Perma-Pipe Revenue Up 28% in Fiscal Q2

Key Points

• Revenue climbed 27.7% to $47.9 million for Q2 FY2025, with major gains in both the Middle East and North America.

• Net income attributable to common stock fell to $0.9 million for Q2 FY2025, weighed down by a $2.1 million one-time executive compensation charge.

• Backlog more than doubled to $157.8 million as of July 31, 2025, supporting future revenue visibility.

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Perma-Pipe International (NASDAQ:PPIH), a specialist in engineered pre-insulated piping and leak detection systems, released its earnings report on September 15, 2025. The company delivered strong revenue growth and a substantial increase in project backlog. However, net income fell steeply, largely due to a one-time executive compensation expense and a higher effective tax rate. Overall, the period highlighted robust demand and operational expansion, but also exposed margin and expense management concerns.

About Perma-Pipe International: Business Overview and Focus Areas

Perma-Pipe International designs and manufactures specialty piping systems and integrated leak detection solutions. Its products are essential for energy transport, district heating and cooling, and protecting the environment from hazardous material leaks. The company customizes many of its systems to client specifications, enhancing safety and efficiency in large projects. It maintains manufacturing and engineering operations in North America, the Middle East, and India, serving clients in the energy, utilities, and infrastructure sectors.

Recent business strategies have centered on increasing the company's project-based backlog, expanding its global reach, and mitigating risks related to supply chains and raw materials. Success factors include product innovation, consistent project execution, and diversification across regions and industries, which helps buffer market volatility. Managing costs, especially for core materials like steel and polymers, is critical for maintaining profitability.

Quarterly Performance: Key Developments, Results, and Drivers

The second quarter marked a period of strong revenue expansion for the company, with sales climbing to $47.9 million—a 27.7% increase compared to the same period in the prior year. The performance was driven by higher sales volumes in both the Middle East and North America, two of its primary markets.

Despite higher sales, operating income fell to $3.2 million, down from $6.1 million in Q2 FY2024. The main reason for this decline was a sharp increase in general and administrative expenses, which jumped to $10.0 million. This included a $2.1 million one-time charge tied to the departure of the previous chief executive, along with higher payroll and professional service costs. As a result, net income attributable to common stock dropped to $0.9 million, compared to $3.3 million for Q2 FY2024. Earnings per share also declined, with diluted EPS at $0.10 for Q2 FY2025 versus $0.40 in the prior-year quarter.

Gross profit improved in absolute terms, increasing to $14.4 million from $13.5 million last year. However, the gross margin as a percentage of revenue decreased to 30.1% from 35.9% in the prior year. The adjusted income before income taxes, which excludes the impact of the one-time executive charge and other non-recurring expenses, was $4.9 million.

The company's backlog, representing signed project orders not yet fulfilled, was $157.8 million. Backlog stood at $157.8 million as of July 31, 2025, more than double the amount reported at the end of last year’s second quarter. The surge reflects both robust new awards in North America and a sizable contract win in Qatar, where the company is opening a new facility. Backlog is an important indicator of future revenue, providing visibility for coming quarters. However, it can carry risk if customers delay or cancel large projects, a common challenge in project-based business models. The effective tax rate also spiked to 54%, primarily because of a deduction limitation related to the executive compensation charge, further impacting net results.

Looking Forward: Management Outlook and Near-Term Watch Points

Management did not provide quantitative guidance for the remainder of the year. However, it noted that over $5 million in new Qatar project awards are expected to be completed by year-end, which will support future sales. Leadership has emphasized the significance of backlog growth across both North America and the Middle East and North Africa as a positive signal for ongoing demand.

The company's disclosure of an active review of strategic alternatives introduces a degree of uncertainty regarding its future direction. This process could lead to changes in ownership or capital structure. Areas to watch in upcoming quarters include expense discipline, margin recovery, and the execution of its expanding backlog, especially in new geographic regions.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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