PPIH Q1-25 Perma-Pipe International Holdings
Q1 Fiscal 2025 Earnings Update
Disclaimer: The following is not investment advice. The author may own, buy, or sell securities mentioned in this post. Please always do your own due diligence! Perma-Pipe is a smaller reporting company. Small investments may move the share price due to low liquidity. Liquidating positions may be challenging.
Overview
On June 13, 2025, Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) reported a strong Q1 FY2025, with revenue climbing 36% to $46.7 million and net income to common stock soaring 243% to $5.0 million. Fueled by Middle East infrastructure projects, particularly in Saudi Arabia and Qatar, PPIH is capitalizing on regional energy and utilities demand. A $131.1 million backlog—double last year’s level—and $18.8 million in cash underscore a strong outlook, with a new temporary facility in Qatar signaling expanding opportunities. Shares held steady post-earnings, reflecting confidence in PPIH’s growth trajectory.
Q1 Financial Snapshot
Revenue: $46.7M, +36% YoY from $34.3M.
Gross Profit: $16.7M, 36% margin (vs. 31% YoY).
Operating Income: $7.9M, +152% YoY from $3.1M.
Net Income (Common Stock): $5.0M, or $0.62/$0.61 per basic/diluted share, +243% YoY from $1.4M, or $0.18/share.
Cash Flow from Operations: $0.7M, vs. -$0.1M YoY.
Cash and Equivalents: $18.8M, +20% from $15.7M at Jan 31, 2025.
Working Capital: $58.9M, with $27.9M debt ($8.5M North American revolver, $6.3M foreign lines).
Borrowing Capacity: $19.5M ($5.0M North America, $14.5M foreign).
Piping Systems Performance
PPIH’s Piping Systems segment, encompassing Specialty Piping/Coating (92% of revenue) and Products (8%), led the charge:
Revenue Mix: Specialty Piping/Coating ($43.1M, +37% YoY) drove growth, with $12.1M from cost-based progress (input method) and $31.0M from units produced/shipped (output method). Products ($3.6M, +12% YoY) grew via leak detection systems and cables.
Margin Strength: A 36% gross margin (vs. 31% YoY) reflects high-value offerings like XTRU-THERM® systems and efficient project execution.
Backlog: At $131.1M, down $7.0M from $138.1M at Jan 31, 2025, but double the $63.1M from April 30, 2024, driven by Middle East contracts, including a $2.4M Qatar project.
Middle East Momentum
PPIH’s growth is anchored in Middle East infrastructure, with Saudi Arabia and Qatar leading the way. A 60/40 Saudi joint venture, exceeding expectations since 2023, supports Vision 2030’s energy and utilities goals. A temporary Qatar facility, tied to a $2.4M contract, signals confidence in expanding regional business and growing customer interest. In Q4 FY2024, low oil prices ($60–$65/bbl) raised demand concerns, but Q1’s ~$70s/bbl range reinforces activity, though infrastructure projects remain the primary driver. Progress on collecting $0.6M from a 2015 project ($1.2M remaining) strengthens regional ties.
Strategic Priorities
PPIH is poised for growth through:
Regional Expansion: Middle East revenue, up 226% since 2020 to $75M in FY2024, benefits from new facilities and contracts.
North America: U.S. (33% of FY2024 revenue) and Canada’s Vars, Ontario facility (20%) tap district heating/cooling markets.
Financial Agility: $18.8M cash and $19.5M borrowing capacity fund $0.9M Q1 capex and backlog execution.
Future Markets: LNG, hydrogen, and ammonia piping systems offer diversification potential.
Financial Notes
G&A Expenses: $7.7M, +26% YoY, driven by payroll and professional fees.
Tax Rate: 21% (vs. 30% YoY), reflecting jurisdictional income mix.
Debt: $27.9M (0.7x FY2024 EBITDA) is manageable, with $19.5M available credit.
Risks
Project Variability: Discrete projects ($131.1M backlog) create revenue lumpiness, with delays possible if infrastructure spending slows.
Geopolitical Tensions: Short-term Middle East conflicts (46% of FY2024 revenue) could postpone contracts, though long-term demand remains strong.
Reporting Risks: Internal control weaknesses in journal entries, IT, and MENA documentation require remediation to ensure reliability.
Final Thoughts
PPIH’s Q1 FY2025 results highlight its strength in Middle East infrastructure, with a $131.1M backlog and 36% margins driving robust growth. The temporary Qatar facility is a bullish signal, reflecting confidence in securing more regional business and attracting new customers. While geopolitical tensions may delay contracts short-term, PPIH’s long-term value in energy and utilities infrastructure is evident. In Q4 FY2024, the stock traded at ~11.5x FY24 P/E and 5x EV/EBITDA, with a projected $18–$20 range for FY2025 at ~$167.5M revenue (+5.7% YoY) and ~$1.26 EPS; it’s now in that range. With Q1’s improved margins, assuming it’s not a run-rate quarter but growth continues, to increase its backlog, so ill keep the ~$167.5M revenue estimate.. At an 8% improved net income margin, FY2025 EPS could reach ~$2.00, implying a $30–$40 target at 15x–20x P/E.