Argan, Inc. Reports First Quarter Fiscal 2025 Results

Rhea-AI Summary

Argan (NYSE: AGX) has reported its financial results for the first quarter of fiscal year 2025, ending April 30, 2024. Revenues rose by 52% to $157.7 million, up from $103.7 million in the same period last year. Despite a gross margin decline from 13.7% to 11.4%, net income significantly increased to $7.9 million, or $0.58 per share, compared to $2.1 million, or $0.16 per share, in the prior year. EBITDA saw a remarkable rise of 225.8% to $11.9 million. The company maintains strong cash and investments of $416.4 million and reported net liquidity of $246.7 million. Argan's project backlog grew to $824 million, including over $300 million in renewable projects. However, the quarter faced a $2.6 million loss related to the Kilroot Power Station project.

Positive

• Revenues increased by 52% to $157.7 million.
• Net income rose to $7.9 million, or $0.58 per share.
• EBITDA surged by 225.8% to $11.9 million.
• Project backlog increased to $824 million.
• Over $300 million in renewable projects included in the backlog.
• Cash and investments grew to $416.4 million.
• Net liquidity improved to $246.7 million.
• Selling, general and administrative expenses declined as a percentage of revenues from 10.2% to 7.2%.

Negative

• Gross margin decreased from 13.7% to 11.4%.
• Loss of $2.6 million associated with the Kilroot Power Station project.
• Income tax expense increased to $3.4 million, up from $0.9 million last year.
• Decreased construction revenues from Guernsey Power Station and Kilroot projects.

Insights

Financial Analyst

Argan's financial results for the first quarter of fiscal 2025 showcase a strong performance. The revenue increase of $54.0 million (52.1%) year-over-year is noteworthy, with contributions from key projects like Trumbull Energy Center and Midwest Solar and Battery Projects. However, the gross margin dropped to 11.4% from 13.7%, suggesting rising costs or project mix changes impacting profitability.

Net income jumped by $5.8 million to $7.9 million and EBITDA saw a significant increase of 225.8% to $11.9 million. These metrics indicate substantial operational improvements despite a loss of $2.6 million related to the Kilroot Power Station project. Cash remains robust at $416.4 million with no debt, enhancing financial stability and flexibility.

Investors should monitor the dividend increase and share repurchases as signals of management confidence. The project backlog of $824 million, including over $300 million in renewable projects, points to sustained demand. However, the decrease in gross margin and specific project losses warrant close observation for potential risks.

Energy Market Analyst

Argan’s project backlog, which includes substantial investments in both renewable and natural gas energy projects, reflects the growing market need for diverse energy solutions. The company's capabilities in traditional and renewable energy construction position it well to capture market share as energy demands rise, driven by data centers, onshoring manufacturing and EV usage.

The significant increase in revenues from projects like Trumbull Energy Center and Midwest Solar and Battery Projects highlights Argan’s adaptability in catering to various energy segments. The emphasis on renewable projects, comprising over $300 million in the backlog, aligns with global trends towards sustainability. Nonetheless, the loss from the Kilroot project underscores the potential volatility and risks associated with complex energy projects.

While the renewable energy focus presents long-term growth opportunities, the balance between traditional and renewable projects ensures stability in the face of evolving energy policies and market conditions.

ROCKVILLE, Md.--(BUSINESS WIRE)-- Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announces financial results for its first quarter of fiscal year 2025 ended April 30, 2024. The Company will host an investor conference call today, June 6, 2024, at 5:00 p.m. ET.

Consolidated Financial Highlights

($s in thousands, except per share data)

		April 30,
For the Quarter Ended:		2024				2023				Change
Revenues		$	157,682			$	103,675			$	54,007
Gross profit			17,944				14,224				3,720
Gross margin %			11.4	%			13.7	%			(2.3	)%
Net income		$	7,882			$	2,109			$	5,773
Diluted income per share			0.58				0.16				0.42
EBITDA (earnings before interest expense, taxes, depreciation and amortization			11,890				3,649				8,241
Cash dividends per share			0.30				0.25				0.05

		April 30,				January 31,
As of:		2024				2024				Change
Cash, cash equivalents and investments		$	416,356			$	412,405			$	3,951
Net liquidity (1)			246,728				244,919				1,809
Share repurchase treasury stock, at cost			97,728				97,528				200
Project backlog			824,000				757,000				67,000

(1)		Net liquidity, or working capital, is defined as total current assets less total current liabilities.

David Watson, President and Chief Executive Officer of Argan, commented, “Fiscal 2025 is off to a solid start with consolidated revenues growth of 52% to $157.7 million, reflecting strong revenues performance at both Gemma Power Systems and The Roberts Company. We achieved net income of $7.9 million, or $0.58 per diluted share, and EBITDA increased by $8.2 million to $11.9 million, which represents a 225.8% increase for the quarter, despite a loss of $2.6 million incurred during the quarter associated with challenges we’ve previously detailed related to the Kilroot Power Station project in Northern Ireland.

“The Company closed the first quarter with backlog of $824 million, which includes over $300 million in renewable projects. Our project pipeline is robust, reflecting the growing urgency to bring additional energy resources online to meet the newly anticipated significant rise in power demand, that is being driven by the addition of high-demand data centers, the onshoring of manufacturing operations and the expansion of EV use. Argan’s expertise and capabilities support the construction of all types of energy facilities, and we are optimistic about the opportunities we’re seeing to participate in renewable projects as well as the natural gas facilities that can provide the 24/7 energy generation required to power the changing economy.”

“As we move through fiscal 2025, we remain intently focused on expanding our leadership role as a trusted partner in the construction and management of complex power facility projects. Our proven and comprehensive capabilities apply to both traditional and renewable energy sources, providing Argan a competitive advantage as the industry moves to fill the need for reliable energy sources in the face of unprecedented demand for power.”

First Quarter Results

Consolidated revenues for the quarter ended April 30, 2024 were $157.7 million, an increase of $54.0 million, or 52.1%, from consolidated revenues of $103.7 million reported for the comparable prior year quarter. The Company experienced increased revenues at several projects, including the Trumbull Energy Center, a large combined cycle, gas-fired power plant under construction near Lordstown, Ohio; the Midwest Solar and Battery Projects; and the Shannonbridge Power Project. Revenues from construction activities at the three ESB FlexGen Peaker Plants being built in Dublin, Ireland, remained steady between both periods. The overall increase in consolidated revenues between quarters was partially offset by decreased construction revenues associated with the Guernsey Power Station project and the Kilroot power facility, as those projects have concluded and have been exited, respectively.

For the quarter ended April 30, 2024, Argan’s consolidated gross profit was approximately $17.9 million, or 11.4% of consolidated revenues, reflecting positive profit contributions from all three reportable business segments. However, the consolidated gross profit for the quarter was adversely impacted by the loss related to the Kilroot project, and reflects the changing mix of projects and contract types. Consolidated gross profit for the quarter ended April 30, 2023 was $14.2 million, or 13.7% of consolidated revenues.

Selling, general and administrative expenses increased by $0.8 million, to $11.4 million for the quarter ended April 30, 2024, from $10.6 million in the comparable prior year quarter. However, as a percentage of revenues, these expenses declined to 7.2% from 10.2% between the same quarters.

Other income, net, for the three months ended April 30, 2024 was $4.8 million, which reflects income earned during the period on invested funds in the total amount of approximately $4.5 million. During the quarter ended April 30, 2024, the Company recorded income tax expense of $3.4 million primarily due to consolidated pre-tax book income of $11.3 million. For the comparable quarter last year, Argan recorded income tax expense of $0.9 million on consolidated pre-tax book income of $3.0 million.

For the quarter ended April 30, 2024, Argan achieved net income of $7.9 million, or $0.58 per diluted share, compared to $2.1 million, or $0.16 per diluted share, for last year’s comparable quarter. EBITDA for the quarter ended April 30, 2024 increased to $11.9 million compared to $3.6 million in the same quarter of last year.

Argan maintained a substantial total balance of cash, cash equivalents and short-term investments during the quarter. The total balances were $416.4 million and $412.4 million as of April 30 and January 31, 2024, respectively. Balance sheet net liquidity was $246.7 million at April 30, 2024 and $244.9 million at January 31, 2024; furthermore, the Company had no debt.

Conference Call and Webcast

Argan will host a conference call and webcast for investors today, June 6, 2024, at 5:00 p.m. ET.

Domestic stockholders and interested parties may participate in the conference call by dialing (888) 506-0062 and international participants should dial (973) 528-0011; all callers shall use access code: 882997.

The call and the accompanying slide deck will also be webcast at:

https://www.webcaster4.com/Webcast/Page/2961/50656

The conference call and slide deck may also be accessed via the Investor Center section of the Company’s website at https://arganinc.com/investor-center. Please allow extra time prior to the call to visit the site.

A replay of the teleconference will be available until June 20, 2024, and can be accessed by dialing 877-481-4010 (domestic) or 919-882-2331 (international). The replay access code is 50656. A replay of the webcast can be accessed until June 6, 2025.

About Argan

Argan’s primary business is providing a full range of construction and related services to the power industry. Argan’s service offerings focus on the engineering, procurement and construction of natural gas-fired power plants and renewable energy facilities, along with related commissioning, maintenance, project development and technical consulting services, through its Gemma Power Systems and Atlantic Projects Company operations. Argan also owns The Roberts Company, which is a fully integrated industrial construction, fabrication and plant services company, and SMC Infrastructure Solutions, which provides telecommunications infrastructure services.

Non-GAAP Financial Measures

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Within this press release, the Company may make reference to EBITDA, a non-GAAP financial measure. The Company believes that the non-GAAP financial measure described in this press release is important to management and investors because the measure supplements the understanding of Argan’s ongoing operating results, excluding the effects of capital structure, depreciation, amortization, and tax rates. The non-GAAP financial measure referred to above should be considered in conjunction with, and not as a substitute for, the GAAP financial information presented in this press release. Financial tables at the end of this press release provide a reconciliation of the non-GAAP financial measure to its comparable GAAP measure.

Safe Harbor Statement

Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Reference is hereby made to the cautionary statements made by the Company with respect to risk factors set forth in its most recent reports on Form 10-K, Forms 10-Q and other SEC filings. The Company’s future financial performance is subject to risks and uncertainties including, but not limited to, the successful addition of new contracts to project backlog, the receipt of corresponding notices to proceed with contract activities, the Company’s ability to successfully complete the projects that it obtains, and the Company’s effectiveness in mitigating future losses related to the Kilroot loss contract. Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to the risk factors highlighted above and described regularly in the Company’s SEC filings.

ARGAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)
		Three Months Ended
		April 30,
		2024				2023
REVENUES		$	157,682			$	103,675
Cost of revenues			139,738				89,451
GROSS PROFIT			17,944				14,224
Selling, general and administrative expenses			11,425				10,591
INCOME FROM OPERATIONS			6,519				3,633
Other income (loss), net			4,794				(629	)
INCOME BEFORE INCOME TAXES			11,313				3,004
Income tax expense			3,431				895
NET INCOME		$	7,882			$	2,109
OTHER COMPREHENSIVE INCOME, NET OF TAXES
Foreign currency translation adjustments			(790	)			440
Net unrealized losses on available-for-sale securities			(969	)			(37	)
COMPREHENSIVE INCOME		$	6,123			$	2,512
NET INCOME PER SHARE
Basic		$	0.59			$	0.16
Diluted		$	0.58			$	0.16
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic			13,257				13,413
Diluted			13,572				13,546
CASH DIVIDENDS PER SHARE		$	0.30			$	0.25

ARGAN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
		April 30,			January 31,
		2024			2024
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	207,738		$	197,032
Investments			208,618			215,373
Accounts receivable, net			59,960			47,326
Contract assets			54,385			48,189
Other current assets			43,625			39,259
TOTAL CURRENT ASSETS			574,326			547,179
Property, plant and equipment, net			10,825			11,021
Goodwill			28,033			28,033
Intangible assets, net			2,120			2,217
Deferred taxes, net			2,305			2,259
Right-of-use and other assets			6,799			7,520
TOTAL ASSETS		$	624,408		$	598,229
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$	66,448		$	39,485
Accrued expenses			60,721			81,721
Contract liabilities			200,429			181,054
TOTAL CURRENT LIABILITIES			327,598			302,260
Noncurrent liabilities			3,655			5,030
TOTAL LIABILITIES			331,253			307,290
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.10 per share – 500,000 shares authorized; no shares issued and outstanding			—			—
Common stock, par value $0.15 per share – 30,000,000 shares authorized; 15,828,289 shares issued; 13,350,180 and 13,242,520 shares outstanding at April 30, 2024 and January 31, 2024, respectively			2,374			2,374
Additional paid-in capital			164,501			164,183
Retained earnings			229,364			225,507
Less treasury stock, at cost – 2,478,109 and 2,585,769 shares at April 30, 2024 and January 31, 2024, respectively			(97,728)			(97,528)
Accumulated other comprehensive loss			(5,356)			(3,597)
TOTAL STOCKHOLDERS’ EQUITY			293,155			290,939
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	624,408		$	598,229

ARGAN, INC. AND SUBSIDIARIES RECONCILIATION TO EBITDA (In thousands) (Unaudited)
		Three Months Ended
		April 30,
		2024			2023
Net income, as reported		$	7,882		$	2,109
Income tax expense			3,431			895
Depreciation			480			547
Amortization of intangible assets			97			98
EBITDA		$	11,890		$	3,649

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240606731655/en/

Company Contact:

David Watson

301.315.0027



Investor Relations Contacts:

John Nesbett/Jennifer Belodeau

IMS Investor Relations

203.972.9200

Source: Argan, Inc.

FAQ

What were Argan's first quarter fiscal 2025 revenues?

Argan reported revenues of $157.7 million for the first quarter of fiscal year 2025.

How much did Argan's net income increase in the first quarter of fiscal 2025?

Net income increased to $7.9 million, or $0.58 per share, compared to $2.1 million, or $0.16 per share, in the prior year.

What is Argan's project backlog as of the first quarter of fiscal 2025?

Argan’s project backlog increased to $824 million.

How did Argan's EBITDA change in the first quarter of fiscal 2025?

EBITDA increased by 225.8% to $11.9 million.

What are the cash and investment balances reported by Argan in the first quarter of fiscal 2025?

Argan reported cash and investments totaling $416.4 million.

What was the impact of the Kilroot Power Station project on Argan’s financials?

Argan incurred a $2.6 million loss associated with the Kilroot Power Station project.

How did Argan's gross margin change in the first quarter of fiscal 2025?

Argan's gross margin decreased from 13.7% to 11.4%.

What was the income tax expense for Argan in the first quarter of fiscal 2025?

Argan recorded an income tax expense of $3.4 million.