AGX Argan Inc

Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announces financial results for its third quarter of fiscal year 2024, ended October 31, 2023. The Company will host an investor conference call today, December 6, 2023, at 5 p.m. ET.

Consolidated Financial Highlights

($ in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

 

 

For the Quarter Ended:

 

2023

 

2022

 

Change

 

Revenues

 

$

163,755

 

$

117,875

 

$

45,880

 

Gross profit

 

 

19,235

 

 

22,208

 

 

(2,973

)

Gross margin %

 

 

11.7

%

 

18.8

%

 

(7.1

)%

Net income

 

$

5,464

 

$

7,758

 

$

(2,294

)

Diluted per share

 

 

0.40

 

 

0.56

 

 

(0.16

)

EBITDA

 

 

12,180

 

 

11,261

 

 

919

 

Cash dividends per share

 

 

0.30

 

 

0.25

 

 

0.05

 

 

 

 

October 31,

 

 

 

For the Nine Months Ended:

 

 

2023

 

2022

 

Change

Revenues

 

$

408,779

 

$

336,262

 

$

72,517

 

Gross profit

 

 

57,201

 

 

66,333

 

 

(9,132

)

Gross margin %

 

 

14.0

%

 

19.7

%

 

(5.7

)%

Net income

 

$

20,340

 

$

19,465

 

$

875

 

Diluted per share

 

 

1.50

 

 

1.36

 

 

0.14

 

EBITDA

 

 

33,774

 

 

36,882

 

 

(3,108

)

Cash dividends per share

 

 

0.80

 

 

0.75

 

 

0.05

 

 

 

October 31,

 

January 31,

 

 

 

 

As of:

 

2023

 

2023

 

Change

 

Cash, cash equivalents and investments

 

$

397,515

 

$

325,458

 

$

72,057

 

Net liquidity (1)

 

 

240,177

 

 

236,199

 

 

3,978

 

Share repurchase treasury stock, at cost

 

 

93,531

 

 

88,641

 

 

4,890

 

Project backlog

 

 

730,000

 

 

822,000

 

 

(92,000

)

(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, “During the third quarter, we delivered substantial revenue growth of 39% to $164 million, demonstrating the underlying strength of our major businesses. However, as we have previously mentioned, our international subsidiary, Atlantic Projects Company (“APC”), has been impacted by operational and contractual challenges related to its Kilroot Power Station project in Northern Ireland (the “Kilroot” project), including supply chain delays, material changes to the project, the COVID-19 omicron outbreak, the war in Ukraine and extreme weather. Certain of these challenges have escalated, and as a result, in the third quarter we recorded a pre-tax loss of approximately $10.7 million associated with the Kilroot project. Naturally, we are disappointed by these developments and are focused on navigating the completion of this project by early next year and making every effort to mitigate these losses to improve the final results of the project. Excluding the Kilroot project, Argan achieved strong consolidated gross margin, as execution was solid across all of our businesses in the third quarter.

“Our businesses continue to successfully develop new opportunities in their end markets, maintaining our backlog of over $0.7 billion, which we expect to increase during the fourth quarter and next year. Our capabilities and proven track record as a full-service construction and project management partner for various types of power facilities are capturing interests and strengthening our pipeline. Importantly, our facility design and construction capabilities are energy diverse, positioning Argan as an ideal partner for the growing demand for reliable power grids and enhanced emergency power resources. We are excited about the prospects we’re seeing to help the energy industry as it transitions to meet increased demand through the establishment of both low emission and renewable power sources. With the growth in our business and strength of our balance sheet, we are pleased to enhance our commitment of returning value to our stockholders through a 20% increased quarterly dividend coupled with our currently active $125 million share repurchase program.”

Third Quarter Results

Consolidated revenues for the quarter ended October 31, 2023 were $163.8 million, an increase of $45.9 million, or 38.9%, from consolidated revenues of $117.9 million reported for the comparable prior year period. The Company experienced increased revenues at several projects, including the Shannonbridge Power Project; the Trumbull Energy Center, a large combined cycle, gas-fired power plant under construction near Lordstown, Ohio; and the three ESB FlexGen peaker plants being built in Dublin, Ireland. The increases in revenues were partially offset by decreased revenues at the Guernsey Power Station and the Maple Hill Solar energy facility, as those projects are near or at completion.

For the three-month period ended October 31, 2023, Argan reported consolidated gross profit of approximately $19.2 million, which represented a gross profit percentage of approximately 11.7% and reflected positive contributions from all three reportable business segments. However, consolidated gross profit for the quarter was adversely impacted by the Kilroot loss. Consolidated gross profit for the quarter ended October 31, 2022 was $22.2 million, representing a gross profit percentage of 18.8%.

Selling, general and administrative expenses declined by $1.3 million, to $11.4 million for the quarter ended October 31, 2023, from $12.7 million in the comparable prior year period.

For the quarter ended October 31, 2023, Argan achieved net income of $5.5 million, or $0.40 per diluted share, compared to $7.8 million, or $0.56 per diluted share, for last year’s comparable quarter. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter ended October 31, 2023 increased to $12.2 million compared to $11.3 million in the same period of last year.

First Nine Months Results

Consolidated revenues for the nine months ended October 31, 2023 were $408.8 million, an increase of $72.5 million, or 21.6%, from consolidated revenues of $336.3 million reported for the comparable prior year period, with the power industry and industrial construction services segments both contributing to the increase.

For the nine months ended October 31, 2023, consolidated gross profit declined to approximately $57.2 million, or consolidated gross margin of 14.0%, compared to consolidated gross profit of $66.3 million, or consolidated gross margin of 19.7%, reported for the nine months ended October 31, 2022. The decline reflects both a change in the mix of revenues and the abovementioned Kilroot project loss.

Selling, general and administrative expenses declined to $32.5 million for the nine months ended October 31, 2023, compared to $34.2 million in the comparable prior year period.

For the nine months ended October 31, 2023, Argan achieved net income of $20.3 million, or $1.50 per diluted share, versus net income of $19.5 million, or $1.36 per diluted share, for last year’s comparable period. EBITDA for the nine months ended October 31, 2023 was $33.8 million compared to $36.9 million in the same period of last year.

As of October 31, 2023, cash and liquid investments totaled $397.5 million and balance sheet net liquidity was $240.2 million; furthermore, the Company had no debt.

Conference Call and Webcast

Argan will host a conference call and webcast for investors today, December 6, 2023, at 5 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: 222989. The call and the accompanying slide deck will also be webcast at:

https://www.webcaster4.com/Webcast/Page/2961/49461

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 December 20, 2023, and can be accessed by dialing 877-481-4010 (domestic) or 919-882-2331 (international). The replay access code is 49461. A replay of the webcast can be accessed until December 6, 2024.

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.

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, and the Company’s ability to successfully complete the projects that it obtains. 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

 

Nine Months Ended

 

 

October 31,

 

October 31,

 

 

2023

 

2022

 

2023

 

2022

REVENUES

 

$

163,755

 

$

117,875

 

$

408,779

 

$

336,262

Cost of revenues

 

 

144,520

 

 

95,667

 

 

351,578

 

 

269,929

GROSS PROFIT

 

 

19,235

 

 

22,208

 

 

57,201

 

 

66,333

Selling, general and administrative expenses

 

 

11,375

 

 

12,667

 

 

32,467

 

 

34,226

INCOME FROM OPERATIONS

 

 

7,860

 

 

9,541

 

 

24,734

 

 

32,107

Other income, net

 

 

3,733

 

 

768

 

 

7,222

 

 

1,868

INCOME BEFORE INCOME TAXES

 

 

11,593

 

 

10,309

 

 

31,956

 

 

33,975

Income tax expense

 

 

6,129

 

 

2,551

 

 

11,616

 

 

14,510

NET INCOME

 

 

5,464

 

 

7,758

 

 

20,340

 

 

19,465

Foreign currency translation adjustments

 

 

(882)

 

 

(650)

 

 

(627)

 

 

(2,601)

Net unrealized losses on available-for-sale securities

 

 

(427)

 

 

—

 

 

(1,147)

 

 

—

COMPREHENSIVE INCOME

 

$

4,155

 

$

7,108

 

$

18,566

 

$

16,864

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

$

0.56

 

$

1.52

 

$

1.36

Diluted

 

$

0.40

 

$

0.56

 

$

1.50

 

$

1.36

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,328

 

 

13,781

 

 

13,381

 

 

14,268

Diluted

 

 

13,559

 

 

13,812

 

 

13,549

 

 

14,350

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS PER SHARE

 

$

0.30

 

$

0.25

 

$

0.80

 

$

0.75

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

October 31,

 

January 31,

 

 

2023

 

2023

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

185,569

 

$

173,947

Investments

 

 

211,946

 

 

151,511

Accounts receivable, net

 

 

49,922

 

 

50,132

Contract assets

 

 

25,391

 

 

24,778

Other current assets

 

 

41,243

 

 

38,334

TOTAL CURRENT ASSETS

 

 

514,071

 

 

438,702

Property, plant and equipment, net

 

 

10,786

 

 

10,430

Goodwill

 

 

28,033

 

 

28,033

Intangible assets, net

 

 

2,315

 

 

2,609

Deferred taxes, net

 

 

3,132

 

 

3,689

Right-of-use and other assets

 

 

5,315

 

 

6,024

TOTAL ASSETS

 

$

563,652

 

$

489,487

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

34,532

 

$

56,375

Accrued expenses

 

 

83,193

 

 

49,867

Contract liabilities

 

 

156,169

 

 

96,261

TOTAL CURRENT LIABILITIES

 

 

273,894

 

 

202,503

Noncurrent liabilities

 

 

4,925

 

 

6,087

TOTAL LIABILITIES

 

 

278,819

 

 

208,590

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

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; 13,332,747 and 13,441,590 shares outstanding at October 31, 2023 and January 31, 2023, respectively

 

 

2,374

 

 

2,374

Additional paid-in capital

 

 

163,154

 

 

162,208

Retained earnings

 

 

217,486

 

 

207,832

Less treasury stock, at cost – 2,495,542 and 2,386,699 shares at October 31, 2023 and January 31, 2023, respectively

 

 

(93,531)

 

 

(88,641)

Accumulated other comprehensive loss

 

 

(4,650)

 

 

(2,876)

TOTAL STOCKHOLDERS' EQUITY

 

 

284,833

 

 

280,897

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

563,652

 

$

489,487

ARGAN, INC. AND SUBSIDIARIES

RECONCILIATIONS TO EBITDA

(In thousands) (Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

October 31,

 

 

2023

 

2022

Net income, as reported

 

$

5,464

 

$

7,758

Income tax expense

 

 

6,129

 

 

2,551

Depreciation

 

 

489

 

 

740

Amortization of intangible assets

 

 

98

 

 

212

EBITDA

 

$

12,180

 

$

11,261

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

October 31,

 

 

2023

 

2022

Net income, as reported

 

$

20,340

 

$

19,465

Income tax expense

 

 

11,616

 

 

14,510

Depreciation

 

 

1,524

 

 

2,296

Amortization of intangible assets

 

 

294

 

 

611

EBITDA

 

$

33,774

 

$

36,882

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231206571710/en/

Company: David Watson 301.315.0027

Investor Relations: John Nesbett/Jennifer Belodeau IMS Investor Relations 203.972.9200