Kewaunee Scientific (KEQU) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related disclosures for the company Item 1. Condensed Consolidated Financial Statements This section presents Kewaunee Scientific Corporation's unaudited condensed consolidated financial statements, including statements of operations, comprehensive earnings, stockholders' equity, balance sheets, and cash flows, along with detailed notes explaining accounting policies, significant transactions like the Nu Aire acquisition, and financial instrument valuations for the three months ended July 31, 2025, and comparative periods Condensed Consolidated Statements of Operations Summarizes the company's net sales, gross profit, operating profit, and net earnings for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net sales | 71,104 | 48,393 | 46.9% | | Cost of products sold | 50,174 | 35,905 | 39.7% | | Gross profit | 20,930 | 12,488 | 67.6% | | Operating expenses | 16,120 | 9,913 | 62.6% | | Operating profit | 4,810 | 2,575 | 86.8% | | Profit before income taxes | 3,920 | 2,430 | 61.3% | | Income tax expense | 761 | 192 | 296.4% | | Net earnings | 3,159 | 2,238 | 41.2% | | Net earnings attributable to Kewaunee Scientific Corporation | 3,093 | 2,193 | 41.0% | | Basic EPS | 1.08 | 0.77 | 40.3% | | Diluted EPS | 1.04 | 0.74 | 40.5% | Condensed Consolidated Statements of Comprehensive Earnings Presents net earnings and other comprehensive income/loss, including foreign currency adjustments, for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net earnings | 3,159 | 2,238 | 41.2% | | Foreign currency translation adjustments | (410) | (116) | 253.4% | | Other comprehensive loss | (410) | (116) | 253.4% | | Comprehensive earnings, net of tax | 2,749 | 2,122 | 29.5% | | Comprehensive earnings attributable to Kewaunee Scientific Corporation | 2,683 | 2,077 | 29.2% | Condensed Consolidated Statements of Stockholders' Equity Details changes in stockholders' equity, including retained earnings and accumulated other comprehensive loss, between April 30, 2025 and July 31, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Kewaunee Scientific Corporation Stockholders' Equity | 67,078 | 64,457 | 2,621 | | Retained Earnings | 62,012 | 58,919 | 3,093 | | Accumulated Other Comprehensive Loss | (4,213) | (3,803) | (410) | - Net earnings attributable to Kewaunee Scientific Corporation for the three months ended July 31, 2025, were $3,093 thousand, contributing to the increase in retained earnings[16] - Other comprehensive loss for the three months ended July 31, 2025, was $(410) thousand[16] Condensed Consolidated Balance Sheets Outlines the company's financial position, including assets, liabilities, and equity, as of July 31, 2025 and April 30, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Current Assets | 117,148 | 118,363 | (1,215) | | Total Assets | 193,486 | 194,654 | (1,168) | | Total Current Liabilities | 50,486 | 53,712 | (3,226) | | Total Liabilities | 124,617 | 128,409 | (3,792) | | Total Stockholders' Equity | 68,869 | 66,245 | 2,624 | | Cash and cash equivalents | 19,489 | 14,942 | 4,547 | | Receivables, net | 56,897 | 62,384 | (5,487) | | Inventories | 34,923 | 32,849 | 2,074 | Condensed Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------- | | Net cash provided by (used in) operating activities | 5,791 | (794) | 6,585 | | Net cash used in investing activities | (771) | (278) | (493) | | Net cash (used in) provided by financing activities | (1,463) | 343 | (1,806) | | Increase (decrease) in cash, cash equivalents and restricted cash | 3,277 | (752) | 4,029 | | Cash, cash equivalents and restricted cash, end of period | 20,441 | 25,186 | (4,745) | - Operating activities provided $5,791 thousand in cash for the three months ended July 31, 2025, a substantial improvement from $794 thousand used in the prior year[21] - Capital expenditures increased to $771 thousand for the three months ended July 31, 2025, from $278 thousand in the prior year[21] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, acquisitions, and financial instruments A. Financial Information Clarifies the basis of preparation for unaudited interim financial statements and their relation to the annual report - The interim financial statements are unaudited and prepared under SEC rules, condensing GAAP disclosures, and should be read in conjunction with the Company's 2025 Annual Report on Form 10-K[26][27] - Interim results are not necessarily indicative of full-year results, and management's estimates and assumptions are subject to actual results differing[27][28] B. Cash, Cash Equivalents and Restricted Cash Details the composition of cash, cash equivalents, and restricted cash, including performance guarantee amounts - Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders[29] | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------------- | :-------------------------- | :--------------------------- | | Cash and cash equivalents | 19,489 | 14,942 | | Restricted cash | 952 | 2,222 | | Total cash, cash equivalents and restricted cash | 20,441 | 17,164 | C. Nu Aire Acquisition Describes the Nu Aire, Inc. acquisition, its financial impact, purchase price allocation, and pro forma information - Kewaunee Scientific Corporation acquired Nu Aire, Inc. on November 1, 2024, for $53.0 million, expanding its capabilities in laboratory furnishings and technical products[31][32][33] - The acquisition was funded by $29.669 million cash and $23.0 million in subordinated seller notes[32][33] - Nu Aire contributed $19.7 million in revenue and $696,000 in net earnings for the three months ended July 31, 2025[37] Nu Aire Purchase Price Allocation (as of July 31, 2025) | Asset/Liability | Final Allocation ($ thousands) | | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | 1,245 | | Receivables | 10,650 | | Inventories | 15,522 | | Property, plant and equipment | 7,349 | | Other intangible assets | 18,600 | | Goodwill | 12,487 | | Total assets acquired | 74,088 | | Total liabilities assumed | (21,108) | | Aggregate acquisition consideration | 52,980 | Pro Forma Financial Information (Three Months Ended July 31, 2024, as if Nu Aire acquired May 1, 2023) | Metric | 2025 (actual) ($ thousands) | 2024 (pro forma) ($ thousands) | | :------------------------------------------ | :-------------------------- | :----------------------------- | | Net sales | 71,104 | 65,448 | | Net earnings | 3,093 | 4,273 | | Basic EPS | 1.08 | 1.50 | | Diluted EPS | 1.04 | 1.44 | D. Revenue Recognition Explains revenue recognition policies, disaggregated revenue by type and geography, and deferred revenue balances - The majority of the Company's revenues are recognized over time as the customer receives control, with a portion recognized at a distinct point in time[41] Disaggregated Revenue (Three Months Ended July 31) | Revenue Type | July 31, 2025 Domestic ($ thousands) | July 31, 2025 International ($ thousands) | July 31, 2025 Total ($ thousands) | July 31, 2024 Domestic ($ thousands) | July 31, 2024 International ($ thousands) | July 31, 2024 Total ($ thousands) | | :----------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | | Over Time | 32,713 | 16,752 | 49,465 | 34,389 | 12,870 | 47,259 | | Point in Time | 21,639 | — | 21,639 | 1,134 | — | 1,134 | | Total | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | - Deferred revenue at July 31, 2025, was $4,983 thousand, with approximately 100% expected to be recognized as revenue in the succeeding 12 months[43] E. Inventories Outlines the valuation method and composition of inventories, including finished products, work in process, and raw materials - Inventories are measured using the first-in, first-out (FIFO) method at the lower of cost or net realizable value[44] Inventories Composition | Inventory Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :------------- | :-------------------------- | :--------------------------- | | Finished products | 6,056 | 5,543 | | Work in process | 6,827 | 3,784 | | Raw materials | 22,040 | 23,522 | | Total | 34,923 | 32,849 | F. Fair Value of Financial Instruments Discusses fair value measurement of financial instruments and their classification within the fair value hierarchy - The carrying value of the Company's financial instruments, including cash, mutual funds, and debt, approximates their fair value[45] Fair Value Hierarchy (July 31, 2025) | Financial Assets | Level 1 ($ thousands) | Level 2 ($ thousands) | Total ($ thousands) | | :------------------------------------------------- | :-------------------- | :-------------------- | :------------------ | | Trading securities held in non-qualified compensation plans | 2,340 | — | 2,340 | | Cash surrender value of life insurance policies | — | 1,514 | 1,514 | | Total Financial Assets | 2,340 | 1,514 | 3,854 | | Financial Liabilities | | | | | Non-qualified compensation plans | — | 4,334 | 4,334 | | Total Financial Liabilities | — | 4,334 | 4,334 | G. Goodwill and Other Intangible Assets Details goodwill from the Nu Aire acquisition and the composition, useful lives, and amortization of other intangible assets - Goodwill of approximately $12.5 million was recorded from the Nu Aire Acquisition, with no impairment losses during the three months ended July 31, 2025[45] Intangible Assets (July 31, 2025) | Intangible Asset | Estimated Useful Life | Gross Carrying Amount ($ thousands) | Accumulated Amortization ($ thousands) | Net Book Value ($ thousands) | | :----------------------- | :-------------------- | :---------------------------------- | :------------------------------------- | :--------------------------- | | Customer relationships | 10 years | 9,800 | (735) | 9,065 | | Trade names and trademarks | indefinite | 4,900 | — | 4,900 | | Developed technology | 7 years | 3,900 | (418) | 3,482 | | Total | | 18,600 | (1,153) | 17,447 | Expected Future Amortization Expense (excluding trade names and trademarks) | Fiscal Year | Amortization Expense ($ thousands) | | :------------------ | :------------------------------- | | Remainder of fiscal 2026 | 1,153 | | 2027 | 1,537 | | 2028 | 1,537 | | 2029 | 1,537 | | 2030 | 1,537 | | Thereafter | 5,246 | | Total | 12,547 | H. Long-term Debt and Other Credit Arrangements Describes long-term debt, including the PNC Loan Agreement, Subordinated Seller Notes, and other credit facilities Long-term Debt Components | Debt Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :---------------- | :-------------------------- | :--------------------------- | | PNC Loan Agreement | 13,000 | 13,750 | | Seller Notes | 24,380 | 23,935 | | Total long-term debt | 37,380 | 37,685 | - The PNC Loan Agreement includes a $20.0 million Revolving Credit Facility (unused at July 31, 2025) and a $15.0 million Term Loan, both maturing on November 1, 2029[49][51] - Subordinated Seller Notes of $23.0 million, accruing 8% interest per annum, mature on November 1, 2027, and are subordinate to PNC's rights[53][55] - International subsidiaries had $495,000 in short-term borrowings at July 31, 2025[57] I. Sale-Leaseback Financing Transaction Explains the headquarters sale-leaseback as a financing transaction, detailing associated liabilities and interest expense - The sale-leaseback arrangement for the Company's headquarters was accounted for as a financing transaction due to the lease being classified as a finance lease, indicating control of the property did not transfer[60][62] - The carrying value of the financing liability was $27,227 thousand at July 31, 2025, with $807 thousand classified as current[63] - Interest expense associated with the financing arrangement was $308 thousand for the three months ended July 31, 2025[63] J. Leases Provides information on right-of-use assets, lease liabilities, and future minimum payments for operating and financing leases - Right-of-use assets totaled $12,022 thousand at July 31, 2025, for operating and financing leases[66] - Operating cash paid to settle lease liabilities was $1,040 thousand for the three months ended July 31, 2025, and operating lease expense was $1,458 thousand[66] Future Minimum Lease Payments (July 31, 2025) | Fiscal Year | Operating ($ thousands) | Financing ($ thousands) | | :------------------ | :---------------------- | :---------------------- | | Remainder of fiscal 2026 | 2,843 | 94 | | 2027 | 3,345 | 40 | | 2028 | 2,462 | 40 | | 2029 | 2,108 | 40 | | 2030 | 1,630 | 40 | | Thereafter | 160 | 22 | | Total Minimum Lease Payments | 12,548 | 276 | | Imputed Interest | (1,403) | (45) | | Total | 11,145 | 231 | K. Stockholders' Equity Details the number of outstanding common shares and the company's share repurchase program - As of July 31, 2025, there were approximately 2,865,000 shares of Common Stock outstanding[69] - The Board of Directors amended the share repurchase program on March 12, 2025, authorizing an additional 100,000 shares[71] - No shares were repurchased under the program during the three months ended July 31, 2025, with 100,603 shares remaining authorized for purchase[71] L. Earnings Per Share Explains basic and diluted earnings per share calculation and reconciliation of weighted average common shares outstanding - Basic EPS is based on the weighted average number of common shares outstanding, while diluted EPS reflects the assumed exercise of outstanding options and conversion of restricted stock units (RSUs)[72] Reconciliation of Basic to Diluted Weighted Average Common Shares Outstanding | Metric | Three Months Ended July 31, 2025 (thousands) | Three Months Ended July 31, 2024 (thousands) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Basic | 2,851 | 2,849 | | Dilutive effect of stock options and RSUs | 112 | 118 | | Weighted average common shares outstanding - diluted | 2,963 | 2,967 | M. Stock Options and Stock-based Compensation Describes the company's stock incentive plans, RSU grants, and stock-based compensation expense - The 2023 Omnibus Incentive Plan replaced the 2017 Plan, reserving 374,633 shares for issuance, with 291,326 shares available at July 31, 2025[74] - The Company granted 72,728 RSUs in June 2025, vesting over three years with service and performance components[75] - Stock-based compensation expense was $431 thousand for the three months ended July 31, 2025, with $3,877 thousand remaining to be recorded[75] N. Income Taxes Presents income tax expense, effective tax rates, and the impact of discrete tax benefits and new tax legislation Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income tax expense | 761 | 192 | | Effective tax rate | 19.4% | 7.9% | - The effective tax rate for Q1 FY2026 (19.4%) reflects foreign operations' tax rates and a $303 thousand discrete tax benefit from RSU vesting[76] - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, and the Company is evaluating its potential impact on future tax obligations[78] O. Segment Information Provides financial data disaggregated by domestic and international operating segments, evaluated by earnings before income taxes - The Company operates in two business segments: Domestic (including the Nu Aire acquisition) and International, with the CEO evaluating performance based on earnings before income taxes[79][80] Segment Financial Information (Three Months Ended July 31, 2025 vs. 2024) | Metric | Domestic Operations 2025 ($ thousands) | International Operations 2025 ($ thousands) | Total 2025 ($ thousands) | Domestic Operations 2024 ($ thousands) | International Operations 2024 ($ thousands) | Total 2024 ($ thousands) | | :------------------------------------ | :------------------------------------- | :------------------------------------------ | :----------------------- | :------------------------------------- | :------------------------------------------ | :----------------------- | | Revenues from external customers | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | | Depreciation and amortization | 1,428 | 96 | 1,549 | 662 | 107 | 815 | | Interest expense | 313 | 13 | 1,058 | 441 | 21 | 472 | | Earnings (loss) before income taxes | 5,835 | 1,143 | 3,920 | 3,635 | 787 | 2,430 | | Segment assets | 153,302 | 40,184 | 193,486 | 90,235 | 41,783 | 132,018 | P. New Accounting Standards Discusses recently issued accounting pronouncements and their expected impact on financial statements - ASU 2023-09, "Improvements for Income Tax Disclosures," is effective for fiscal year 2026, with no significant impact expected[82] - ASU 2024-03/2025-01, "Expense Disaggregation Disclosures," is effective for annual disclosures in fiscal year 2028 and interim disclosures in fiscal year 2029, with no significant impact expected[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance and condition, highlighting the impact of the Nu Aire acquisition on sales and gross profit, discussing liquidity, and outlining the outlook amidst market challenges and strategic growth initiatives Acquisition of Nu Aire, Inc. Details the strategic rationale and financial aspects of the Nu Aire acquisition, expanding product offerings - The Nu Aire acquisition, completed November 1, 2024, for $55.0 million, significantly expands the Company's product portfolio to include biological safety cabinets, CO2 incubators, and ultralow freezers[85][86] - This acquisition accelerates the Company's vision of becoming a market leader in laboratory furniture and technical products by combining capabilities and leveraging Nu Aire's established distribution partners[87] Critical Accounting Estimates Confirms no material changes to critical accounting estimates since the last annual report, except as noted - There have been no material changes to the Company's critical accounting estimates since the 2025 Annual Report on Form 10-K, beyond those set forth in this quarterly report[88] Results of Operations Analyzes key financial performance indicators like sales, gross profit, operating expenses, and net earnings for the three months ended July 31, 2025 and 2024 Key Financial Performance Indicators (Three Months Ended July 31) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | YoY Change ($ thousands) | YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :----------------------- | :------------- | | Sales | 71,104 | 48,393 | 22,711 | 46.9% | | Domestic Sales | 54,352 | 35,523 | 18,829 | 53.0% | | International Sales | 16,752 | 12,870 | 3,882 | 30.2% | | Gross Profit Margin | 29.4% | 25.8% | 3.6 pp | - | | Operating Expenses | 16,120 | 9,913 | 6,207 | 62.6% | | Interest Expense | 1,058 | 472 | 586 | 124.2% | | Income Tax Expense | 761 | 192 | 569 | 296.4% | | Net Earnings | 3,093 | 2,193 | 900 | 41.0% | | Diluted EPS | 1.04 | 0.74 | 0.30 | 40.5% | - Domestic sales increased 53.0% primarily due to the Nu Aire acquisition, while International sales increased 30.2% due to large project deliveries[89] - The Company's order backlog was $205.0 million at July 31, 2025, compared to $159.4 million at July 31, 2024[90] Liquidity and Capital Resources Discusses liquidity sources, working capital, and cash flows from operating, investing, and financing activities - Principal liquidity sources are funds from operating activities and the new PNC Revolving Credit Facility, which replaced the terminated Mid Cap Revolving Credit Facility[97] Working Capital and Ratios | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Working Capital | 66,662 | 64,651 | | Ratio of Current Assets to Current Liabilities | 2.3-to-1.0 | 2.2-to-1.0 | - Operating activities provided $5,791 thousand in cash, driven by decreases in receivables, partially offset by increases in inventories and decreases in accounts payable[99] - Investing activities used $771 thousand for capital expenditures, and financing activities used $1,463 thousand, primarily for long-term debt servicing[99] Outlook Provides management's expectations for future performance, including project timelines, backlog, and strategic growth initiatives - The Company anticipates some volatility in project delivery timelines for fiscal year 2026 but maintains a strong overall backlog of $205.0 million[101][90] - Management is focused on organic and inorganic growth, making strategic investments in people, processes, and technology to support sustainable growth[102] - The Company believes its strategic investments and healthy backlog position it well to manage short-term headwinds and ensure long-term business health[102] Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Warns about forward-looking statements, outlining risks and uncertainties that could cause actual results to differ - The document contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that could significantly impact results[103] - Factors that could cause differences include the ability to realize Nu Aire acquisition benefits, competitive and economic conditions, customer demands, technological changes, international operations risks, and raw material costs[103] - The Company assumes no obligation to update any forward-looking statements[103] Item 3. Quantitative and Qualitative Disclosures About Market Risk States no material changes to market risk disclosures from the most recent annual report - No material changes to market risk disclosures compared to the 2025 Annual Report on Form 10-K[104] Item 4. Controls and Procedures Reports on the effectiveness of disclosure controls and procedures and the ongoing integration of Nu Aire into the control environment - As of July 31, 2025, the Company's disclosure controls and procedures were deemed adequate and effective by management, including the CEO and CFO[105] - The Company is integrating Nu Aire into its systems and control environment, monitoring and maintaining appropriate internal control over financial reporting during this process[106] - No other significant changes in internal control over financial reporting occurred during the quarter[106] PART II. OTHER INFORMATION Contains additional information not covered in financial statements, including risk factors, equity sales, and exhibits Item 1A. Risk Factors Refers to previously disclosed risk factors and notes any updates or new factors impacting the company's business - No material changes to risk factors from the 2025 Annual Report on Form 10-K, except as noted in this quarterly report[109] - Various known or unknown factors could materially and adversely affect the Company's business, financial condition, operating results, and stock price[109] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports on unregistered sales of equity securities and details the company's share repurchase activities - No unregistered sales of equity securities occurred during the period[110] - The Company did not purchase any shares under its share repurchase program during the three months ended July 31, 2025, with 100,603 shares remaining authorized for purchase[111] Item 5. Other Information Discloses information regarding Rule 10b5-1 trading arrangements by directors and executive officers - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended July 31, 2025[113] Item 6. Exhibits Lists all documents filed as exhibits to the Form 10-Q, including certifications and financial data in XBRL format - Exhibits include bylaws, CEO/CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents for financial data[116] SIGNATURE Confirms the official signing of the report by an authorized financial officer - The report was signed by Donald T. Gardner III, Vice President, Finance and Chief Financial Officer, on behalf of Kewaunee Scientific Corporation on September 12, 2025[118]