Pharma-Bio Serv, Inc. Annual Report Summary - Fiscal Year Ended October 31, 2025

Pharma-Bio Serv, Inc. navigated a dynamic fiscal year ending October 31, 2025, reporting a modest revenue increase but a decline in net income. This summary offers a concise overview of the company's financial performance and operational highlights from its latest SEC 10-K filing, helping investors understand its current standing and future prospects.

Business Overview

Pharma-Bio Serv, Inc. provides specialized consulting services that help companies in highly regulated sectors—like pharmaceuticals, biotechnology, medical devices, chemicals, cosmetics, and food—meet complex government rules and standards. The company's core business involves sending expert consultants to clients to ensure they comply with these regulations.

While its main operations are based in Puerto Rico, Pharma-Bio Serv also serves clients across the United States, Europe, and Brazil.

Financial Performance Highlights

For the fiscal year ended October 31, 2025, Pharma-Bio Serv reported total revenue of approximately $25.2 million. This marks a modest 4.8% increase from $24.0 million in the previous fiscal year.

Despite this revenue growth, net income decreased by 16.7% to $1.5 million in fiscal year 2025, down from $1.8 million in fiscal year 2024. Consequently, Diluted Earnings Per Share (EPS) fell to $0.065 for 2025, compared to $0.078 in 2024. This decline in net income, even with rising revenue, suggests potential pressures on operating margins or increased expenses.

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

This section offers management's insights into the company's financial health and operational results, highlighting key trends and uncertainties.

Revenue Generation Pharma-Bio Serv generates approximately 99% of its revenue from "time and materials" contracts. Under this model, clients pay for the actual hours consultants work and any related project expenses. This revenue stream directly depends on how often the company's expert consultants are utilized. A smaller portion, about 1%, comes from "fixed-fee" or "not to exceed" contracts. While these contracts offer predictable revenue, they carry higher risk. If the company underestimates project scope or costs, it could incur losses or achieve lower-than-expected profit margins on these specific engagements.

Customer Concentration A significant factor for investors is the company's customer concentration. In fiscal year 2025, three major customers contributed 43.5% of total revenue. This represents a slight decrease from 44.2% in the prior year, indicating a marginal improvement in customer diversification. Although the company served approximately 70 different customers during the year, its substantial reliance on a few large clients means that losing even one major customer, or a significant reduction in their project volume, could materially harm the company's financial results.

Strategic Objectives and Operational Management Pharma-Bio Serv aims to expand its market share in the U.S., Europe, and Latin America, while maintaining its strong position in Puerto Rico. Its strategic initiatives include:

• Service Quality: Delivering high-quality, value-added services.
• Talent Management: Recruiting, developing, and retaining highly skilled consultants, which is crucial for its service-based model.
• Market Expansion: Expanding service offerings and pursuing potential strategic acquisitions to broaden capabilities and geographic reach.
• Employee Motivation: Implementing competitive compensation programs to attract and retain top talent.
• Reputation: Upholding a strong reputation for ethics and quality.
• Cost Efficiency: Actively managing operating and financial costs. To manage significant labor costs, which are central to its business model, the company employs strategies such as strategically selecting cost-effective consultants, negotiating favorable rates, utilizing subcontractors, and attempting to pass on rate increases to customers when feasible.

Tax Implications The company's effective tax rate notably increased from 2.9% in fiscal year 2024 to 6.6% in fiscal year 2025. This increase primarily resulted from a higher allowance for deferred tax assets, which reduced the net benefit from tax holidays. While the company continues to benefit from tax incentives and "tax holidays" in Puerto Rico (government-granted tax reductions to encourage economic activity), other tax adjustments partially offset these benefits, leading to a higher overall tax burden on its earnings.

Financial Health and Liquidity

As of October 31, 2025, the company reported $5.1 million in cash and cash equivalents and $1.2 million in total debt. This indicates a healthy liquidity position. The company's strong cash reserves relative to its debt suggest a robust balance sheet and a solid ability to meet short-term obligations. Investors can find further details on working capital and specific debt maturities in the full financial statements.

Competitive Position

The market for technical compliance consulting services in highly regulated industries is competitive and fragmented. Pharma-Bio Serv competes with various entities, including larger, diversified consulting firms, smaller specialized consulting boutiques, and clients' in-house capabilities. Key competitive factors include consultants' expertise and reputation, service quality, pricing, and the ability to adapt to evolving regulatory requirements. The company differentiates itself by leveraging its deep industry knowledge, long-standing client relationships, and specialized focus.

Future Outlook

Strategy: The company's strategic objectives, detailed in the MD&A section, focus on market expansion, talent management, service quality, and cost efficiency to drive future growth and profitability.

Key Risks for Investors

Investors should be aware of several key risks:

• Customer Concentration: Significant reliance on a few major customers creates substantial revenue vulnerability. The loss of a key client or a reduction in their business could severely impact financial performance.
• Operational Cost Management: The company's profitability heavily depends on its ability to effectively manage labor costs and pass on increases to clients. Misjudging costs on fixed-fee contracts could lead to financial losses.
• Talent Acquisition and Retention: As a service-based company, attracting, retaining, and effectively deploying highly qualified consultants is paramount. A shortage of skilled personnel or high turnover could impair service delivery and growth.
• Economic and Industry Downturns: The industries Pharma-Bio Serv serves (e.g., pharma, biotech) are susceptible to economic downturns, regulatory changes, and shifts in R&D spending. Such factors could reduce demand for consulting services.
• Regulatory Environment: Changes in the complex regulatory landscape governing the pharmaceutical and related industries could impact the demand for compliance services or require significant adaptation of the company's offerings.
• Competition: The consulting market is competitive. Failure to differentiate services or maintain competitive pricing could impact market share and profitability.

Company Profile

Pharma-Bio Serv, Inc. incorporated in Delaware in 2004. The SEC classifies it as a "smaller reporting company" and a "non-accelerated filer." This classification means the company follows scaled-down disclosure requirements, potentially providing less detailed financial and operational information compared to larger public companies.

As of April 30, 2025, the common stock held by non-affiliates had an aggregate market value of approximately $6.1 million. By January 23, 2026, the company had approximately 22.9 million shares of common stock outstanding.