Argan (AGX) 12 Apr 232023 Q4 Earnings call transcript

Good evening, ladies and gentlemen, and welcome to the Argan, Inc. Conference Call for the Fourth Quarter and the Fiscal Year Ended January 31, 2023. This call is being recorded. All participants have been placed on a listen-only mode.

Following management's remarks, the call will be opened for questions. presentation the today's webcast. slide be which a via accessed is that remarks, accompanies can There

today, IMS At to over for turn time, the Nesbitt, this it floor to is your go Relations. Please Investor my pleasure John ahead. of host

evening XX, Good our to referred XXXX. as XXXX, results which welcome discuss the fiscal conference quarter fiscal the is fourth and and to year Argan’s you. Thank call for ended January to

the Executive On today, Officer. David we Chief Watson, call have

subject the to, not and safe and conference factors known forward-looking read statement. include, historical I'll Statements are company's and in this profits. take the to a risks. are during statements harbor statements are call the made of and projections targets moment not to regarding facts future Such statements. presentation goals limited unknown based presented and that revenues are but statements or These on

on release to understandings undertake press Argan’s the based The and described and with Securities company's expressed to or afternoon's by those that performance or Exchange to been update cause we duty an any differences implied Commission. these of are statements are statements. filing such and may of believed this from today materially contribute material as some that achievements be differ actual that could results, have forward-looking These in the statements or not risks accurate U.S. factors and in information do forward-looking such

Argan. now ahead, would call Okay. I CEO to turn the Go Watson, over David. David of

joining Thanks, John, thank today. for everyone and

the operations fourth by some up to call of have the and I'll We'll for I'll by Hank Deily, Financial our to of the January a conclude results fiscal Officer. call first be opening Chief know, we're As quarter. our results that quarter by pleased for reviewing earnings brief start the year full portion discuss you and call, joined financial highlights XXXX. during Q&A ended fourth is our opportunity and XX, already of most for the our of this this and

service grow. Argan a the more of demand growth to power well capabilities as industry, by to and partner positioned leading power projects sources the continues gross includes XXXX energy bigger diversified alternative cash, safety very worldwide With the customer robust and having of full generation for to achieved sheet, drive capturing long-term is and fiscal We performance, XXX.X balance record, debt. a million which exit short-term a margin a solid base, strong cash and with and no investments equivalents strong

repurchase shareholders through you to back, XXX program pleased we've million million a to segments. XX% three returned I'm brief representing to issued reportable of that over descriptions Furthermore, shares. business highlight Taking of during we've our share let me our our step fiscal increased and XXXX to that nearly XX date, walk

XXXX. Systems is which energy Atlantic all of operating industry services, including Projects our services our revenues in solar Gemma First, biomass, power plants, the XX% Power industry Power construction of focuses wind Company represented units, power and efficient types of fiscal farms. fire of and comprised power gas, on facilities, facilities, the

revenues This well mostly Fabrication of customers pulp offers segment services solutions and other power paper, manufacturing and shutdowns, as segment our by such and as emergency agriculture, construction focus Services, and XX% Field which Industrial its in This field mobilizations, and and represented Roberts Company, petrochemical, contributed XXXX. provides the on type fiscal industrial Second, to plant turnarounds, to as fabrication. is maintenance industries. the a with vessel clients and

services for wiring in federal well requiring military inside group, security segment, Solutions services sectors. construction our services infrastructure X% level installations the utility and providing this our government our in as for telecommunications smallest our the which have revenues and premise clearances, contributed is of Infrastructure fiscal brand high XXXX. we Lastly, SMC as operating telecommunications locations outside segment,

proud capabilities, coal continues reliable a facilities agnostic With are construction are project options and in our essentially tremendous power generation like environmentally large to in management fired our We more and evolution renewable have partner. production as of we build in reputation we play as energy transitions to power plants, industry power our gas friendly opportunity be role the natural the to of a ability facilities. to a power plants

Global and cost energy net Energy momentum. transition by zero relationships year's gains leverage that Insights Last Perspective to global to that to share transition XXXX a is market capture is poised massive is to our carbon the as capabilities, market number. $XXX estimated McKinsey recognition, emissions the trillion, Energy Argan anticipated experience,

sustainable We of U.S. snapshot XX% additional the are fired decline the date is a power by as fired] environmental growth power [ph] as generation. drop positioned generation expected precipitous to alternatives. for to coal of the neutrality of more countries. goal generation. XXXX, an the Carbon This decline of and only to to provides X% an net decline U.S. and electricity fired coal benefit power [coal is the from important many slide anticipated generation, in well the By in represent other both

as for to our many We the business. are driving significant that factors view potential technologies this generation. power There shift for tailwind new continuing are a transition

approximately note of to carbon low our XX% in projects I think current a million, those of it's XXX important support economy. emissions that backlog

generation large our for demand a the to role power. electrical sustained with grow already the and to transition playing participation power increasing cleaner are reliability we grid with So, expect in

On consolidated our financial revenues million. our we quarter Fourth performance. X, Now, XXXX declined turning to XXX present statements. X.X% to income Slide

quarter completion, starts was the incurred in the project for costs of while as certain As by projects certain variability and is Services our frequently segment Power Industry the the near just top are project performance case, beginning. timing of impacted our others fourth line

Center, Power Equinix related quarter project, current Hill the Station, to the revenues The plants, Kilroot Station, Guernsey energy Power they or our major ESB the award. projects, by FlexGen’s center latest declining decrease project Maple peaker neared and newer EPC services reached from Energy including completion, Solar the partially all growing is several offset the Trumbull revenues the data facility, as at and primarily

bit down XX.X%, administrative to mix. year quarter declined the investments year quarter quarter. a for Gross write-offs fourth XX.X the due decreased and accruals in healthy, of This margins million expenses was activities associated and due certain in million revenues other for cash at the quarter. general, liability XXXX fiscal to comparable prior to our Selling, development XX.X and to fourth but primarily were from the incentive in with expenses business due prior change and

the tax even research benefits tax quarter, was due of income deferred certain credits and pretax and consolidated associated recognition reported current an tax the though we XX the favorable development benefit of allowances. the with X.X This book was million, to of During income valuation reversal million.

before for share of fourth Net per fiscal fourth income XXXX for per diluted million for up last amortization from from is significantly quarter. earnings $X.XX interest, $X stockholders to XX.X depreciation, which Argan year's last increased the was fiscal EBITDA, to the attributed or taxes, the diluted of XX.X for X.X quarter fourth million quarter X.X share year. also comparable million quarter of and million significantly XXXX

are Power level the with Maple Hill the the million, were prior fiscal XX% year. naturally in Industry decreased Guernsey For facility associated as winding our Solar a Power Services the construction energy million from revenues of XXXX, XX.X down. revenues in segment by of project activities decrease and the XXX earned the Revenues full-year Station

was FlexGen in quarter, increased including by for Power projects, ESB Trumbull Station, the Like at reduction the Center. fourth offset plants, and several the revenues the partially Kilroot revenues the peaker Energy

services XXXX the our year's current and XX% infrastructure prior to for profit and respectively fiscal as services the percentage XX.X% of a consistent gross compared year. XX.X%, Industry margin expressed percent was margin revenues consolidated segments Our our for Power relatively in at percents. industrial remained our as Services, Gross XX.X%, telecommunications

our impact The during partially SG&A described of for primarily year. X.X% due on same to expenses decrease by the the year. decreased for inflationary offset pressures quarter, the above the current was expenses reasons the

So, last what to our add-up year, stockholders diluted share compared XX.X EBITDA stockholders or does compared $X.XX net and million, attributed or million year. to? of for $X.XX this EBITDA per our was share, million last XX.X XXXX million XX.X to Fiscal attributed was to with fiscal income XXXX all XX.X per

of revenues Power XXXX generated representing XX earned revenues is representing pretax of the in XX% excess revenues fiscal and XXXX income. let's segments. for consolidated Now, million, for XX%. pretax income look EBITDA for XX% The in consolidated Services operating reported in of achieve to million million, achieved The of at million. Fabrication X revenues fiscal this the year segment XX and each XXX of and second industrial unit Industry margins Services Field This of consecutive

telecommunications XX X% XXXX. lastly, reported fiscal of And revenues for consolidated infrastructure or the of revenues million services

last XX, with fully also year, in Power X.X approximately stronger billion Our both not project consolidated a which Industrial only projects from as XXXX mostly January has backlog, segments. increased reflects and profile of committed longer-term the totaled but

present currently wrapping is a is nice power the project projects Maple facility, On and Solar included completion. space gas is nearing several The that tremendous also a the capabilities our project largest our Slide in major fired up. we Likewise, in us is Power U.S. which phase project of the Guernsey for been Station, which plant Hill representation in renewable single the has XX, backlog.

Trumbull seeing in Energy both revenues we're fiscal last So, full construction over the increased on Guernsey and course early to ramp-up reduced the as saw year. stages Maple and when year Center, which from associated Conversely, were is with the Hill, to of projects revenues expected XXXX, is compared now construction the we in those of in swing.

Station peak are peaker near Power and at Kilroot activity. that the plants power FlexGen are The or ESB projects

receive those tasks projects to details spaces performing look renewable fired traditional undisclosed the the certain to also we on both to are projects. gas with notices more we when forward providing We and the related proceed several and full in

will to solid excited for that and revenues are our about amount year fiscal in a project XXXX the that beyond. the of backlog diversity projects earn we these expect we provide execution and in We on believe base

provides balance to Our sheet financial the with underpinning grow business. a us strong

and have and shares, during net year. nearing expected cycle XXXX income and of for XXXX, million. projects our completion, reduction and short-term in January liquidity was million short-term net reflected cash, no The by we the of debt. XXX.X XXX.X cash dividends equivalents of of two XX, flow As repurchase investments offset XXX totaled million equivalents, investments partially significant cash, fiscal cash the payment Furthermore, the the cash

began figure and million equity However, trend XXX minimal a during goodwill cash solid equivalents, at flow million. XX.X the short-term quarter, to XX cash, XXXX, January by million. reverse includes investments XX, as increased that fourth was Stockholders' cash of

substantial business you this to was capital It to million. ordinarily lower liquidity see a return expenditures. As low repurchases dividends. Bridge, was and year, due level our Liquidity opportunistic XXXX, the strong At via January than of requires XXX.X continuing cash can capital share shareholders net model XX, our very from very commitment a our to previous

November shares about returned approximately Since share. price we outstanding we’ve of to total is at our [$X.XXXX] X.X of to XXXX, an All of at have approximately or beginning a repurchased the million the of XX shares shareholders. And program. per XX% date, average million nearly

its indication XXX the this of quarter the and confidence of our and our As of size to backlog. Directors the continuing also in continued the share million Board from project repurchase which XXXX, growth of businesses program strength an our of commitment during million fiscal previously, increased reflects program, fourth XXX to

since paid a quarterly per share fiscal $X.XX regularly dividend we've of Additionally, XXXX. cash

of that April record date quarterly XX April cash dividend of XX. $X.XX has You date a a our and of should next payment note

will on our Since focused shareholders. Argan contracts due operating and at have value XXXX, have nature a will we to of value very business, grown results bit the has dividends lumpy as the shareholders. continue long-term of always be to creation and share all That's timing considerably. deliver know. to cumulative our value been long-term times tangible we per book Quarterly but for we

momentum as year. the We we fiscal new positive into believe that move we have

complementary beginning Our businesses from project and reiterate at leadership it's by in during year To XXXX are businesses. end XXX growing our the improving the of in backlog our million energized the of million fiscal new all and grew markets. opportunities XXX to

for grow. company energy our are increasing seeing as We to demand continues opportunities worldwide

that we will transition anticipate global the forward, and our services. expertise and Moving portfolio create greater demand energy construction for technology

To close, strategy our simple. is long-term growth

to competencies and core our opportunities. market management business. leverage will is critical our existing emerging on Risk in capitalize We

of continue management's our overruns. strong is the we effectiveness record improve safety risk and project to minimizing Our project thereby any costly and

and low strengthening power partner are reliability. maintaining as our net choice new transitions We the as a to energy of position industry cleaner building alternatives, generation mission zero while for facilities grid

balance sense carefully And finally, growth sure that priority, while it options. business acquisition make to opportunities making top we with other organic for allocation is will our review capital

valued work shareholders our their dedication partner. support hard position like our in Argan our I'd for industry continued employees as and thank a to for building their to and power

With questions. for that, operator, up let's open it

Chris Securities. [Operator Instructions] from our comes And proceed. CJS with first Moore question Chris, please

afternoon, will year receive a fiscal Gemma we'll Maybe likelihood XXXX? with David. proceed. Good for project has additional when taking notice in the questions. become start a of to an few to project What's difficult increasingly backlog. funding Thanks Recognizing significant pinpoint and

the Good question, our Chris. end we're and current excited the our really day, backlog. of At about pipeline

As largest I XX% The Roberts of is power and consists segment number in of to to it my noted Company. the the early primarily it plants. segment, XX% which relates power And of the remarks, history fired relates of in industrial that gas backlog our

proceed, our to under already achieved project to backlog while in firm there typically equity always means backlog has and a major be and XXX% both really are for So, is all debt the notices we project. projects which the financing, full owner consider this risk,

of So, time, really all at line. an and projects are the focusing which seeing finish we're are abundance markets in opportunities closest to on this

in had there. you know, that didn't the get past, some As contracts we've

projects phase to evaluate the are pipeline. for ensure we have of to best the sustained where continue regardless they We a development success in long-term

reminder, gas our primarily last in this is backlog revenue of as lot renewal the renewable time, from And Industrial our also while about has a X we're space power a the So, of fired the years opportunities. over segment. come XX% at seeing

to be our the over seeing excited we're year. potentially add backlog able we'll and So, to we're what next about what about

your that bit kind level I X too Just Got it. a etcetera? little optimal billion will And comfortably What it maybe low? that that be you just number that. an That's mean, that look a helpful. differently. Is handle could on backlog have? of we thoughts Is would is you labor high? at get of availability, would too given

guys we can that my – achieve. me there that would I tell would number a isn't

is, absolutely but not I at Gemma, expanding generating So, operations mind my and executable. desire SMC, and every and billion in Keep earnest are them and some single project of achievable at really got robust one is revenues think that we've backlogs. APC $X just Roberts,

constraints all labor localized frankly You simple. a and in is is projects. mentioned our labor very driver of it's and not Labor key

in local all positive member we of So, subcontractors our want we strive use be to local projects we and participate to labor, suppliers, a and that community. as of

been So, do we historically, there's town] get recognize able [war though to for the labor, a we've [ph].

lot isn't me, but And got a so, ceiling, to X isn’t billion front a a ceiling, X really of billion opportunity in of us. it's

project, Maybe Got you the at up year bit. project. a cash about thinking and in flow operations? it. Cash a How about we talk should That's usually cash little helpful. picks XXXX of flow you switch versus sometimes access end early generation, be a will XXXX from flow gears fiscal

of there. add excellent that kind to, And Argan. misunderstood like question – little an a largely that is Cash, because with here I'd at is clarity

as they they cash XXX. you short-term by driven in we are a pointed projects. investment around do given specifically are like cash, major any and with million And our currently XXX.X our lot balances out, largely of project are because equivalents, bounce So, lifecycle, where

project's cash by the end the at contract. of are the Each terms flows of driven day the

project commitments significant inflows. prepayments customer, we're However, beginning to the stages, outflows large typically than as and in progresses are cash as costs at you – pointed the but are later on of making contract the part the of greater our typically our because received cash are out, its behalf the

we that's experienced fiscal XXXX. what kind in And of

the the changes projects timing increase year. expected some But for one that, XXXX. to a and like expect is I'd find and as cash million kind we income, of $XXX net liquidity, conservative what current and a current kind and point our presents, call of second fiscal might these our at projects and and number. it and out starts, a of payments net of we it If during and conservative three existing project happened to currently stands for on during shares the repurchased you'll strips to based you of of dividends of our what based largely short-term new what less pause timing cash assets that metric due off look view timing at paid, But that it's items: investments liabilities, out which a –

I think two there, out prepared this other remarks. in key point I'd points to and said my

organization We throughout and debt. no have we capital all minimal of our expenditures have

it leave it. appreciate I Very there. helpful. it. I Got will

Absolutely, calling. Chris. Thanks for

Okay. The Lake proceed. Markets. please coming Capital next question Brown from with Rob, is Street Rob

David. afternoon, Good

evening, Good Rob.

in maybe on question are I things you Could pipeline activity project with sort a where general for regional mix of pipeline characterization maybe little number in on, of the you've and is the said in and in ask pipeline talked the the of gas Thanks there, seeing all [indiscernible]? you sort that or about, of to color. what's of activity renewables a wanted characterize, secured sort the the growing. in more you activity are

finish as it's closer across Yes, abundance projects earlier, I of both the board sure. is, – are mean that we're those an kind earnest renewables. our focus seeing And the first of line. in to opportunities gas I stated and

As the of of challenges get well whether projects to it's grid a able interconnect, connect of being are out and there's a aware, things their lot to for other there, that number folks control. to are

and country the gas others. seeing between are from but aspirational of finish to gas currently solar abundance an standpoint, Clearly, goals pipeline of opportunities our we think our IRA number large there's the on continuing out line. backlog and are chunk capital we human and that projects we this energies there of close a a the are so, and And our to focus as those of a reflects

and jobs a work balancing a of settling adjusted we can can achieve. a the lot believe of best the do act. that but returns we once, So, with it's best it's really risk lot jobs at do We on really

great. Thank opportunities And in an of demand opened since just what you. you? up uptick that Okay, then IRA the you maybe have sort and seen for

and defined IRA flexible regulators. facilitate still our do the agnostic. number frankly, needs we build-out. mean, that IRS I to expect group. to or are to folks, help the IRA. of a We the the a the success power the generation being we’re project agnostic requirements are There's But meet And a in are by oriented we here organization customers' we're by

there a that of number there. out out a There's hiccups other But yes, activity been there us. is things for panels solar lot the happened there is So, industry. in of yes, opportunities an uptick and between in have

a in you then a business, is or should how And – is project business that first backlog of and do of you long noted This way. activity market, it. in characterize earlier, are margins. the two pipeline business? robust the We come growing plus And business? achieved, would XX% that's years there just and I come as industrial you that seeing, the that end And great. Okay, revenues that's in how EBITDA kind has since been you long fabrication how way acquired say a how I

frankly synergies our this year-end. our be on customer [with took And able to project plants since [ph] backlog. space effort that] greater achieve cost in it's into one consolidate flexible past and meeting more the record grown And a to needs. We to be year

where when especially of of opportunities comes space shortage work no the in is it that States, doing primarily to the the there field. United for it's So, Southeast

in our if bidding we're there in that a seeing even economy, potentially downturn not our pipeline. activity So, or is the

is question last then I guess, ramp. And Trumbull's on, you. Thank Okay.

last started percent throughout do just, the it ramping of, exact Not revenue that ramps? what's, how project? year. And recognition but sort late sort that of How this in on cadence it year? of numbers, of think see you, I sort of

This the any have how of able of more as some dirt landing and for of years. in that quarter quite revenue then Yes. and recorded identify – we is much those the around time, given revenues But knowing multiple us is around, over to beauty bit activities of our performing followed to is the significant little obviously pushing engineering the bounced large projects nature and challenge mobilize, ramp you our procurement. time revenue because be business. we're takes a have Being you

ground. are So, when comes think and And a of incurred. And the lot staff as bell everything of got when curve plant, a labor as you've primarily costs is recorded you're costs power else revenue that of you're project incurred are on that. a erecting out the and with

meaningful pretty a has timeline job Trumbull the schedule. So,

not but the and peak our to And expect be not timeline, a might a that big be have beginning we're that as jobs revenue of might – so, shorter other the it as a curve of in stages. some as somewhat of bell have

over. Thank I'll turn it you. Okay.

Great. Thanks, questions? Rob. Operator, are there any more

Sorry me? Can about that. you hear

Yes.

from a Moore. further we no have We have questions. follow-up Actually, do Chris

Okay.

Chris, your line is live.

of wanted Terrific. Can wrapped – meant point still get that it as there Yes, possibility for I some [indiscernible] talk excess to this in I know up? risks you're Guernsey. you you just wrapping up. the Is to this kind I time? about, at exist margin

as it repeat kind three the our on company's And we've job largest a reminder customer in power a associated job achieved customer, power buyer also pandemic. Yes, that's we've all largest the phase It's a that supply two we've plant, And single those. achieved lot. substantial And a been history. achieved plant throughout in impacts. been and in the units. fired gas the with job history. building We've building We've U.S. the of Guernsey strong of chain completion first

to reliability. grid forward coal X.X [ph] time quarters is at which in achieving next cleaner plus [retiring] of to help this know, mean, you grid, strengthen and replace getting efficient plant power finish plants this gigawatts all electricity same looked with couple And the power the our as will, line the the power. project adds, over partners with the this I We highly success as to of customer

there of in we're the job success think the this quarters. this So, next of we'll excited and job in, about get again, couple we

it leave Got Thanks guys. there. it. Helpful. I'll

Chris. you, Great. Thank

for turn floor Watson back remarks. the to to I'd David closing like now

time, today's report great we all earnings for when call QX quite our we've call, and a Have again everybody. speaking to first with in some thank in we numbers. forward XXXX Well, evening, done you look participating you fiscal

today's conference you lines for this time. may participation. disconnect concludes you This your at and your Thank