Perma-Pipe International Holdings, Inc. Announces Third Quarter Financial Results

Rhea-AI Summary

Perma-Pipe International Holdings (NASDAQ: PPIH) reported Q3 2024 financial results with net sales of $41.6 million, down 9% from Q3 2023. Net income increased 29% to $2.5 million. Year-to-date net sales reached $113.4 million, up 3%, with net income growing 294% to $7.2 million.

The company's backlog reached a record $114.2 million, equivalent to approximately nine months of revenue, showing significant growth from $68.5 million in January 2024. This represents the highest backlog level since the company's transition from MFRI to Perma-Pipe in March 2017. The growth is driven by increased infrastructure spending in Saudi Arabia, India, and the U.A.E.

Positive

• Record backlog of $114.2 million, up 67% from January 2024
• YTD net income increased 294% to $7.2 million
• Gross profit margin improved to 34% from 29% in Q3
• YTD net sales increased 3% to $113.4 million
• Interest expense decreased due to declining rates on variable debt

Negative

• Q3 net sales decreased 9% to $41.6 million
• General and administrative expenses increased by $1.6 million in Q3
• Higher payroll expenses and professional fees impacting costs

Insights

Financial Analyst

The Q3 results demonstrate remarkable financial strength, with $7.2 million in year-to-date net income representing a 294% increase from the previous year. The backlog surge to $114.2 million, equivalent to nine months of revenue, signals robust future growth potential. The gross profit margin improvement to 34% from 29% year-over-year reflects enhanced operational efficiency and favorable product mix.

Key performance indicators show substantial improvements: better project execution, declining interest expenses due to favorable rate environments and a more efficient tax structure with ETR dropping to 28% from 49%. The Middle East expansion strategy is paying off, evidenced by increased sales volumes in the region. The record-high backlog since the 2017 transition from MFRI suggests strong market positioning and potential revenue acceleration in upcoming quarters.

Market Research Analyst

The infrastructure spending increases in Saudi Arabia, India and the UAE are creating a favorable market environment for Perma-Pipe's growth trajectory. The company's 3% year-to-date revenue growth to $113.4 million might seem modest, but the substantial backlog growth indicates accelerating momentum. The reduction in selling expenses coupled with improved gross margins suggests effective cost management despite inflationary pressures.

The company's geographic diversification across six countries provides natural hedging against regional market fluctuations. While higher G&A expenses ($7.3 million vs $5.7 million) could be a concern, they appear to be strategic investments in human capital and professional services to support growth initiatives. The reduced foreign currency exposure, evidenced by lower other expenses, indicates improved risk management.

• The Company generated net sales of $41.6 million for the quarter and $113.4 million year-to-date
• Income before income taxes of $5.1 million for the quarter and $13.2 million year-to-date
• Backlog of $114.2 million at October 31, 2024, compared to $68.5 million at January 31, 2024

SPRING, Texas--(BUSINESS WIRE)-- Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) announced today financial results for the second quarter and fiscal year-to-date period ended October 31, 2024.

"Net sales for the third quarter were $41.6 million, a decrease of $4.1 million, as compared to the same quarter last year. Net income attributable to common stock of $2.5 million was an increase of $0.5 million, or 29%, compared to $1.9 million in the third quarter of 2023. For the nine months ended October 31, 2024, net sales of $113.4 million represent an increase of 3% compared to the nine months ended October 31, 2023. The net income attributable to common stock of $7.2 million was an increase of $5.4 million, or 294%, compared to net income attributable to common stock of $1.8 million in the nine months ended October 31, 2023,” noted President and CEO David Mansfield.

“Backlog in the third quarter shows considerable growth and now stands at $114.2 million. This is the equivalent to approximately nine months revenue based upon prior years’ revenues. The continual strengthening of our backlog over the past two quarters is encouraging and provides a sense of optimism heading into next year. Additionally, backlog at the end of the third quarter represents the highest level since transitioning from MFRI to Perma-Pipe, which occurred in March 2017,” Mr. Mansfield continued.

“Our third quarter and fiscal 2024 year-to-date results continue to reflect exceptional performance, which has remained consistent throughout the year. It is worth noting that our net income attributable to common stock for the nine months ended October 31, 2024, represents the highest level of earnings on a year-to-date basis since transitioning from MFRI to Perma-Pipe,” said Mr. Mansfield.

“We are pleased with the level of business activity we have experienced and continue to see, as supported by the significant rise in backlog and share price. The increases in infrastructure spending in Saudi Arabia, India, and the U.A.E., represent key drivers of our overall improvement, for which the strength of our financial results further enables us to continue to execute on strategic initiatives,” concluded Mr. Mansfield.

Third Quarter Fiscal 2024 Results

Net sales were $41.6 million and $45.7 million in the three months ended October 31, 2024 and 2023, respectively. The decrease of $4.1 million, or 9%, was a result of the timing of project execution.

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 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 were $1.2 million and $1.5 million in the three months ended October 31, 2024 and 2023, respectively. The decrease of $0.3 million, was due to lower payroll expense in the quarter.

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 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.

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.

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.

Fiscal 2024 Year-to-Date Results

Net sales were $113.4 million and $110.5 million in the nine months ended October 31, 2024 and 2023, respectively. The increase of $2.9 million, or 3%, was a result of increased sales volumes in the Middle East.

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.

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.

Selling expenses were $3.8 million and $4.2 million in the nine months ended October 31, 2024 and 2023, respectively. The decrease of $0.4 million, was due to lower payroll expenses.

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.

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.

The Company's ETR was 28% and 49% in 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.

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.

Perma-Pipe International Holdings, Inc.

Perma-Pipe International Holdings, Inc. (the “Company”) is a global leader in pre-insulated piping and leak detection systems for oil and gas gathering, district heating and cooling, and other applications. It uses its extensive engineering and fabrication expertise to develop piping solutions that solve complex challenges regarding the safe and efficient transportation of many types of liquids. In total, the Company has operations at fourteen locations in six countries.

Forward-Looking Statements

Certain statements and other information contained in this press release that can be identified by the use of forward-looking terminology constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby, including, without limitation, statements regarding the expected future performance and operations of the Company. These statements should be considered as subject to the many risks and uncertainties that exist in the Company's operations and business environment. Such risks and uncertainties include, but are not limited to, the following: (i) fluctuations in the price of oil and natural gas and its impact on customer order volume for the Company's products; (ii) the Company’s ability to purchase raw materials at favorable prices and to maintain beneficial relationships with its suppliers; (iii) decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’ liquidity and access to capital funds; (iv) the Company’s ability to repay its debt and renew expiring international credit facilities; (v) the Company’s ability to effectively execute its strategic plan and achieve sustained profitability and positive cash flows; (vi) the Company's ability to collect a long-term account receivable related to a project in the Middle East; (vii) the Company’s ability to interpret changes in tax regulations and legislation; (viii) the Company's ability to use its net operating loss carryforwards; (ix) reversals of previously recorded revenue and profits resulting from inaccurate estimates made in connection with the Company’s "over-time" revenue recognition; (x) the Company’s failure to establish and maintain effective internal control over financial reporting; (xi) the timing of order receipt, execution, delivery and acceptance for the Company’s products; (xii) the Company’s ability to successfully negotiate progress-billing arrangements for its large contracts; (xiii) aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates; (xiv) the Company’s ability to manufacture products free of latent defects and to recover from suppliers who may provide defective materials to the Company; (xv) reductions or cancellations of orders included in the Company’s backlog; (xvi) risks and uncertainties specific to the Company's international business operations; (xvii) the Company’s ability to attract and retain senior management and key personnel; (xviii) the Company’s ability to achieve the expected benefits of its growth initiatives; (xix) the impact of pandemics and other public health crises on the Company and its operations; and (xx) the impact of cybersecurity threats on the Company’s information technology systems. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, which are available at https://www.sec.gov and under the Investor Center section of our website (http://investors.permapipe.com.)

Additional information regarding the Company's financial results for the three months ended October 31, 2024, including management's discussion and analysis of the Company's financial condition and results of operations, is contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2024, which will be filed with the Securities and Exchange Commission on or about the date hereof and will be accessible at www.sec.gov and www.permapipe.com. For more information, visit the Company's website.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED 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
Gross profit		14,086			13,184			38,077			29,424
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
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
Note: Earnings per share calculations could be impacted by rounding.

PERMA-PIPE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
	October 31, 2024		January 31, 2024
ASSETS
Current assets	$	104,405	$	98,818
Long-term assets		56,344		56,893
Total assets	$	160,749	$	155,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	$	53,794	$	57,742
Long-term liabilities		26,792		25,991
Total liabilities		80,586		83,733
Non-controlling interests		8,952		6,266
Stockholders' equity		71,211		65,712
Total liabilities and equity	$	160,749	$	155,711

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241223777874/en/

Perma-Pipe International Holdings, Inc.

David Mansfield, President and CEO

Perma-Pipe Investor Relations

(847) 929-1200

investor@permapipe.com

Source: Perma-Pipe International Holdings, Inc.

FAQ

What was PPIH's Q3 2024 revenue and how did it compare to last year?

PPIH reported Q3 2024 revenue of $41.6 million, representing a decrease of $4.1 million or 9% compared to Q3 2023.

How much did PPIH's backlog grow in Q3 2024?

PPIH's backlog grew to $114.2 million as of October 31, 2024, compared to $68.5 million at January 31, 2024, representing a 67% increase.

What was PPIH's net income for the first nine months of 2024?

PPIH's net income for the first nine months of 2024 was $7.2 million, a 294% increase from $1.8 million in the same period of 2023.

What drove PPIH's improved performance in 2024?

PPIH's improved performance was driven by increased infrastructure spending in Saudi Arabia, India, and the U.A.E., better project execution, and improved margins due to product mix.

How did PPIH's gross profit margin change in Q3 2024?

PPIH's gross profit margin improved to 34% in Q3 2024 from 29% in Q3 2023, driven primarily by better margins due to product mix.