What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-13 compared with 2024-12-23 · 82 added, 137 removed, 153 unchanged (59% of the section changed)

12 unchanged sentences

Since the Company focuses on discrete projects, operating results can be significantly impacted as a result of large variations in the level of project activity in reporting periods.

Three Months Ended October 31,

Nine Months Ended October 31,

Change favorable (unfavorable)

Three Months Ended April 30,

Change favorable (unfavorable)

1 unchanged sentence

Percent of Net Sales

General and administrative expenses

Selling expense

Selling expenses

Interest expense

2 unchanged sentences

Income tax expense

Net income (loss)

Net income attributable to non-controlling interest

Net income (loss) attributable to common stock

Three months ended October 31, 2024

Three months ended October 31, 2023

Net sales were $

41.6 million and $

45.7 million in the

three months ended October 31, 2024 and 2023, respectively.

million, or 9%,

was a result of the timing of project execution.

Gross profit:

Gross profit was $14.1 million, or 34% of net sales, and $13.2 million, or 29% of net sales, in the three months ended October 31, 2024 and 2023, respectively.

The increase of $0.9 million, was driven primarily by better margins due to product mix.

General and administrative expenses:

General and administrative expenses were $7.3 million and $5.7 million in the three months ended October 31, 2024 and 2023, respectively.

The increase of $1.6 million, was due to higher payroll expenses and professional fees in the quarter.

Selling expenses:

Selling expenses were $

1.2 million and $

1.5 million in the

three months ended October 31, 2024 and 2023, respectively.

decrease of $

0.3 million, was due to lower payroll expense in the quarter.

Interest expense:

Net interest expense remained consistent and was $0.5 million and $0.6 million in the three months ended October 31, 2024 and 2023, respectively.

Other expense:

Other expense was $0.1 million and $0.5 million in the three months ended October 31, 2024 and 2023 , respectively.

The decrease of $0.4 million, was due primarily to exchange rate fluctuations in foreign currency transactions.

Income tax expense:

The Company's ETR was 32% and 31% in the three 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.

For further information, see Note 6 - Income taxes, in the Notes to Consolidated Financial Statements.

Net income attributable to common stock

Net income attributable to common stock was $2.5 million and $1.9 million in the three months ended October 31, 2024 and 2023 , respectively.

The increase of $0.6 million, was mainly due to better project execution in the quarter.

Nine months ended October 31, 2024

Nine months ended October 31, 2023

Three months ended April 30, 2025

Three months ended April 30, 2024

Net sales were $

1 unchanged sentence

34.3 million in the

nine months ended October 31, 2024 and 2023, respectively.

three months ended April 30, 2025 and 2024, respectively.

million, or 36%,

, was a result of increased sales volumes in the Middle East.

was a result of increased sales volumes in the Middle East and in North America.

Gross profit:

Gross profit was $38.1 million, or 34% of net sales, and $29.4 million, or 27% of net sales, in the nine months ended October 31, 2024 and 2023, respectively.

The increase of $8.7 million, was driven primarily by better margins due to product mix.

Gross profit was $16.7 million, or 36% of net sales, and $10.5 million, or 31% of net sales, in the three months ended April 30, 2025 and 2024, respectively.

The increase of $6.2 million, was driven primarily by increased volume of activity and better margins due to product mix.

General and administrative expenses:

General and administrative expenses were $19.5 million and $16.4 million in the nine months ended October 31, 2024 and 2023, respectively.

The increase of $3.1 million, was due to higher payroll expenses and professional fees.

General and administrative expenses were $7.7 million and $6.1 million in the three months ended April 30, 2025 and 2024, respectively.

The increase of $1.6 million, was due to higher payroll expenses and professional fees in the quarter.

Selling expenses:

Selling expenses were $

Selling expenses remained consistent and were $

1.1 million and $

1.2 million in the

nine months ended October 31, 2024 and 2023, respectively.

decrease of $

0.4 million, was due to lower payroll expenses.

three months ended April 30, 2025 and 2024, respectively.

Interest expense:

Net interest expense was $1.5 million and $1.8 million in the nine months ended October 31, 2024 and 2023, respectively.

The decrease of $0.3 million, was due primarily to declining interest rates on certain variable rate debt.

Net interest expense remained consistent and was $0.4 million and $0.5 million in the three months ended April 30, 2025 and 2024, respectively.

Other expense:

Other expense was $0.2 million and $0.4 million in the nine months ended October 31, 2024 and 2023 , respectively.

The change was due primarily to exchange rate fluctuations in foreign currency transactions.

Other expense remained consistent and was less than $0.1 million in the three months ended April 30, 2025 and 2024 .

Income tax expense:

The Company's ETR was 28% and 49% in the nine months ended October 31, 2024 and 2023, respectively.

The Company's ETR was 21% and 30% in the three months ended April 30, 2025 and 2024, respectively.

The change in the ETR is due to the mix of income and loss in various jurisdictions.

For further information, see Note 6 - Income taxes, in the Notes to Consolidated Financial Statements.

Net income attributable to common stock:

Net income attributable to common stock was $7.2 million and $1.8 million in the nine months ended October 31, 2024 and 2023 , respectively.

The increase of $5.4 million, was mainly due to better project execution during the year.

Net income attributable to common stock was $5.0 million and $1.4 million in the three months ended April 30, 2025 and 2024 , respectively.

The increase of $3.6 million, was mainly due to increased sales volumes and better project execution in the quarter.

Liquidity and capital resources

Cash and cash equivalents as of October 31, 2024 were $13.3 million compared to $5.8 million on January 31, 2024.

On October 31, 2024, $0.9 million was held in the United States, and $12.4 million was held at the Company's foreign subsidiaries.

The Company's working capital was $50.6 million on October 31, 2024 compared to $41.1 million on January 31, 2024.

Of the working capital components, accounts receivable decreased by $6.7 million and cash and cash equivalents increased by $7.5 million as the result of the movements discussed below.

As of October 31, 2024, the Company ha d $3.5 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $8.3 million of borrowing capacity under its foreign revolving credit agreements.

The Company had $7.8 million borrowed under the Renewed Senior Credit Facility and $3.2 million borro wed under its foreign revolving credit agreements at October 31, 2024.

Net cash provided by operating activities was $ 7.9 million and $ 7.6 million in the nine months ended October 31, 2024 and 2023 , respectively.

The increase of $ 0.3 million was primarily attributable to changes in accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts, partially offset by changes to accounts payable.

Net cash used in investing activities in the nine months ended October 31, 2024 and 2023 was $( 1.6 ) million and $( 8.2 ) million, respectively.

The decrease of $( 6.6 ) million was due primarily to fewer capital expenditures in the United States and Canada.

Net cash provided by financing activities in the nine months ended October 31, 2024 and 2023 remained consistent and was $ 1.3 million and $ 1.2 million, respectively.

Debt totaled $ 27.0 million and $ 25.7 million as of October 31, 2024 and January 31, 2024 , respectively.

Cash and cash equivalents as of April 30, 2025 were $18.8 million compared to $15.7 million on January 31, 2025.

On April 30, 2025, $0.7 million was held in the United States, and $18.1 million was held at the Company's foreign subsidiaries.

The Company's working capital was $58.9 million on April 30, 2025 compared to $54.7 million on January 31, 2025.

Of the working capital components, accounts receivable increased by $3.9 million and cash and cash equivalents increased by $3.1 million as the result of the movements discussed below.

As of April 30, 2025, the Company ha d $5.0 million of borrowing capacity under the Renewed Senior Credit Facility in North America and $14.5 million of borrowing capacity under its foreign revolving credit agreements.

The Company had $8.5 million borrowed under the Renewed Senior Credit Facility and $6.3 million borro wed under its foreign revolving credit agreements at April 30, 2025.

Net cash provided by (used in) operating activities was $ 0.7 million and $(0.1) million in the three months ended April 30, 2025 and 2024 , respectively.

The increase of $ 0.8 million was primarily attributable to changes in inventories, customer deposits, prepaid expenses and other current assets and net income, partially offset by changes to accounts receivable and unbilled accounts receivable.

Net cash used in investing activities in the three months ended April 30, 2025 and 2024 was $0.9 million and $0.6 million, respectively.

The increase of $0.3 million was primarily due to a greater amount of capital expenditures in the quarter.

Net cash provided by financing activities in the three months ended April 30, 2025 and 2024 was $ 3.2 million and $ 2.6 million, respectively.

Debt totaled $ 27.9 million and $ 24.5 million as of April 30, 2025 and January 31, 2025 , respectively.

See Note 10 - Debt, in the Notes to Consolidated Financial Statements for further discussion relating to this topic.

Treasury stock.

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.

See Note 15 - Treasury stock, in the Notes to Consolidated Financial Statements for further discussion relating to this topic.

Revolving lines - North America

3 unchanged sentences

The Renewed Senior Credit Facility matures on September 20, 2026.

October 31, 2024, the Company had borrowed an aggregate of

April 30, 2025, the Company had borrowed an aggregate of

million at a rate of 9.0%

2 unchanged sentences

The Company was in compliance with respect to the covenants under the Credit Agreement as of

October 31, 2024.

April 30, 2025.

Revolving lines - foreign

6 unchanged sentences

Dirhams (approximately $

October 31, 2024

April 30, 2025

) from a bank in the U.A.E.

October 31, 2024

April 30, 2025

, the facility has an interest rate of approximately

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.

and expires in July 2025.

The Company had borrowed an aggregate of $0.4 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.

October 31, 2024 and January 31, 2024

as of April 30, 2025

and January 31, 2025

, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

April 30, 2025 and January 31, 2025

, the Company had unused borrowing availability of approximately $1.7 million and $1.6 million, respectively.

2 unchanged sentences

Dirhams (approximately $

October 31, 2024

April 30, 2025

) from a bank in the U.A.E.

October 31, 2024

April 30, 2025

, the facility has an interest rate of approximately

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

Company had no outstanding balance

as of April 30, 2025

and $0.1 million

1 unchanged sentence

, 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

The Company had unused borrowing availability of approximately $8.0 million and $9.0 million as of

April 30, 2025 and January 31, 2025

, respectively.

1 unchanged sentence

million Egyptian Pounds (approximately $

October 31, 2024

April 30, 2025

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.

October 31, 2024

April 30, 2025

, the facility has an interest rate of approximately

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.

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.

and expires in November 2025.

As of April 30, 2025 and January 31, 2025, the Company had an immaterial amount outstanding, 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

April 30, 2025

January 31, 2025

, the Company had unused borrowing capacity of $2.0 million and $3.2 million, respectively.

, the Company had approximately $2.0 million of unused borrowing capacity with respect to this credit arrangement.

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

As this project has progressed and the Company has received collections, the facility has decreased to a current amount of

million Egyptian Pounds (approximately $0.1 million at

October 31, 2024

April 30, 2025

This credit arrangement is in the form of project financing at rates competitive in Egypt.

3 unchanged sentences

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

The Company had no outstanding balance

as of April 30, 2025

and $0.1 million

as of January 31, 2025

, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

1 unchanged sentence

million Saudi Riyals (approximately $

October 31, 2024

April 30, 2025

This credit arrangement is in the form of project financing at rates competitive in Saudi Arabia.

The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary.

The facility was renewed in May 2024 with substantially the same terms and conditions and expires in May 2025.

October 31, 2024

The line is secured by certain assets (such as accounts receivable) of the Company's Saudi Arabian subsidiary, and expired in May 2025.

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.

April 30, 2025

, the facility has an interest rate of approximately

The Company had borrowed an aggregate of $3.1 million and $1.5 million

as of October 31, 2024 and January 31, 2024

as of April 30, 2025 and January 31, 2025

, respectively, and is presented as a component of current maturities of long-term debt in the Company's consolidated balance sheets.

The unused borrowing availability attributable to this credit arrangement at

October 31, 2024

April 30, 2025

January 31, 2025

5 unchanged sentences

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.

April 30, 2025 and January 31, 2025 , the amount of foreign subsidiary debt guaranteed by the Company was approxim

ately $10.0 million.

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,

April 30, 2025,

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.

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.

April 30, 2025, interest rates were based on (i) the Emirates Inter Bank Offered Rate plus 3.0% to 3.5% per annum for the U.A.E.

credit arrangements, two of which have a minimum interest rate of 4.5% per annum;

2 unchanged sentences

Based on these base rates, as of

October 31, 2024, the Company's interest rates ranged from

April 30, 2025, the Company's interest rates ranged from

20.8%, with a weighted average rate of

1 unchanged sentence

million under these credit arrangements.

October 31, 2024

April 30, 2025

$16.6 million

1 unchanged sentence

Additionally, as of

October 31, 2024

April 30, 2025

, the Company had borrow

1 unchanged sentence

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).

as of April 30, 2025 and January 31, 2025.

In June 2023, the Company assumed a promissory note of approximately $2.8 million in connection with the formation of the joint venture with Gulf Insulation Group

(see Note 15).

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.

This amount is presented as a component of current liabilities in the Company's consolidated balance sheets.

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.

October 31, 2024, the remaining balance on the mortgage in Canada is approximately CAD

April 30, 2025, the remaining balance on the mortgage in Canada is approximately CAD

5.7 million (approximately $

4.1 million at

October 31, 2024).

April 30, 2025).

The interest rate is variable, and was

October 31, 2024.

April 30, 2025.

The principal balance is included as a component of long-term debt, less current maturities in the Company's consolidated balance sheets and is presented net of issuance costs of $0.1 million

as of October 31, 2024 and January 31, 2024, respectively.

as of April 30, 2025 and January 31, 2025.

Finance obligation - buildings and land.

7 unchanged sentences

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 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 $8.7 million is recognized in long-term finance obligation on the Company's consolidated balance sheets as of April 30, 2025

The net carrying amount of the financial liability and remaining assets will be zero at the end of the lease term.

4 unchanged sentences

40.7 million as of

October 31, 2024, with a remaining balance due in the amount of $

April 30, 2025, with a remaining balance due in the amount of $

1.2 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.

4 unchanged sentences

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 $

three months ended April 30, 2025, and at various times throughout 2024, the Company received partial payments to settle $

0.6 million and $

2 unchanged sentences

As a result, the Company did not reserve any allowance against the remaining outstanding balances as of

October 31, 2024.

April 30, 2025.

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.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis