Q2 2026 Perma-Pipe International Holdings Inc Earnings Call Transcript
Key Points
- Perma-Pipe International Holdings Inc (PPIH) delivered a strong second quarter with net sales up 24% year-over-year to $59.6 million and net income attributable to common stock growing to $2.5 million, or $0.31 per diluted share, from $0.10 in the prior year period.
- The company's backlog increased to $142.3 million at the end of the quarter, up from $121.6 million at the start of the fiscal year, providing a strong foundation for the second half of 2026.
- PPIH's leak detection business has already secured approximately 80% of its full-year bookings target, indicating strong market demand and successful expansion into new applications like digital infrastructure.
- The new global credit facility with JPMorgan Chase, consisting of a $75 million revolving credit facility and a $14 million term loan with an additional $50 million of incremental capacity, significantly enhances the company's financial flexibility to pursue larger projects, including those exceeding $100 million.
- Strategic expansion initiatives are progressing, including the ramp-up of the new Ohio facility and the Qatar facility, and a new MoU in Jordan with Welspun to enter pipe manufacturing, positioning the company for growth in the Levant region's infrastructure projects.
- The company's balance sheet has strengthened, with net debt reduced to approximately $4.3 million from $13.8 million at the end of the previous fiscal year, and cash and cash equivalents increased to $31.8 million.
- PPIH recorded a $3.9 million charge related to an uncollectible accounts receivable balance, which negatively impacted operating expenses and net income for the quarter.
- Gross margins for the first six months declined to approximately 29% from 33% in the prior year period, impacted by product mix, seasonal factors in Canada, and startup costs at the new Ohio facility.
- The company faces margin pressure from ongoing Middle East conflicts, which have significantly increased shipping costs and commodity prices, and not all of these cost increases can be passed on to customers due to fixed-price contracts.
- The new Ohio and Qatar facilities are still in their ramp-up phases, and their fixed costs are currently not fully absorbed, which is expected to continue to pressure margins until they reach full utilization, anticipated by early 2027.
- The company's effective tax rate can vary meaningfully from period to period due to changes in the mix of income and losses across the jurisdictions in which it operates, as evidenced by the 54% rate in the prior year quarter.
- The Jordan joint venture with Welspun is not yet a definitive award and has not been included in backlog, meaning the significant potential revenue from the National Carrier Water Project is not yet secured.
Good day and welcome to Perma-Pipe International Holding's second quarter fiscal 2026 earnings conference call. All participants are in a listen-only mode. (Operator Instructions) Please note, this call is being recorded. If you require operator assistance, please press star then zero.
I will now turn the call over to Chuck Heaton, Chief Compliance Officer and Vice President at Perma-Pipe. Please go ahead.
Thank you, Operator. Good morning, everyone, and thank you for joining Perma-Pipe International Holdings' second quarter fiscal 2026 earnings conference call.
With me on the call today are Saleh Sagr, President and Chief Executive Officer, and Matthew Lewicki, Chief Financial Officer.
Our second quarter results were issued this morning before market open. If you have not yet seen the release, it is available in the investor section of our website at investors.permapipe.com, where an archive of today's call will also be posted.
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