KEWAUNEE SCIENTIFIC CORP /DE/

Previous wording

The Company's 2025 Annual Report to Stockholders on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the fiscal year ended April 30, 2025. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2025. The analysis of results of operations compares the three and six months ended October 31, 2025 with the comparable period of the prior year.

Current wording

The Company's 2025 Annual Report on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the fiscal year ended April 30, 2025. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2025. The analysis of results of operations compares the three and nine months ended January 31, 2026 with the comparable period of the prior year.

Previous wording

Sales for the quarter were $70,096,000, an increase from sales of $47,764,000 in the comparable period of the prior year. Domestic sales for the quarter were $55,224,000, up 51.7% when compared to sales of $36,409,000 in the comparable period of the prior year. Domestic sales increased when compared to the prior year primarily due to the acquisition of Nu Aire, as discussed above, which closed on November 1, 2024 and was not part of the prior year comparable results. International sales for the quarter were $14,872,000, up 31.0% when compared to sales of $11,355,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to the continued delivery of large projects booked in prior periods, a trend that continues from the Company's first quarter fiscal year 2026 results.

Current wording

Sales for the quarter were $69,399,000, an increase from sales of $67,167,000 in the comparable period of the prior year. Domestic sales for the quarter were $50,953,000, down 2.0% when compared to sales of $51,976,000 in the comparable period of the prior year. Domestic sales remained relatively flat when compared to the prior year. International sales for the quarter were $18,446,000, up 21.4% when compared to sales of $15,191,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to higher billings, principally in the Indian market.

Previous wording

Sales for the six months ended October 31, 2025 were $141,200,000, an increase from sales of $96,157,000 in the comparable period of the prior year. Domestic sales for the period were $109,576,000, up 52.3% from sales of $71,932,000 in the comparable period of the prior year. The increase in Domestic sales was due to the acquisition of Nu Aire, as discussed above, which was not part of the prior year comparable results. International sales for the period were $31,624,000, up 30.5% from sales of $24,225,000 in the comparable period of the prior year. The increase in International sales was primarily driven by the continued delivery of large projects booked in prior periods, as noted above.

Current wording

Sales for the nine months ended January 31, 2026 were $210,599,000, an increase from sales of $163,324,000 in the comparable period of the prior year. Domestic sales for the period were $160,529,000, up 29.6% from sales of $123,908,000 in the comparable period of the prior year. The increase in Domestic sales was due to the acquisition of Nu Aire, as discussed above, which was included in the prior year comparable results for only a portion of the nine month period. International sales for the period were $50,070,000, up 27.0% from sales of $39,416,000 in the comparable period of the prior year. The increase in International sales was primarily driven by increased billings, as noted above.

Previous wording

The Company's order backlog was $192.9 million at October 31, 2025, as compared to $184.4 million at October 31, 2024, and $214.6 million at April 30, 2025.

Current wording

The Company's order backlog was $183.2 million at January 31, 2026, as compared to $221.6 million at January 31, 2025, and $214.6 million at April 30, 2025.

Previous wording

The gross profit margin for the three months ended October 31, 2025 was 28.1% of sales, as compared to 29.2% of sales in the comparable quarter of the prior year. The gross profit margin for the six months ended October 31, 2025 was 28.8% of sales, as compared to 27.5% of sales in the comparable period of the prior year. The change in gross profit margin percentage for the three and six months ended October 31, 2025 was primarily driven by the acquisition of Nu Aire on November 1, 2024. Additionally, domestic segment profitability in the three months ended October 31, 2025 was also impacted by lower manufacturing volumes and reduced productivity across the laboratory construction portion of the business, offset by strength in the end-user containment portion of the business.

Current wording

The gross profit margin for the three months ended January 31, 2026 was 26.7% of sales, as compared to 27.4% of sales in the comparable quarter of the prior year. The gross profit margin for the nine months ended January 31, 2026 was 28.1% of sales, as compared to 27.4% of sales in the comparable period of the prior year. The change in gross profit margin percentage for the nine months ended January 31, 2026 was primarily driven by the acquisition of Nu Aire on November 1, 2024. Additionally, domestic segment profitability in the three months ended January 31, 2026 was impacted by lower manufacturing volumes across the laboratory construction portion of the business as well as changes in product mix.

Previous wording

Operating expenses for the three months ended October 31, 2025 were $15,613,000, or 22.3% of sales, as compared to $9,518,000, or 19.9% of sales, in the comparable period of the prior year. Operating expenses for the six months ended October 31, 2025 were $31,733,000, or 22.5% of sales, as compared to $19,431,000, or 20.2% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended October 31, 2025 was primarily due to the acquisition of Nu Aire. The increase in operating expenses was also impacted by increases in SG&A wages, benefits, incentive and stock-based compensation of $699,000 and international operating expenses of $397,000, partially offset by decreases in consulting and professional fees of $624,000. The increase in operating expenses for the six months ended October 31, 2025 was primarily due to the acquisition of Nu Aire. The increase in operating expenses was also impacted by increases in SG&A wages, benefits, incentive and stock-based compensation of $881,000 and international operating expenses of $789,000, partially offset by decreases in consulting and professional fees of $655,000.

Current wording

Operating expenses for the three months ended January 31, 2026 were $15,963,000, or 23.0% of sales, as compared to $16,129,000, or 24.0% of sales, in the comparable period of the prior year. Operating expenses for the nine months ended January 31, 2026 were $47,696,000, or 22.6% of sales, as compared to $35,560,000, or 21.8% of sales, in the comparable period of the prior year. Operating expenses for the three months ended January 31, 2026 remained relatively flat. The increase in operating expenses for the nine months ended January 31, 2026 was primarily due to the acquisition of Nu Aire. The increase in operating expenses was also impacted by increases in SG&A wages, benefits, incentive and stock-based compensation of $1,008,000 and international operating expenses of $682,000, partially offset by decreases in consulting and professional fees of $1,106,000.

Previous wording

Interest expense was $1,061,000 and $2,119,000 for the three and six months ended October 31, 2025, respectively, as compared to $442,000 and $914,000 for the comparable periods of the prior year. The changes in interest expense were due to changes in the levels of bank and other borrowings and interest rates.

Current wording

Interest expense was $1,112,000 and $3,231,000 for the three and nine months ended January 31, 2026, respectively, as compared to $1,137,000 and $2,051,000 for the comparable periods of the prior year. The changes in interest expense were due to changes in the levels of bank and other borrowings and interest rates.

Previous wording

Income tax expense of $915,000 and $916,000 were recorded for the three months ended October 31, 2025 and 2024, respectively. Income tax expense of $1,676,000 and $1,108,000 were recorded for the six months ended October 31, 2025 and 2024, respectively. The effective income tax rate for the three and six months ended October 31, 2025 was 26.5% and 22.7%, respectively, as compared to 23.3% and 17.4% for the three and six months ended October 31, 2024, respectively. The effective tax rate for the current three and six month periods reflects the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21%, combined with expected current year tax expense for the Company's domestic operations. In addition, the income tax expense recorded for the three months ended July 31, 2025 was favorably impacted by a discrete tax benefit of $303,000 resulting from the issuance of stock through the vesting of restricted stock units during the first quarter. On July 4, 2025, the U.S. government enacted Public Law No. 119-21, commonly known as the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting businesses. Since OBBBA was enacted on July 4, 2025, its full impact is not reflected in the Company's Condensed Consolidated Financial Statements for the three months ended July 31, 2025. The Company is evaluating the provisions to assess potential effects on its effective tax rate, deferred tax assets and liabilities, and future cash tax obligations. See Note N, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

Income tax expense of $528,000 and income tax benefit of $108,000 were recorded for the three months ended January 31, 2026 and 2025, respectively. Income tax expense of $2,204,000 and $1,000,000 were recorded for the nine months ended January 31, 2026 and 2025, respectively. The effective income tax rate for the three and nine months ended January 31, 2026 was 32.9% and 24.6%, respectively, as compared to (8.5)% and 13.1% for the three and nine months ended January 31, 2025, respectively. The effective tax rate for the current three and nine month periods reflects the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21%, combined with expected current year tax expense for the Company's domestic operations. In addition, the income tax expense recorded for the nine months ended January 31, 2026 was favorably impacted by a discrete tax benefit of $303,000 resulting from the issuance of stock through the vesting of restricted stock units during the first quarter. The comparable prior year period also included a one-time tax benefit related to the remeasurement of deferred tax assets following the Nu Aire acquisition. The acquisition changed the Company's weighted average state tax rate, resulting in a favorable deferred tax assets adjustment. On July 4, 2025, the U.S. government enacted Public Law No. 119-21, commonly known as the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting businesses. Since OBBBA was enacted on July 4, 2025, the Company has evaluated its provisions and reflected the impact of the bonus amortization acceleration under Section 174 of the Internal Revenue Code in its income tax provision for the nine months ended January 31, 2026. The enactment impacts the Company's effective tax rate and deferred tax balances for the period. The Company continues to evaluate other provisions of the legislation; however, no additional material impacts have been identified as of January 31, 2026. See Note N, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company decreased net earnings by $93,000 and $159,000 for the three and six months ended October 31, 2025, respectively, as compared to $7,000 and $52,000, respectively, for the comparable period of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings (losses) of the subsidiaries in the related period.

Current wording

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company decreased net earnings by $384,000 and $543,000 for the three and nine months ended January 31, 2026, respectively, as compared to $29,000 and $81,000, respectively, for the comparable period of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings (losses) of the subsidiaries in the related period.

Previous wording

Net earnings was $2,445,000, or $0.82 per diluted share, for the three months ended October 31, 2025, compared to net earnings of $3,008,000, or $1.01 per diluted share, in the prior year period. Net earnings was $5,538,000, or $1.86 per diluted share, for the six months ended October 31, 2025, compared to net earnings of $5,201,000, or $1.75 per diluted share, in the prior year period.

Current wording

Net earnings was $692,000, or $0.23 per diluted share, for the three months ended January 31, 2026, compared to net earnings of $1,354,000, or $0.45 per diluted share, in the prior year period. Net earnings was $6,230,000, or $2.09 per diluted share, for the nine months ended January 31, 2026, compared to net earnings of $6,555,000, or $2.20 per diluted share, in the prior year period.

Previous wording

The Company had working capital of $67,830,000 at October 31, 2025, compared to $64,651,000 at April 30, 2025. The ratio of current assets to current liabilities was 2.5-to-1.0 at October 31, 2025, compared to 2.2-to-1.0 at April 30, 2025.

Current wording

The Company had working capital of $54,793,000 at January 31, 2026, compared to $64,651,000 at April 30, 2025. The ratio of current assets to current liabilities was 2.1-to-1.0 at January 31, 2026, compared to 2.2-to-1.0 at April 30, 2025.

Previous wording

The Company's operating activities provided cash of $1,526,000 during the six months ended October 31, 2025. Net cash provided by operating activities was primarily driven by operations and decreases in receivables of $3.4 million, partially offset by increases in inventories of $2.7 million, decreases in accounts payable and other accrued expenses of $6.4 million, and decreases in deferred revenue of $1.7 million. During the six months ended October 31, 2025, the Company used net cash of $2,341,000 in investing activities related to capital expenditures. The Company's financing activities used net cash of $2,316,000 during the six months ended October 31, 2025, primarily related to the servicing of the Company's long-term debt arrangements and the payment of employee taxes withheld for stock-based compensation. See Note H, Long-term Debt and Other Credit Arrangements, for more details. On December 4, 2025, the Company entered into a First Amendment to Loan Agreement with PNC and completed the Seller Note Repayment. See Note Q, Subsequent Events, for more details.

Current wording

The Company's operating activities provided cash of $13,173,000 during the nine months ended January 31, 2026. Net cash provided by operating activities was primarily driven by operations and decreases in receivables of $8.2 million, partially offset by decreases in accounts payable and other accrued expenses of $5.4 million, and decreases in deferred revenue of $2.0 million. During the nine months ended January 31, 2026, the Company used net cash of $3,009,000 in investing activities related to capital expenditures. The Company's financing activities used net cash of $16,376,000 during the nine months ended January 31, 2026, primarily related to the servicing of the Company's long-term debt arrangements and the payment of employee taxes withheld for stock-based compensation. Additionally, on December 4, 2025, the Company entered into a First Amendment to Loan Agreement with PNC and completed the Seller Note Repayment. See Note H, Long-term Debt and Other Credit Arrangements, for more details.

Previous wording

The Company remains focused on growth, both organically and inorganically, and is committed to making strategic investments in the people, processes, and technology that will support and enable this growth in a sustainable manner. The Company is confident that these strategic investments and its healthy backlog position the Company well to handle any anticipated short-term headwinds and maintain the long-term health of the business.

Current wording

The Company remains committed to its focus on growth and continuing strategic investments in the people, processes, and technology that will support and enable this growth in a sustainable manner.