Perma-Pipe International Holdings, Inc. 10-Q

Item 1. Financial Statements PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Net sales $ 41,563 $ 45,690 $ 113,397 $ 110,489 Cost of sales 27,477 32,506 75,320 81,065 Gross profit 14,086 13,184 38,077 29,424 Operating expenses General and administrative expenses 7,330 5,674 19,457 16,417 Selling expenses 1,170 1,471 3,757 4,201 Total operating expenses 8,500 7,145 23,214 20,618 Income from operations 5,586 6,039 14,863 8,806 Interest expense 468 640 1,489 1,788 Other expense ( 50 ) ( 502 ) ( 156 ) ( 350 ) Income before income taxes 5,068 4,897 13,218 6,668 Income tax expense 1,615 1,533 3,692 3,257 Net income 3,453 3,364 9,526 3,411 Less: Net income attributable to non-controlling interest 962 1,429 2,303 1,577 Net income attributable to common stock $ 2,491 $ 1,935 $ 7,223 $ 1,834 Weighted average common shares outstanding Basic 7,981 7,955 7,947 7,996 Diluted 8,027 8,021 7,991 8,106 Earnings per share attributable to common stock Basic $ 0.31 $ 0.24 $ 0.91 $ 0.23 Diluted $ 0.31 $ 0.24 $ 0.90 $ 0.23 See accompanying notes to consolidated financial statements. 2 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) (Unaudited) Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Net income $ 3,453 $ 3,364 $ 9,526 $ 3,411 Other comprehensive income (loss) Foreign currency translation adjustments, net of tax ( 185 ) ( 2,035 ) ( 1,792 ) ( 2,133 ) Comprehensive income $ 3,268 $ 1,329 $ 7,734 $ 1,278 Less: Comprehensive income attributable to non-controlling interests 962 1,429 2,303 1,577 Total comprehensive income (loss) attributable to common stock $ 2,306 $ ( 100 ) $ 5,431 $ ( 299 ) See accompanying notes to consolidated financial statements. 3 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) October 31, 2024 January 31, 2024 ASSETS Current assets Cash and cash equivalents $ 13,307 $ 5,845 Restricted cash 1,419 1,395 Trade accounts receivable, less allowance for credit losses of $ 704 at October 31, 2024 and $ 699 at January 31, 2024 39,904 46,646 Inventories 15,957 15,541 Prepaid expenses and other current assets 11,635 9,697 Unbilled accounts receivable 19,684 16,597 Costs and estimated earnings in excess of billings on uncompleted contracts 2,499 3,097 Total current assets 104,405 98,818 Long-term assets Property, plant and equipment, net of accumulated depreciation 35,652 37,620 Operating lease right-of-use asset 7,403 6,467 Deferred tax assets 7,221 7,919 Goodwill 2,141 2,222 Other long-term assets 3,927 2,665 Total long-term assets 56,344 56,893 Total assets $ 160,749 $ 155,711 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade accounts payable $ 20,788 $ 25,323 Accrued compensation and payroll taxes 1,280 1,214 Commissions and management incentives payable 5,262 4,523 Revolving line - North America 7,766 5,519 Current maturities of long-term debt 3,682 4,071 Customers' deposits 3,243 4,264 Operating lease liability short-term 1,061 914 Other accrued liabilities 6,634 9,039 Billings in excess of costs and estimated earnings on uncompleted contracts 1,350 495 Income taxes payable 2,728 2,380 Total current liabilities 53,794 57,742 Long-term liabilities Long-term debt, less current maturities 8,855 9,035 Long-term finance obligation 3,883 4,229 Deferred compensation liabilities 1,407 1,212 Deferred tax liabilities 1,325 1,217 Operating lease liability long-term 7,104 6,270 Loan payable to GIG 2,753 2,753 Other long-term liabilities 1,465 1,275 Total long-term liabilities 26,792 25,991 Non-controlling interest 8,952 6,266 Commitments and contingencies Stockholders' equity Common stock, $ .01 par value, authorized 50,000 shares; 7,983 issued and outstanding at October 31, 2024 and 8,017 at January 31, 2024 80 80 Additional paid-in capital 60,130 60,063 Treasury stock, no shares at October 31, 2024 and 112 shares at January 31, 2024 - ( 968 ) Retained earnings 18,344 12,088 Accumulated other comprehensive loss ( 7,343 ) ( 5,551 ) Total stockholders' equity 71,211 65,712 Total liabilities and stockholders' equity $ 160,749 $ 155,711 See accompanying notes to consolidated financial statements. 4 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands, except share data) (Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity Total stockholders' equity at January 31, 2024 $ 80 $ 60,063 $ 12,088 $ ( 968 ) $ ( 5,551 ) $ 65,712 Net income attributable to common stock - - 1,443 - - 1,443 Common stock issued under stock plans, net of shares used for tax withholding - 8 - - - 8 Stock-based compensation expense - 220 - - - 220 Amount attributable to non-controlling interest - ( 421 ) - - - ( 421 ) Foreign currency translation adjustment - - - - ( 1,415 ) ( 1,415 ) Total stockholders' equity at April 30, 2024 $ 80 $ 59,870 $ 13,531 $ ( 968 ) $ ( 6,966 ) $ 65,547 Net income attributable to common stock - - 3,289 - - 3,289 Common stock issued under stock plans, net of shares used for tax withholding 1 ( 210 ) - - - ( 209 ) Stock-based compensation expense - 177 - - - 177 Amount attributable to non-controlling interest - ( 29 ) - - - ( 29 ) Foreign currency translation adjustment - - - - ( 192 ) ( 192 ) Total stockholders' equity at July 31, 2024 $ 81 $ 59,808 $ 16,820 $ ( 968 ) $ ( 7,158 ) $ 68,583 Net income attributable to common stock - - 2,491 - - 2,491 Common stock issued under stock plans, net of shares used for tax withholding - 23 - - - 23 Retirement of treasury stock ( 1 ) - ( 967 ) 968 - - Stock-based compensation expense - 232 - - - 232 Amount attributable to non-controlling interest - 67 - - - 67 Foreign currency translation adjustment - - - - ( 185 ) ( 185 ) Total stockholders' equity at October 31, 2024 $ 80 $ 60,130 $ 18,344 $ - $ ( 7,343 ) $ 71,211 Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stockholders' Equity Total stockholders' equity at January 31, 2023 $ 80 $ 62,562 $ 1,617 $ ( 26 ) $ ( 6,449 ) $ 57,784 Net loss attributable to common stock - - ( 1,123 ) - - ( 1,123 ) Stock-based compensation expense - 229 - - - 229 Foreign currency translation adjustment - - - - ( 437 ) ( 437 ) Total stockholders' equity at April 30, 2023 $ 80 $ 62,791 $ 494 $ ( 26 ) $ ( 6,886 ) $ 56,453 Net income attributable to common stock - - 1,022 - - 1,022 Common stock issued under stock plans, net of shares used for tax withholding - ( 274 ) - - - ( 274 ) Repurchase of common stock 1 - - ( 312 ) - ( 311 ) Stock-based compensation expense - 245 - - - 245 Foreign currency translation adjustment - - - - 339 339 Total stockholders' equity at July 31, 2023 $ 81 $ 62,762 $ 1,516 $ ( 338 ) $ ( 6,547 ) $ 57,474 Net income attributable to common stock - - 1,935 - - 1,935 Repurchase of common stock ( 1 ) - - ( 629 ) - ( 630 ) Stock-based compensation expense - 229 - - - 229 Foreign currency translation adjustment - - - - ( 2,035 ) ( 2,035 ) Total stockholders' equity at October 31, 2023 $ 80 $ 62,991 $ 3,451 $ ( 967 ) $ ( 8,582 ) $ 56,973 Shares 2024 2023 Balances at beginning of year 8,016,781 8,007,002 Treasury stock retired ( 112,015 ) - Shares issued, net of shares used for tax withholding 77,802 66,726 Prior period adjustments - ( 56,947 ) Balances at period end 7,982,568 8,016,781 See accompanying notes to consolidated financial statements. 5 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended October 31, 2024 2023 Operating activities Net income $ 9,526 $ 3,411 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,687 2,774 Deferred tax expense 1,019 145 Stock-based compensation expense 629 686 Provision on uncollectible accounts 83 ( 37 ) Loss (gain) from disposal of fixed assets 130 ( 13 ) Changes in operating assets and liabilities Accounts receivable 6,047 ( 5,377 ) Inventories ( 970 ) ( 1,426 ) Costs and estimated earnings in excess of billings on uncompleted contracts 1,452 ( 175 ) Accounts payable ( 3,954 ) 9,346 Accrued compensation and payroll taxes ( 124 ) 1,167 Customers' deposits ( 894 ) 1,272 Income taxes payable ( 904 ) 327 Prepaid expenses and other current assets ( 952 ) 205 Unbilled accounts receivable ( 3,708 ) ( 2,776 ) Other assets and liabilities ( 2,161 ) ( 1,912 ) Net cash provided by operating activities 7,906 7,617 Investing activities Capital expenditures ( 1,555 ) ( 8,204 ) Proceeds from insurance recovery for property and equipment - 5 Net cash used in investing activities ( 1,555 ) ( 8,199 ) Financing activities Proceeds from revolving credit lines 57,637 120,467 Payments of debt on revolving credit lines ( 55,765 ) ( 117,419 ) Payments of principal on finance obligation ( 138 ) ( 84 ) Payments of other debt ( 174 ) ( 179 ) Decrease in drafts payable ( 19 ) ( 199 ) Payments on finance lease obligations ( 23 ) ( 176 ) Repurchase of common stock - ( 941 ) Stock options exercised and taxes paid related to restricted shares vested ( 178 ) ( 273 ) Net cash provided by financing activities 1,340 1,196 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 205 ) 1 Net increase in cash, cash equivalents and restricted cash 7,486 615 Cash, cash equivalents and restricted cash - beginning of period 7,240 6,793 Cash, cash equivalents and restricted cash - end of period $ 14,726 $ 7,408 Supplemental cash flow information Cash interest paid $ 1,456 $ 1,754 Cash income taxes paid 3,297 2,546 Fixed assets acquired from non affiliates - non-cash $ - $ 4,357 See accompanying notes to consolidated financial statements. 6 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS October 31, 2024 (In thousands, except per share data, or unless otherwise specified) (Unaudited) Note 1 - Basis of presentation The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", or "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, 2024 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 2024 and 2023 are for the fiscal year ending January 31, 2025 and for the fiscal year ended January 31, 2024 , respectively. Revision of Previously Issued Financial Statements During the six months ended July 31, 2024, the Company identified and corrected an error relating to a subsidiary in the Middle East incorrectly recording a duplicate invoice related to the purchase of property, plant, and equipment ("PP&E"), resulting in an overstatement of PP&E and trade accounts payable of $ 1.4 million on the unaudited consolidated balance sheet as of April 30, 2024, and a corresponding overstatement of net cash provided by operating activities and net cash used in investing activities in the consolidated statement of cash flows during the three months ended April 30, 2024. The Company determined that the error was not material to the unaudited consolidated financial statements in its Quarterly Report on Form 10 -Q for the three months ended April 30, 2024. However, in order to correctly present the unaudited consolidated financial statements, management will revise the unaudited consolidated financial statements as of and for the three months ended April 30, 2024, the next time such unaudited consolidated financial statements are filed which will be in connection with the issuance of the Quarterly Report on Form 10 -Q for the three months ended April 30, 2025. The following tables summarize the impact of this correction as of and for the periods presented: April 30, 2024 Consolidated Balance Sheet As Reported Adjustment As Revised Property, plant and equipment, net of accumulated depreciation $ 38,211 $ ( 1,423 ) $ 36,788 Total assets $ 157,163 $ ( 1,423 ) $ 155,740 Trade accounts payable $ 24,672 ( 1,423 ) $ 23,249 Total current liabilities $ 59,410 $ ( 1,423 ) $ 57,987 April 30, 2024 Consolidated Statement of Cash Flows As Reported Adjustment As Revised Operating activities Accounts payable ( 268 ) ( 1,423 ) ( 1,691 ) Net cash provided by operating activities $ 1,350 $ ( 1,423 ) $ ( 73 ) Investing activities Capital expenditures $ ( 2,012 ) $ 1,423 $ ( 589 ) Net cash used in investing activities $ ( 2,012 ) $ 1,423 $ ( 589 ) Note 2 - Business segment reporting The Company is engaged in the manufacture and sale of products in one reportable segment: Piping Systems. The Company engineers, manufactures and sells pre-insulated specialty piping systems and leak detection systems. Pre-insulated specialty piping systems include: (i) insulated and jacketed district heating and cooling piping systems for efficient energy distribution from central energy plants to multiple locations, (ii) primary and secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products, (iii) the coating and/or insulation of oil and gas gathering and transmission pipelines, and (iv) liquid and powder based anti-corrosion coatings applied both to the external and internal surfaces of steel pipe, including shapes like bends, reducers, tees, and other spools/fittings used in pipelines for the transportation of oil and gas products and potable water. The Company's leak detection systems are sold with its piping systems or on a stand-alone basis to monitor areas where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard, impair essential services or damage equipment or property. 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 allowance for credit losses is based on specifically identified amounts in customers' accounts, where future collectability is deemed uncertain. Management may exercise its judgment in adjusting the provision as a consequence of known items, such as current economic factors and credit trends. 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. 7 Table of Contents In 2015, the Company completed a project in the Middle East with billings in the aggregate amount of approximately $ 41.9 million. The system has not yet been commissioned by the customer. Nevertheless, the Company has received approximately $ 40.1 million as of October 31, 2024 , with a remaining balance due in the amount of $ 1.8 million, all of which pertains to retention clauses within the agreements with the Company's customer, and which become payable by the customer when this project is fully tested and commissioned. Of this amount, $ 1.3 million is classified in other long-term assets on the Company's consolidated balance sheets. The Company has been actively involved in ongoing efforts to collect this outstanding balance. The Company continues to engage with the customer to ensure full payment of the open balances, and during the nine months ended October 31, 2024 , and at various times throughout 2023, the Company received partial payments to settle $ 0.3 million and $ 0.6 million, respectively, of the customer's outstanding balances. Further, the Company has been engaged by the customer to perform additional work in 2024 under customary trade terms that support the continued cooperation between the Company and the customer. As a result, the Company did not reserve any allowance against the remaining outstanding balances as of October 31, 2024 . However, if the Company's efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts. For the three months ended October 31, 2024 , no individual customer accounted for more than 10% of the Company's consolidated net sales, and during the same period in 2023, one customer accounted for greater than 10% of the Company's consolidated net sales. For the nine months ended October 31, 2024 and 2023 , no individual customer accounted for more than 10% of the Company's consolidated net sales. As of October 31, 2024 and January 31, 2024 , no individual customer accounted for more than 10% of the Company's accounts receivable, and one customer accounted for more than 10% of the Company's accounts receivable, respectively. 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 ) Systems and Coating - which include all bundled products in which the Company engineers, and manufactures pre-insulated specialty piping systems mainly relating to the district heating and cooling and oil & gas markets. 2 ) Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract. In accordance with ASC 606 - 10 - 25 - 27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exist: 1 ) the customer owns the material that is being coated, so the customer controls the asset and thus the work-in-process; or 2 ) the customer controls the work-in-process due to the custom nature of the pre-insulated, fabricated system being manufactured, which has no alternative future use, and there is a right to payment for work performed to date plus profit margin. Products revenue is recognized when goods are shipped or services are performed (ASC 606 - 10 - 25 - 30 ). A breakdown of the Company's revenues by revenue class for the three and nine months ended October 31, 2024 and 2023 are as follows: Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Sales % of Total Sales % of Total Sales % of Total Sales % of Total Products $ 3,622 8 % $ 2,553 5 % $ 9,670 8 % $ 7,541 7 % Specialty Piping Systems and Coating Revenue recognized under input method 12,268 30 % 18,641 41 % 35,020 31 % 41,779 38 % Revenue recognized under output method 25,673 62 % 24,496 54 % 68,707 61 % 61,169 55 % Total $ 41,563 100 % $ 45,690 100 % $ 113,397 100 % $ 110,489 100 % 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. 8 Table of Contents The output method as noted in ASC 606 - 10 - 55 - 17 is used by all other operating entities to measure revenue by the direct measurement of the outputs produced relative to the remaining goods promised under the contract. Due to the types of end customers, generally these contracts require formal inspection protocols or specific export documentation for units produced, or produced and shipped, therefore, the output method is the most faithful depiction of the Company’s performance under the contract. Depending on the conditions of the contract, revenue may be recognized based on units produced, inspected and held by the Company prior to shipment or on units produced, inspected and shipped. Contract assets and liabilities Contract assets represent revenue recognized in excess of amounts billed for work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Contract liabilities represent billings in excess of costs for work in progress for which the Company has a valid contract and an enforceable right to payment for work completed. Both customer billings and the satisfaction (or partial satisfaction) of the performance obligation(s) occur throughout the manufacturing process and impact the period end balances in these accounts. In addition, contract assets include receivables or amounts that are billable beyond the passage of time. The following table shows the reconciliation of costs in excess of billings and billings in excess of costs: October 31, 2024 January 31, 2024 Costs incurred on uncompleted contracts $ 15,742 $ 21,912 Estimated earnings 11,766 11,270 Earned revenue 27,508 33,182 Less billings to date 26,359 30,580 Costs in excess of billings, net $ 1,149 $ 2,602 Balance sheet classification Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts $ 2,499 $ 3,097 Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts ( 1,350 ) ( 495 ) Costs in excess of billings, net $ 1,149 $ 2,602 The Company anticipates that substantially all costs incurred on uncompleted contracts as of October 31, 2024 will be billed and collected within one year . Unbilled accounts receivable The Company has recorded $ 19.7 million and $ 16.6 million of unbilled accounts receivable on the consolidated balance sheet s as of October 31, 2024 and January 31, 2024 , 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, 2024 will be billed within one year. 9 Table of Contents 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. Inventories consisted of the following: October 31, 2024 January 31, 2024 Raw materials $ 15,033 $ 13,787 Work in process 481 611 Finished goods 1,264 2,022 Subtotal 16,778 16,420 Less allowance 821 879 Inventories $ 15,957 $ 15,541 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. 10 Table of Contents 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, 2024 and 2023 were 32 % and 31 % , respectively. The Company's ETR was 28 % and 49 % for the nine months ended October 31, 2024 and 2023 , respectively. The change in the ETR is due to the ability to recognize tax benefits on losses in the United States in the current year, whereas the prior year had a full valuation allowance and changes 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 $ 0.8 million as of October 31, 2024 related to these taxes. Note 7 - Goodwill All identifiable goodwill as of October 31, 2024 and January 31, 2024 , 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 more likely than not that the fair value of the reporting unit did not exceed its carrying value, resulting in an impairment. The following table provides a reconciliation of changes in the carrying amount of goodwill: January 31, 2024 Foreign exchange change effect October 31, 2024 Goodwill $ 2,222 $ ( 81 ) $ 2,141 There were no triggering events identified during the three and nine months ended October 31, 2024 . 11 Table of Contents 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, 2024 , the Company had reserved a total 196,276 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. Stock-based compensation expense The Company has granted stock-based compensation awards to eligible employees, officers or independent directors. The Company recognized the following stock-based compensation expense for the periods presented: Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Restricted stock-based compensation expense $ 232 $ 227 $ 629 $ 686 Stock options The Company did not grant any stock options during the three or nine months ended October 31, 2024 . The following table summarizes the Company's stock option activity: Options Weighted Average Exercise Price (Per share) Weighted Average Remaining Contractual Term (In years) Aggregate Intrinsic Value Outstanding at January 31, 2024 22 $ 11.15 0.7 $ 6 Exercised ( 5 ) 6.89 - 21 Expired or forfeited ( 17 ) 12.41 - - Outstanding and exercisable at October 31, 2024 - $ 6.85 1.1 $ 4 There was no vesting, expiration or forfeiture of previously unvested stock options during the nine months ended October 31, 2024 . In addition , there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options. 12 Table of Contents Restricted stock The following table summarizes the Company's restricted stock activity for the nine months ended October 31, 2024 : Restricted Shares Weighted Average Price (Per share) Aggregate Intrinsic Value Outstanding at January 31, 2024 222 $ 9.33 $ 2,078 Granted 108 8.81 Vested and issued ( 73 ) 9.36 Forfeited or retired for taxes ( 27 ) 10.29 Outstanding at October 31, 2024 230 $ 9.05 $ 2,080 As of October 31, 2024 , there was $ 1.3 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 1.9 years . Note 9 - Earnings per share Three Months Ended October 31, Nine Months Ended October 31, 2024 2023 2024 2023 Basic weighted average common shares outstanding at October 31, 2024 7,981 7,955 7,947 7,996 Dilutive effect of equity compensation plans 46 66 44 110 Weighted average common shares outstanding assuming full dilution 8,027 8,021 7,991 8,106 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 - 122 2 18 Stock options and restricted stock with exercise prices or grant date prices below the average market prices 46 66 44 170 Net income attributable to common stock $ 2,491 $ 1,935 $ 7,223 $ 1,834 Earnings per share attributable to common stock Basic $ 0.31 $ 0.24 $ 0.91 $ 0.23 Diluted $ 0.31 $ 0.24 $ 0.90 $ 0.23 13 Table of Contents Note 10 - Debt Debt totaled $ 27.0 million and $ 25.7 million at October 31, 2024 and January 31, 2024 , respectively. 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, 2024 , the Company had borrowed an aggregate of $ 7.8 million at a rate of 9.5 % and had $ 3.5 million available under the Renewed Senior Credit Facility. As of January 31, 2024 , the Company had borrowed an aggregate of $ 5.5 million and had $ 4.0 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, 2024 . 14 Table of Contents Finance obligation - buildings and land. On April 14, 2021, the Company entered into a purchase and sale agreement, pursuant to which the Company sold its land and buildings in Lebanon, Tennessee (the "Property") for $ 10.4 million. The transaction generated net cash proceeds of $ 9.1 million. Concurrently with the sale, the Company paid off the approximately $ 0.9 million mortgage note on the Property to its lender. The Company used the remaining proceeds to repay its borrowings under the Senior Credit Facility, for strategic investments, and for general corporate needs. Concurrent with the sale of the Property, the Company entered into a fifteen -year lease agreement (the “Lease Agreement”), whereby the Company leases back the Property at an annual rental rate of approximately $ 0.8 million, subject to annual rent increases of 2.0 %. Under the Lease Agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option. In accordance with ASC 842, Leases , this transaction was recorded as a failed sale and leaseback as the present value of lease payments exceeded substantially the fair value of the underlying assets. The Company utilized an incremental borrowing rate of 8.0 % to determine the finance obligation to record for the amounts received and will continue to depreciate the assets. The current portion of the finance obligation of $ 0.2 million is recognized in current maturities of long-term debt and the long-term portion of $ 8.9 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of October 31, 2024 . The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term. 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. United Arab Emirates The Company has a revolving line for 8.0 million U.A.E. Dirhams (approximately $ 2.2 million at October 31, 2024 ) from a bank in the U.A.E. As of October 31, 2024 , the facility has an interest rate of approximately 7.7 % and expired in July 2024. The facility was subsequently renewed in November 2024 with substantially the same terms and conditions and expires in July 2025. The Company had borrowed an aggregate of $ 1.1 million as of October 31, 2024 and $ 0.2 million as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. As of October 31, 2024 and January 31, 2024 , the Company had unused borrowing availability of approximately $ 1.0 million and $ 1.9 million, respectively. The Company has a revolving line for 20.5 million U.A.E. Dirhams (approximately $ 5.6 million at October 31, 2024 ) from a bank in the U.A.E. As of October 31, 2024 , the facility has an interest rate of approximately 8.6 % and expired in August 2024. The facility was subsequently renewed in November 2024 with substantially the same terms and conditions, except for the revolving line, which decreased to 17.5 million U.A.E. Dirhams (approximately $ 4.8 million at October 31, 2024 ) and expires in August 2025. The reduction in the revolving line was due primarily to the removal of 2 million U.A.E. Dirhams (approximately $ 0.5 million) in connection with a capital expenditure component that is no longer applicable to the revolving credit facility and, to a lesser extent, 1 million U.A.E. Dirhams (approximately $ 0.3 million) due to a decrease in revolver capacity. The Company had borrowed an aggregate of $ 0.7 million as of October 31, 2024 and $ 0.1 million as of January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. The Company had unused borrowing availability of approximately $ 1.0 million as of October 31, 2024 and January 31, 2024 , respectively. Egypt In June 2021, and as renewed or amended subsequently thereafter, the Company's Egyptian subsidiary entered into a credit arrangement with a bank in Egypt for a revolving line of 100.0 million Egyptian Pounds (approximately $ 2.0 million at October 31, 2024 ). This credit arrangement is in the form of project financing, for which the line is secured by certain assets (such as accounts receivable) of the Company's Egyptian subsidiary. Among other covenants, the credit arrangement established a maximum leverage ratio allowable and restricted the Company's Egyptian subsidiary's ability to undertake any additional debt. As of October 31, 2024 , the facility has an interest rate of approximately 20.8 % and expired in November 2024. The Company has started the process to renew and extend this credit agreement and the credit facility has continued without interruption or penalty. As of October 31, 2024 , the Company had an immaterial amount outstanding with respect to this credit arrangement, and approximately $ 1.4 million outstanding at January 31, 2024 , which is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. Further, as of October 31, 2024 and January 31, 2024 , the Company had unused borrowing capacity of $ 2.0 million and $ 3.2 million, respectively. In December 2021, the Company entered into a credit arrangement for project financing with a bank in Egypt for 28.2 million Egyptian Pounds. As this project has progressed and the Company has made collections, the facility has decreased to a current amount of 2.1 million Egyptian Pounds (approximately $ 0.1 million at October 31, 2024 ). This credit arrangement is in the form of project financing at rates competitive in Egypt. The line is secured by the contract for a project being financed by the Company's Egyptian subsidiary. The facility has an interest rate of approximately 11.0 % and, as of November 2022, is no longer available for borrowings by the Company. The facility will expire in connection with final customer balance collections and the completion of the project. The Company had approximately $ 0.1 million outstanding as of October 31, 2024 and January 31, 2024 , respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets. 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, 2024 ). 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. The facility was renewed in May 2024 with substantially the same terms and conditions and expires in May 2025. As of October 31, 2024 , the facility has an interest rate of approximately 9.5 % . The Company had borrowed an aggregate of $ 1.3 million and $ 3.2 million as of October 31, 2024 and January 31, 2024 , 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, 2024 and January 31, 2024 , was $ 3.3 million and $ 6.1 million, respectively. 15 Table of Contents 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. The amount of foreign subsidiary debt guaranteed by the Company was approxim ately $ 1.1 million and $ 0.1 million at October 31, 2024 and January 31, 2024 , 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, 2024 , with the exception of an arrangement that has expired and has not yet been renewed. Although a certain arrangement has expired 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 arrangement has continued without interruption or penalty. On October 31, 2024 , 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, 2024 , the Company's interest rates ranged from 7.7 % to 20.8 %, with a weighted average rate of 10.6 %, and the Company had facility limits totaling $ 19.7 million under these credit arrangements. As of October 31, 2024 , $ 11.0 million o f availability was used to support letters of credit to guarantee amounts committed for inventory purchases and for performance guarantees. Additionally, as of October 31, 2024 , the Company had borrow ed $ 3.2 million and had an additional $ 8.3 million of borrowing remaining available 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, 2024 and January 31, 2024 . 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 16 ). I n 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. 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, 2024 , the remaining balance on the mortgage in Canada is approximately CAD 5.8 million (approximately $ 4.2 million at October 31, 2024 ). The interest rate is variable, and was 7.8 % at October 31, 2024 . 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, 2024 and January 31, 2024 , respectively. Note 11 - Leases The Company classifies its leases as either operating or finance leases, which are recorded on the Company's consolidated balance sheets. 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. 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. In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components. Additionally, most of the Company's leases do not provide an implicit rate, resulting in the Company using its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company excludes short-term leases having an initial term of 12 months or less in accordance with an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. Operating Leases. In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company built a facility. The initial annual payments were approximately 1.2 million U.A.E. Dirhams (approximatel y $ 0.3 million at October 31, 2024 ), inclusive of rent, escalation clauses, and other common charges contained in the agreement. The lease expires in August 2050. In March and December 2022, the Company served Notices of Termination to its lessor in connection with a lease of land and buildings in Fujairah in the U.A.E., for which the Company intended to relocate to a different facility in Abu Dhabi. Portions of the leased space were vacated in December 2022, and the Company expects to vacate the remaining space in December 2024. In connection with the Notices of Termination, the Company was required to pay an additional amount equal to three months' rent. This also resulted in adjustments to reduce the carrying balances attributable to short-term and long-term operating lease liabilities and operating lease right-of-use assets by $ 0.4 million, $ 6.0 million, and $ 5.5 million, respectively. The additional payment and the effect of these adjustments were recorded in prior periods, and did not impact the Company's consolidated financial statements for the year ended January 31, 2024 , or during the three and nine months ended October 31, 2024 . There were no other adjustments in connection with the Notices the Termination. Finance Leases. The Company has several lease agreements, with lease terms of one to thirty 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 the options. At October 31, 2024 , the Company had finance lease liabilities of $ 0.1 million included in current maturities of long-term debt and long-term debt less current maturities, and financial ROU assets of $ 0.3 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets. 16 Table of Contents Supplemental balance sheet information related to leases is as follows: Operating and Finance leases October 31, 2024 January 31, 2024 Finance leases assets: Property and Equipment - gross $ 935 $ 970 Accumulated depreciation and amortization ( 615 ) ( 536 ) Property and Equipment - net $ 320 $ 434 Finance lease liabilities: Finance lease liability short-term $ 33 $ 113 Finance lease liability long-term 53 - Total finance lease liabilities $ 86 $ 113 Operating lease assets: Operating lease ROU assets $ 7,403 $ 6,467 Operating lease liabilities: Operating lease liability short-term $ 1,061 $ 914 Operating lease liability long-term 7,104 6,270 Total operating lease liabilities $ 8,165 $ 7,184 Total lease costs consist of the following: Three Months Ended October 31, Nine Months Ended October 31, Lease costs Consolidated Statements of Operations Classification 2024 2023 2024 2023 Finance Lease Costs Amortization of ROU assets Cost of sales $ 25 $ 37 $ 100 $ 121 Interest on lease liabilities Interest expense 1 3 5 7 Operating lease costs Cost of sales, SG&A expenses 463 564 1,361 1,450 Short-term lease costs (1) Cost of sales, SG&A expenses 151 99 384 350 Sub-lease income SG&A expenses - ( 20 ) - ( 61 ) Total Lease costs $ 640 $ 683 $ 1,850 $ 1,867 ( 1 ) Includes variable lease costs, which are not material. 17 Table of Contents Supplemental cash flow information related to leases is as follows: Nine Months Ended October 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Financing cash outflows from finance leases $ 23 $ 176 Operating cash outflows from finance leases 5 7 Operating cash outflows from operating leases 1,690 1,399 ROU assets obtained in exchange for new lease obligations: Finance leases liabilities $ - $ 139 Operating leases liabilities $ 1,718 $ 3,615 Weighted-average lease terms and discount rates are as follows: October 31, 2024 Weighted-average remaining lease terms (in years): Finance leases 2.5 Operating leases 12.3 Weighted-average discount rates: Finance leases 6.4 % Operating leases 10.1 % Maturities of lease liabilities as of October 31, 2024 , are as follows: Operating Leases Finance Leases For the six months ending January 31, 2025 $ 396 $ 9 For the year ended January 31, 2026 2,154 37 For the year ended January 31, 2027 2,148 37 For the year ended January 31, 2028 2,147 9 For the year ended January 31, 2029 1,805 - For the year ended January 31, 2030 773 - Thereafter 7,162 - Total lease payments $ 16,585 $ 92 Less: amount representing interest ( 8,420 ) ( 6 ) Total lease liabilities at October 31, 2024 $ 8,165 $ 86 Rent expense attributable to operating leases was $ 0.6 million for the three months ended October 31, 2024 and 2023 , respectively. Note 12 - Restricted cash Restricted cash held by foreign subsidiaries is related to fixed deposits that also serve as security deposits and guarantees: October 31, 2024 January 31, 2024 Cash and cash equivalents $ 13,307 $ 5,845 Restricted cash 1,419 1,395 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 14,726 $ 7,240 18 Table of Contents 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 2023, the FASB issued ASU No. 2023 - 07, Segment Reporting ( Topic 280 ): Improvements to Reportable Segment Disclosures . The standard update requires additional disclosures, including further details about segment expenses regarding a public entity's reportable segments on an annual and interim basis. The additional segment disclosures are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is still evaluating the impact of these updated disclosure requirements on its consolidated financial statements and related disclosures. 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 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 financial position or results of operations. 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. Note 15 - Treasury stock The repurchase program approved on October 4, 2021 authorized the Company to use up to $ 3.0 million for the purchase of its outstanding shares of common stock. Stock repurchases were permitted to be executed through open market or privately negotiated transactions, depending upon current market conditions and other factors. On December 7, 2022 the Board of Directors authorized the use of $ 1.0 million remaining under the share repurchase program previously approved on October 4, 2021 that expired on October 3, 2022. During the twelve months ended January 31, 2024 , the Company used the remaining $ 1.0 million authorized to repurchase its outstanding shares of common stock. Accordingly, t here was no repurchase activity with respect to the Company's shares of common stock during the three and nine months ended October 31, 2024 . On August 29, 2024, the Company retired all remaining treasury stock previously repurchased under the stock repurchase program. The retirement was recorded as a reduction to common stock based on the par value of the shares, and the excess over par value was recorded as a decrease in retained earnings in accordance with ASC 505 - 30, Equity-Treasury Stock . Note 16 - 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 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 remaining 40 % owned by GIG. The Company expects this collaborative business arrangement to result in expanding its market presence in Saudi Arabia, Kuwait, and Bahrain. The primary business activities of the JV include the manufacture and sale of the 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. T he carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $ 31.8 million and $ 18.5 million, respectively, as of October 31, 2024 . 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 $ 1.0 million and $ 1.4 million for the three months ended October 31, 2024 and 2023 , respectively. Net income attributable to GIG was $ 2.3 million and $ 1.6 million for the nine months ended October 31, 2024 and 2023 , 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 $ 9.0 million and $ 6.3 million at October 31, 2024 and January 31, 2024 , respectively. The change in non-controlling interest consists of $ 2.3 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 other forms of distributions from non-controlling interest for the period ended October 31, 2024 and January 31, 2024 , respectively. 19 Table of Contents