Perma-Pipe International Q2 Earnings Call Highlights

Key Points

• Strong second-quarter results: Net sales rose 24% year over year to $59.6 million, while net income increased to $2.5 million, or $0.31 per diluted share. Results included a $3.9 million write-off of an uncollectible receivable, partially offset by a $1.6 million tax benefit.
• Backlog and capacity are expanding: Backlog reached $142.3 million after $67.8 million in new quarterly orders, with 40%–50% expected to convert to revenue in the third quarter. New facilities in Ohio and Qatar are ramping production, while the leak-detection business has secured about 80% of its full-year bookings target.
• Greater financial flexibility supports growth: A new JPMorgan facility provides approximately $90 million in initial commitments, up to $50 million in additional capacity and $30 million in letter-of-credit availability. Management said the financing will support larger projects and a pipeline exceeding $900 million, alongside expansion opportunities in water, energy and infrastructure.

Perma-Pipe International NASDAQ: PPIH reported higher second-quarter fiscal 2026 sales and earnings as volumes increased in its Middle East and North Africa and North American operations, while the company expanded production capacity and added financing flexibility for future growth initiatives.

Net sales for the quarter ended July 31 rose 24% to $59.6 million from $47.9 million a year earlier. Net income attributable to common stock increased to $2.5 million, or $0.31 per diluted share, from $0.9 million, or $0.10 per diluted share, in the prior-year quarter.

The quarter's results included a $3.9 million charge tied to an uncollectible accounts receivable balance with a specific customer. The charge was partially offset by an approximately $1.6 million tax benefit. CFO Matt Lewicki said the company conducted an extensive review of the customer's financial position, intent and ability to pay, and the collection process before determining that a full write-off was appropriate.

“At this time, we're not pursuing recovery of this amount, as we're taking a relatively conservative position,” Lewicki said, adding that any future collection would be recognized as a subsequent recovery in the income statement.

Sales Growth and Backlog

For the first six months of fiscal 2026, Perma-Pipe recorded net sales of $109.8 million, up 16% from $94.6 million in the comparable prior-year period. The company attributed growth in both the quarterly and year-to-date periods to higher volumes in MENA and North America.

Quarterly gross profit increased 21% to $17.4 million, representing about 29% of sales, compared with $14.4 million, or roughly 30% of sales, a year earlier. For the first six months, gross profit was $32 million, or about 29% of sales, versus $31.1 million, or about 33% of sales, in the year-earlier period.

Lewicki said the year-to-date margin comparison reflected product mix in various jurisdictions during the first quarter, particularly in Canada, along with seasonal factors and startup and ramp-up costs at the company's new Ohio manufacturing facility.

Income from operations rose to $4.3 million in the second quarter from $3.2 million a year earlier. For the first half, however, operating income declined to $8.9 million from $11.1 million, reflecting lower gross profit and higher operating expenses.

Perma-Pipe ended the quarter with backlog of $142.3 million, up from $121.6 million at the end of fiscal 2025. The company secured $67.8 million in new orders during the quarter. Management said substantially all backlog is expected to be completed within the next 12 months and projected that approximately 40% to 50% would convert into revenue during the third quarter.

New Facilities and Leak Detection Focus

President and CEO Saleh Sagr said the Ohio facility became operational and is ramping production to support North American growth, including data-center and district heating and cooling opportunities. He said the facility is expected to reach full production by early 2027. Perma-Pipe's Qatar facility is also in a production ramp-up phase and is expected to reach full production on a similar timeline.

Sagr said Perma-Pipe is emphasizing safety and quality as it gradually raises utilization at the facilities. He also said the Ohio operation is primarily geared toward data centers and district heating and cooling applications.

The company said its leak-detection business has already secured approximately 80% of its full-year bookings target. Sagr said customers and infrastructure owners are placing more emphasis on pipeline integrity, asset protection, early leak detection and operational reliability.

Perma-Pipe is seeking to expand its PermAlert and distributed fiber-optic sensing offerings across water, energy, oil and gas, district heating and cooling, and other infrastructure applications. The company also said it is working to formalize relationships with select equipment manufacturers to embed its sensing technology in their products.

Financing and Strategic Expansion

Cash and cash equivalents totaled $31.8 million at July 31, compared with $18.7 million at Jan. 31. Total debt was $36.1 million, compared with $32.5 million at the prior fiscal year-end, resulting in net debt of approximately $4.3 million, down from approximately $13.8 million.

After the quarter ended, Perma-Pipe closed a new global credit facility with JPMorgan Chase. The facility includes a $75 million revolving credit facility and a $14 million term loan, for approximately $90 million in commitments at closing, as well as access to up to $50 million in additional incremental capacity.

The facility also provides up to $30 million in letter-of-credit availability. Lewicki said it replaces the company's prior revolving credit agreement and is intended to improve the flexibility and efficiency of managing liquidity across the global organization. Perma-Pipe used the $14 million term loan and available cash to repay the prior JPMorgan credit agreement and subsequently repaid the mortgage note on its Alberta, Canada, plant.

Sagr said the expanded facility would improve Perma-Pipe's ability to pursue and execute larger projects, including opportunities exceeding $100 million. He said the company has a project pipeline exceeding $900 million, while noting it does not expect to win all of those opportunities.

Middle East, Water and Energy Opportunities

Management highlighted its memorandum of understanding with Welspun to establish local manufacturing capability in Jordan. The proposed joint venture is intended to pursue Jordan's National Water Carrier Program as an initial opportunity, while also creating a platform for water, energy and other infrastructure projects across the Levant region.

Sagr said the National Water Carrier project is not a definitive award and has not been included in backlog. The proposed partnership would also mark Perma-Pipe's entry into pipe manufacturing, complementing its existing coating and piping capabilities.

In oil and gas, Sagr said Saudi Aramco qualified Perma-Pipe's new product line designed for Saudi Arabia's energy expansion program. The company also said it saw a recovery in Canadian market activity during the second quarter.

Looking ahead, Sagr said Perma-Pipe enters the second half with backlog, a growing pipeline of requests for proposals and quoting opportunities, and business-development activity across its regions. He said the company is positioned for a stronger second half of fiscal 2026, barring a material worsening of market and geopolitical conditions.

About Perma-Pipe International (NASDAQ:PPIH)

Perma-Pipe International Holdings Ltd. is a publicly traded company on the NASDAQ under the symbol PPIH that specializes in the design, manufacture and installation of prefabricated piping systems. Its core business revolves around factory-assembled thermal insulation and corrosion protection solutions, including pre-insulated pipe, heat tracing, field-applied jackets and specialty spool pieces. These engineered systems are custom-built to industry specifications and are used to maintain temperatures, control heat loss and extend the life of critical piping infrastructure.

The company's products and services serve a diverse range of end markets, with primary focus on oil and gas production, petrochemical processing, power generation, district energy, and industrial facilities.

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