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 April 30, 2025 2024 Net sales $ 46,747 $ 34,321 Cost of sales 30,023 23,804 Gross profit 16,724 10,517 Operating expenses General and administrative expenses 7,749 6,148 Selling expenses 1,086 1,235 Total operating expenses 8,835 7,383 Income from operations 7,889 3,134 Interest expense 406 507 Other expense 47 67 Income before income taxes 7,436 2,560 Income tax expense 1,582 770 Net income 5,854 1,790 Less: Net income attributable to non-controlling interest 902 347 Net income attributable to common stock $ 4,952 $ 1,443 Weighted average common shares outstanding Basic 7,983 7,906 Diluted 8,079 8,056 Earnings per share attributable to common stock Basic $ 0.62 $ 0.18 Diluted $ 0.61 $ 0.18 See accompanying notes to consolidated financial statements. 2 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended April 30, 2025 2024 Net income $ 5,854 $ 1,790 Other comprehensive income Foreign currency translation adjustments, net of tax 922 ( 1,415 ) Comprehensive income $ 6,776 $ 375 Less: Comprehensive income attributable to non-controlling interests 902 347 Total comprehensive income attributable to common stock $ 5,874 $ 28 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) April 30, 2025 January 31, 2025 ASSETS Current assets Cash and cash equivalents $ 18,841 $ 15,716 Restricted cash 1,413 1,401 Trade accounts receivable, less allowance for credit losses of $ 914 at April 30, 2025 and $ 703 at January 31, 2025 47,009 43,148 Inventories 14,534 16,622 Prepaid expenses and other current assets 12,117 10,045 Unbilled accounts receivable 23,314 18,936 Costs and estimated earnings in excess of billings on uncompleted contracts 3,472 2,934 Total current assets 120,700 108,802 Long-term assets Property, plant and equipment, net of accumulated depreciation 36,007 35,365 Operating lease right-of-use asset 8,617 8,199 Deferred tax assets 6,690 6,639 Goodwill 2,157 2,057 Other long-term assets 4,144 4,179 Total long-term assets 57,615 56,439 Total assets $ 178,315 $ 165,241 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade accounts payable $ 20,053 $ 23,691 Accrued compensation and payroll taxes 1,180 1,388 Commissions and management incentives payable 6,725 5,840 Revolving line - North America 8,533 6,765 Current maturities of long-term debt 4,049 2,481 Customers' deposits 6,917 2,506 Operating lease liability short-term 1,208 1,071 Other accrued liabilities 6,959 6,697 Billings in excess of costs and estimated earnings on uncompleted contracts 991 1,249 Income taxes payable 2,383 2,375 Loan payable to GIG 2,753 - Total current liabilities 61,751 54,063 Long-term liabilities Long-term debt, less current maturities 3,781 3,669 Long-term finance obligations 8,730 8,798 Deferred compensation liabilities 1,832 1,689 Deferred tax liabilities 1,457 1,320 Operating lease liability long-term 8,094 7,713 Loan payable to GIG - 2,753 Other long-term liabilities 2,565 2,131 Total long-term liabilities 26,459 28,073 Commitments and contingencies Non-controlling interest 12,238 10,967 Stockholders' equity Common stock, $ .01 par value, authorized 50,000 shares; 7,983 issued and outstanding at April 30, 2025 and January 31, 2025 80 80 Additional paid-in capital 60,006 60,151 Retained earnings 25,056 20,104 Accumulated other comprehensive loss ( 7,275 ) ( 8,197 ) Total stockholders' equity 77,867 72,138 Total liabilities and stockholders' equity $ 178,315 $ 165,241 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, 2025 $ 80 $ 60,151 $ 20,104 $ - $ ( 8,197 ) $ 72,138 Net income attributable to common stock - - 4,952 - - 4,952 Stock-based compensation expense - 224 - - - 224 Amount attributable to non-controlling interest - ( 369 ) - - - ( 369 ) Foreign currency translation adjustment - - - - 922 922 Total stockholders' equity at April 30, 2025 $ 80 $ 60,006 $ 25,056 $ - $ ( 7,275 ) $ 77,867 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 Stock-based compensation expense - 228 - - - 228 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 Shares 2025 2024 Balances at beginning of year 7,982,568 8,016,781 Treasury stock retired - ( 112,015 ) Shares issued, net of shares used for tax withholding - 77,802 Balances at period end 7,982,568 7,982,568 See accompanying notes to consolidated financial statements. 5 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended April 30, 2025 2024 Operating activities Net income $ 5,854 $ 1,790 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 937 829 Deferred tax expense (benefit) 40 ( 269 ) Stock-based compensation expense 224 228 Provision on uncollectible accounts 210 ( 26 ) Loss (gain) from disposal of fixed assets - 14 Changes in operating assets and liabilities Accounts receivable ( 3,617 ) 1,854 Inventories 1,870 ( 359 ) Costs and estimated earnings in excess of billings on uncompleted contracts ( 796 ) 1,191 Accounts payable ( 3,983 ) ( 1,691 ) Accrued compensation and payroll taxes 653 1,000 Customers' deposits 4,407 1,143 Income taxes payable 17 ( 694 ) Prepaid expenses and other current assets ( 1,633 ) ( 2,552 ) Unbilled accounts receivable ( 4,341 ) 295 Other assets and liabilities 891 ( 2,826 ) Net cash provided by (used in) operating activities 733 ( 73 ) Investing activities Capital expenditures ( 927 ) ( 589 ) Net cash used in investing activities ( 927 ) ( 589 ) Financing activities Proceeds from revolving credit lines 21,261 18,268 Payments of debt on revolving credit lines ( 17,950 ) ( 16,405 ) Payments of principal on finance obligations ( 54 ) ( 42 ) Payments of other debt ( 55 ) ( 58 ) Decrease in drafts payable 2 794 Payments on finance lease obligations ( 8 ) ( 8 ) Stock options exercised and taxes paid related to restricted shares vested - 8 Net cash provided by financing activities 3,196 2,557 Effect of exchange rate changes on cash, cash equivalents and restricted cash 135 ( 71 ) Net increase in cash, cash equivalents and restricted cash 3,137 1,824 Cash, cash equivalents and restricted cash - beginning of period 17,117 7,240 Cash, cash equivalents and restricted cash - end of period $ 20,254 $ 9,064 Supplemental cash flow information Cash interest paid $ 397 $ 248 Cash income taxes paid 1,455 1,575 Fixed assets acquired - non-cash $ 158 $ - See accompanying notes to consolidated financial statements. 6 Table of Contents PERMA-PIPE INTERNATIONAL HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands, except per share data, or unless otherwise specified) (Unaudited) Note 1 - Basis of presentation The interim consolidated financial statements of Perma-Pipe International Holdings, Inc., and subsidiaries (collectively, "PPIH", "Company", 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, 2025 is derived from the audited consolidated balance sheet as of that date. The results of operations for any interim period are not necessarily indicative of future or annual results. Interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10 -K. The Company's fiscal year ends on January 31. Years and balances described as 2025 and 2024 are for the fiscal year ending January 31, 2026 and for the fiscal year ended January 31, 2025 , respectively. Revision of Previously Issued Financial Statements During 2024, the Company had identified and corrected an error relating to a subsidiary in the Middle East that incorrectly recorded a duplicate invoice related to the purchase of property, plant, and equipment ("PP&E"), which caused an overstatement of PP&E and trade accounts payable, and resulted in an overstatement of net cash provided by operating activities and net cash used in investing activities of approximately $ 1.4 million 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, the Company revised the unaudited consolidated financial statements as of and for the three months ended April 30, 2024. The following tables summarize the impact of this correction as of and for the three months ended April 30, 2024: 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 operates under one segment: Piping Systems. The results are presented on a consolidated basis to the Chief Executive Officer who serves as the chief operating decision maker ("CODM"). The CODM regularly reviews consolidated revenues, significant expenses, and consolidated net income attributable to common stock to make operating decisions and assess performance. The CODM uses this information in making company-wide decisions when determining how to allocate resources. Significant expenses represent amounts that are regularly provided to the CODM and included in consolidated net income attributable to common stock. The following table summarizes the Company's revenues, net income attributable to common stock, and significant expenses: Three Months Ended April 30, 2025 2024 Net sales $ 46,747 $ 34,321 Cost of sales Labor 6,289 5,238 Materials 17,416 13,183 Depreciation and amortization 849 733 Other costs of sales 5,469 4,650 Total cost of sales 30,023 23,804 Operating expenses Salaries and wages 4,217 3,373 Depreciation and amortization 87 82 Other general and administrative expense 3,445 2,693 General and administrative expenses 7,749 6,148 Selling expense 1,086 1,235 Total operating expenses 8,835 7,383 Income from operations 7,889 3,134 Interest expense 406 507 Other expense 47 67 Income before income tax 7,436 2,560 Income tax expense 1,582 770 Net income 5,854 1,790 Less: Net income attributable to non-controlling interest 902 347 Net income attributable to common stock $ 4,952 $ 1,443 The CODM regularly reviews asset information by our reporting segment in a manner that is consistent with the presentation on the Company's accompanying consolidated balance sheets. Note 3 - Accounts receivable The majority of the Company's accounts receivable are due from geographically dispersed contractors and manufacturing companies. Credit is extended based on an evaluation of a customer's financial condition. In the United States, collateral is not generally required. In the United Arab Emirates ("U.A.E."), Saudi Arabia, Egypt and India, letters of credit are usually obtained for significant orders. Accounts receivable are due within various time periods specified in the terms applicable to the specific customer and are stated as amounts due from customers net of an allowance for claims and credit losses. Standard payment terms are generally net 30 to 60 days. The Company maintains an allowance for credit losses for accounts receivable. The assessment of the allowance for credit losses involves certain judgments and estimates. Management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable forecasts. The Company may also establish an allowance for credit losses for specific receivables when it is probable that a specific receivable will not be collected and the loss can be reasonably estimated. Past due trade accounts receivable balances are written off when the Company's collection efforts have been unsuccessful in collecting the amount due and the amount is deemed uncollectible. The write off is recorded against the allowance for credit losses. For the three months ended April 30, 2025 and 2024 , no individual customer accounted for more than 10% of the Company's consolidated net sales. As of April 30, 2025 and January 31, 2025 , no individual customer accounted for more than 10% of the Company's accounts receivable . Note 4 - Revenue recognition The Company accounts for its revenues under Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers . Revenue from contracts with customers The Company defines a contract as an agreement that has approval and commitment from both parties, defined rights and identifiable payment terms, which ensures the contract has commercial substance and that collectability is reasonably assured. The Company’s standard revenue transactions are classified into two main categories: 1 ) Systems and Coating - which include all bundled products in which the Company engineers, and manufactures pre-insulated specialty piping systems mainly relating to the district heating and cooling and oil & gas markets. 2 ) Products - which include cables, leak detection products, heat trace products, material/goods not bundled with piping or flowline systems, and field services not bundled into a project contract. In accordance with ASC 606 - 10 - 25 - 27 through 29, the Company recognizes specialty piping and coating systems revenue over time as the manufacturing process progresses because one of the following conditions exists: 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 months ended April 30, 2025 are as follows: Three Months Ended April 30, 2025 2024 Sales % of Total Sales % of Total Products $ 3,640 8 % $ 3,253 9 % Specialty Piping Systems and Coating Revenue recognized under input method 12,060 26 % 10,140 30 % Revenue recognized under output method 31,047 66 % 20,928 61 % Total $ 46,747 100 % $ 34,321 100 % 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. 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. 7 Table of Contents 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: April 30, 2025 January 31, 2025 Costs incurred on uncompleted contracts $ 13,859 $ 11,621 Estimated earnings 9,984 9,366 Earned revenue 23,843 20,987 Less billings to date 21,362 19,302 Costs in excess of billings, net $ 2,481 $ 1,685 Balance sheet classification Contract assets: Costs and estimated earnings in excess of billings on uncompleted contracts $ 3,472 $ 2,934 Contract liabilities: Billings in excess of costs and estimated earnings on uncompleted contracts ( 991 ) ( 1,249 ) Costs in excess of billings, net $ 2,481 $ 1,685 The Company anticipates that substantially all costs incurred on uncompleted contracts as of April 30, 2025 will be billed and collected within one year . Unbilled accounts receivable The Company has recorded $ 23.3 million and $ 18.9 million of unbilled accounts receivable on the consolidated balance sheet s as of April 30, 2025 and January 31, 2025 , respectively, from revenues generated by certain of its subsidiaries. The Company has fulfilled all performance obligations and has recorded revenue under the respective contracts. The deliverables under these contracts have been accepted by the customer and billings will be made once the customer takes possession of or arranges shipping for the products. The Company anticipates that substantially all of the amounts included in unbilled accounts receivable as of April 30, 2025 will be billed within one year. 8 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. April 30, 2025 January 31, 2025 Raw materials $ 13,945 $ 16,374 Work in process 1,112 745 Finished goods 350 366 Subtotal 15,407 17,485 Less allowance 873 863 Inventories $ 14,534 $ 16,622 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. 9 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 April 30, 2025 and 2024 were 21 % and 30 % , respectively. The change in the ETR is due to 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 $ 1.0 million as of April 30, 2025 related to these taxes. Note 7 - Goodwill All identifiable goodwill as of April 30, 2025 and January 31, 2025 , is attributable to the purchase of the remaining 50 % interest in Perma-Pipe Canada, Ltd., which occurred in 2016. The Company performs an impairment assessment of goodwill annually as of January 31, or more frequently if triggering events occur that could indicate that more likely than not that the fair value of the reporting unit did not exceed its carrying value, resulting in an impairment. The following table provides a reconciliation of changes in the carrying amount of goodwill: January 31, 2025 Foreign exchange change effect April 30, 2025 Goodwill $ 2,057 $ 100 $ 2,157 There were no triggering events identified during the three months ended April 30, 2025 . 10 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 April 30, 2025 , the Company had reserved a total of 197,026 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 April 30, 2025 2024 Restricted stock-based compensation expense $ 224 $ 228 Stock options The Company did not grant any stock options during the three months ended April 30, 2025 . 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, 2025 1 $ 6.85 0.8 $ 4 Exercised - - - - Expired or forfeited - - - - Outstanding and exercisable at April 30, 2025 1 $ 6.85 0.6 $ 4 There was no vesting, expiration or forfeiture of previously unvested stock options during the three months ended April 30, 2025 . In addition , there were no remaining unvested stock options outstanding, and therefore no unrecognized compensation expense related to unvested stock options. 11 Table of Contents Restricted stock The following table summarizes the Company's restricted stock activity for the three months ended April 30, 2025 : Restricted Shares Weighted Average Price (Per share) Aggregate Intrinsic Value Outstanding at January 31, 2025 230 $ 9.05 $ 2,080 Granted 2 14.52 Vested and issued - - Forfeited or retired for taxes ( 1 ) 9.54 Outstanding at April 30, 2025 231 $ 9.09 $ 2,098 As of April 30, 2025 , there was $ 0.8 million of unrecognized compensation expense related to unvested restricted stock granted under the plans. These costs are expected to be recognized over a weighted average period of 1.7 years . Note 9 - Earnings per share Three Months Ended April 30, 2025 2024 Basic weighted average common shares outstanding at April 30, 2025 7,983 7,906 Dilutive effect of equity compensation plans 96 150 Weighted average common shares outstanding assuming full dilution 8,079 8,056 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 - 32 Stock options and restricted stock with exercise prices or grant date prices below the average market prices 96 150 Net income attributable to common stock $ 4,952 $ 1,443 Earnings per share attributable to common stock Basic $ 0.62 $ 0.18 Diluted $ 0.61 $ 0.18 12 Table of Contents Note 10 - Debt Debt totaled $ 27.9 million and $ 24.5 million at April 30, 2025 and January 31, 2025 , 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 April 30, 2025 , the Company had borrowed an aggregate of $ 8.5 million at a rate of 9.0 % and had $ 5.0 million available under the Renewed Senior Credit Facility. As of January 31, 2025 , the Company had borrowed an aggregate of $ 6.8 million and had $ 3.7 million available under the Renewed Senior Credit Facility. The Company was in compliance with respect to the covenants under the Credit Agreement as of April 30, 2025 . 13 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 $ 8.7 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. 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 April 30, 2025 ) from a bank in the U.A.E. As of April 30, 2025 , the facility has an interest rate of approximately 7.5 % and expires in July 2025. The Company had borrowed an aggregate of $ 0.5 million 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. As of April 30, 2025 and January 31, 2025 , the Company had unused borrowing availability of approximately $ 1.7 million and $ 1.6 million, respectively. The Company has a revolving line for 65.2 million U.A.E. Dirhams (approximately $ 17.7 million at April 30, 2025 ) from a bank in the U.A.E. As of April 30, 2025 , the facility has an interest rate of approximately 7.5 % and expires in August 2025. 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. 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. 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 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. As of April 30, 2025 , the facility has an interest rate of approximately 20.8 % 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 April 30, 2025 and January 31, 2025 , 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 received collections, the facility has decreased to a current amount of 2.1 million Egyptian Pounds (approximately $ 0.1 million at April 30, 2025 ). 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 15.0 % 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 no outstanding balance 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. 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 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, 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. As of April 30, 2025 , the facility has an interest rate of approximately 8.9 % . The Company had borrowed an aggregate of $ 3.1 million and $ 1.5 million 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 April 30, 2025 and January 31, 2025 , was $ 2.3 million and $ 3.0 million, respectively. 14 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. As of 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 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. On 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; (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 April 30, 2025 , the Company's interest rates ranged from 7.5 % to 20.8 %, with a weighted average rate of 8.4 %, and the Company had facility limits totaling $ 31.8 million under these credit arrangements. As of April 30, 2025 , $ 16.6 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 April 30, 2025 , the Company had borrow ed $ 6.3 million and had an additional $ 14.5 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 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. 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 April 30, 2025 , the remaining balance on the mortgage in Canada is approximately CAD 5.7 million (approximately $ 4.1 million at April 30, 2025 ). The interest rate is variable, and was 6.8 % at 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 April 30, 2025 and January 31, 2025 . Note 11 - Leases 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 April 30, 2025 ), inclusive of rent, escalation clauses, and other common charges contained in the agreement. The lease expires in August 2050. Finance Leases. At April 30, 2025 , 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 $ 0.2 million which were included in property plant and equipment , net of accumulated depreciation in the consolidated balance sheets. 15 Table of Contents Supplemental balance sheet information related to leases is as follows: Operating and Finance leases April 30, 2025 January 31, 2025 Finance leases assets: Property and Equipment - gross $ 942 $ 899 Accumulated depreciation and amortization ( 706 ) ( 626 ) Property and Equipment - net $ 236 $ 273 Finance lease liabilities: Finance lease liability short-term $ 34 $ 32 Finance lease liability long-term 36 43 Total finance lease liabilities $ 70 $ 75 Operating lease assets: Operating lease ROU assets $ 8,617 $ 8,199 Operating lease liabilities: Operating lease liability short-term $ 1,208 $ 1,071 Operating lease liability long-term 8,094 7,713 Total operating lease liabilities $ 9,302 $ 8,784 Total lease costs consist of the following: Three Months Ended April 30, Lease costs Consolidated Statements of Operations Classification 2025 2024 Finance Lease Costs Amortization of ROU assets Cost of sales $ 49 $ 38 Interest on lease liabilities Interest expense 1 2 Operating lease costs Cost of sales, SG&A expenses 534 455 Short-term lease costs (1) Cost of sales, SG&A expenses 391 143 Total Lease costs $ 975 $ 638 ( 1 ) Includes variable lease costs, which are not material. 16 Table of Contents Supplemental cash flow information related to leases is as follows: Three Months Ended April 30, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: Financing cash outflows from finance leases $ 8 $ 8 Operating cash outflows from finance leases 1 2 Operating cash outflows from operating leases 315 454 Weighted-average lease terms and discount rates are as follows: April 30, 2025 Weighted-average remaining lease terms (in years): Finance leases 2.0 Operating leases 12.5 Weighted-average discount rates: Finance leases 6.4 % Operating leases 9.0 % Maturities of lease liabilities as of April 30, 2025 , are as follows: Operating Leases Finance Leases For the year ended January 31, 2026 $ 1,781 $ 28 For the year ended January 31, 2027 2,094 37 For the year ended January 31, 2028 2,120 9 For the year ended January 31, 2029 1,791 - For the year ended January 31, 2030 899 - For the year ended January 31, 2031 355 - Thereafter 6,807 - Total lease payments $ 15,847 $ 74 Less: amount representing interest ( 6,545 ) ( 4 ) Total lease liabilities at April 30, 2025 $ 9,302 $ 70 Rent expense attributable to operating leases was $ 0.9 million and $ 0.6 million for the three months ended April 30, 2025 and 2024 , respectively. Note 12 - Restricted cash Restricted cash held by foreign subsidiaries is related to fixed deposits that also serve as security deposits and guarantees: April 30, 2025 January 31, 2025 Cash and cash equivalents $ 18,841 $ 15,716 Restricted cash 1,413 1,401 Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 20,254 $ 17,117 17 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 December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes ( Topic 740 ): Improvements to Income Tax Disclosures . Pursuant to this standard update, companies are required to provide additional information, which is primarily attributable to the rate reconciliation and income taxes paid. The standard update is to be applied prospectively, with retrospective application permitted. The new income tax disclosures are effective for fiscal years beginning after December 15, 2024. The Company is still evaluating this standard update but does not expect it to have a material impact on its consolidated financial statements. In November 2024, the FASB issued ASU No. 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses . In accordance with this standard update, companies are required to disclose specified information about certain costs and expenses in the notes to the financial statements at each interim and annual reporting period. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard update on its consolidated financial statements and related disclosures. 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. 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. As of April 30, 2025 , t he carrying amount of the assets and liabilities of the JV that are consolidated by the Company totaled $ 39.6 million and $ 20.6 million, respectively, and $ 39.1 million and $ 22.1 million, respectively, as of January 31, 2025 . The Company adjusts net income in the consolidated statements of operations to exclude the proportionate share of results that is attributable to the non-controlling interest. Additionally, the Company presents the proportionate share that is attributable to the non-controlling interest as temporary equity within the consolidated balance sheets. This temporary equity presentation is the result of the non-controlling interest being subject to certain redemption rights that are not entirely within the Company's control. Due to these redemption rights, at each balance sheet date, the Company is required to adjust the carrying value attributable to the non-controlling interest to fair value, which is limited to its original carrying value at the formation of the business arrangement. Adjustments made to reflect the change in the value of the redeemable non-controlling interest are offset against permanent equity within the Company's consolidated balance sheets. Net income attributable to GIG was $ 0.9 million and $ 0.3 million for the three months ended April 30, 2025 and 2024 , respectively. The proportionate share of net income was accounted for as a reduction in deriving net income attributable to common stock in the Company's consolidated statements of operations. The non-controlling interest as measured at fair value was $ 12.2 million and $ 11.0 million at April 30, 2025 and January 31, 2025 , respectively. The change in non-controlling interest consists of $ 0.9 million in current year net income attributable to non-controlling interest, and approximately $ 0.4 million as an adjustment to the carrying value of the redeemable non-controlling interest pertaining to the business arrangement. In addition, there were no dividends or any other form of distributions from non-controlling interest for the periods ended April 30, 2025 and January 31, 2025 . 18 Table of Contents