to satisfy all working capital needs and any planned capital expenditures for the twelve months following the issuance of the Condensed Consolidated Financial Statements, based on its existing cash on hand, cash flows from operations, and available credit facilities.
Restricted cash was $3.5 million as of April 30, 2026 and $3.6 million January 31, 2026. This balance primarily relates to fixed deposits utilized as security deposits and financial guarantees.
Debt
Revolving lines - North America.
We assess going concern uncertainty on a quarterly basis to determine if we have sufficient cash and cash equivalents on hand, working capital and access to capital through financing agreements to operate for a period of at least one year from the date our consolidated financial statements are issued (the look-forward period). Our ability to continue as a going concern is dependent on many factors, including, among other things, our ability to comply with the covenants in our debt agreements, our ability to cure any defaults that may occur under our debt agreements, or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as principal payments come due. We can offer no assurances we will be able to successfully obtain financing.
A summary of our liquidity and relevant cash flows is presented above. We believe that our unrestricted cash, cash flows from operating activities, and availability under existing financing agreements are sufficient to meet future business requirements for the twelve months following the issuance of these Condensed Consolidated Financial Statements.
Accounts receivable:
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies are described in Item 7. MD&A and in the Notes to the Condensed Consolidated Financial Statements for the year ended January 31, 2026 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 Condensed 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 Condensed 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, the “Exchange Act”) as of April 30, 2026. 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 April 30, 2026, 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 at operating locations in the Middle East and North Africa (“MENA”), including not maintaining sufficient documentation to support an evaluation that controls over all 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 Condensed 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. These material weaknesses also resulted in immaterial corrected and uncorrected misstatements in the statement of cash flows and to stock based compensation expense, unbilled receivables, prepaid expenses and other current assets, operating lease liability short-term, other long-term assets, cost of sales, property, plant and equipment, net of accumulated depreciation, income taxes payable, deferred tax assets, income tax expense costs in excess of billings on uncompleted contracts, and billings in excess of costs and estimated earnings on uncompleted contracts as of and for the year ended January 31, 2026, and in the interim periods ended April 30, 2025, July 31, 2025, and October 31, 2025.
Additionally, each of these material weaknesses could result in a material misstatement of substantially all accounts and disclosures that would result in a material misstatement in the Company’s consolidated 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
While management, under the leadership of our CEO, has improved our internal control over financial reporting throughout the three months ended April 30, 2026, additional time and effort is required to fully complete the remediation activities. We continue to believe these actions will be effective in the remediation of the material weaknesses, but these activities currently remain ongoing.
Implemented a new consolidation and reporting software. In connection with this implementation, we updated the processes that constitute our internal control over financial reporting, as necessary, to accommodate related changes in our business processes, including the statement of cash flows and segregation of duties for manual consolidating journal entries;
In addition to the items noted above, our remediation plans related to our MENA locations include the following:
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 April 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, tax, product liability, and general liability claims. The Company accrues a liability for these matters when it is considered probable that future costs will be incurred, and the amount can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes with respect to any legal proceedings, and its experience in contesting, litigating, and settling other similar matters.
As of April 30, 2026, the Company had no material pending litigation.
Item 5.
Other Information
During the three months ended April 30, 2026, 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
32
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 Sagr
Saleh Sagr
President, Chief Executive Officer, and Director
(Principal Executive Officer)
By: /s/ Matthew Lewicki
Matthew Lewicki
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)