Argan (AGX) 8 Jun 232024 Q1 Earnings call transcript

Good evening, ladies and gentlemen, and welcome to the Argan Inc. Conference Call for First Quarter Fiscal 2024 Ended April 30, 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 Nesbett this it floor to is your go Relations. Please Investor my pleasure John ahead. of host

evening, XX, Good our to XXXX. results welcome discuss fiscal year conference quarter the first and of to XXXX Argan's you. Thank call for ended April

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

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

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

release a with Commission. first as Exchange afternoon, its its the press issued this at quarter Earlier announcing and company financial you least Securities of XX-Q and the first most Form quarter filed results know,

Argan. Watson, Go David over of now ahead, Officer Okay. turn I will call Executive to the David. Chief

XX, Hank and I'll start financial Q&A, Then everyone some Financial we'll up brief Deily, call, for Thanks, of the call for the of ended first reviewing the open John, by joined quarter results portion the our Chief April be of a XXXX of Officer. operations fiscal for by and joining for today. and XXXX. highlights that you I'll and our activities thank

continue for is to growth to Argan demand the diverse to to for strengthen driving long-term service continues well positioned long-term continues full leading as macroenvironment sources a partner grow. The power industry, energy facilities aging and the by as by retired replacement also infrastructure and federal driven Act. plants in refreshment the of on-demand are as legislation supported power-generating Reduction us part Inflation such and

which recently, for streamlining potential on constraints Biden industry. the the Most June us is bill there by for The the was which permitting current President bill, ceiling energy-generating from power certain the ease debt Xrd. signed language upside process includes would facilities on addressing of

is our cash of over of $X.X sheet did notable, billion Backlog $XXX and with major XX, investments. April liquid million we of not strong balance quarter during projects the and as XXXX any remains given add that

we carry debt. Additionally, no

stock $X.X approximately first total approximately for of common of quarter, spend the we our million. shares During XX,XXX repurchased a

efficient and gas-fired our three Atlantic construction of focuses quarter business first The facilities, biomass revenues. industry power and This Company and reportable Systems comprised of XX% wind of power including our is solar power on types Gemma fields, Reviewing Power segments. of units farms. our all the services segment energy operating facilities plants, Projects represented

plant services industries of pipe and as expanding in other or well and other and emergency the mobilizations petrochemical, Roberts maintenance segment well production newer with industrial vessels field a Southeast. and industrial water The quarter to like our The industries adding as on contributed strong pulp XX% is Services, had shutdowns turnarounds, Company mostly offers paper, represented quarter construction a facilities first manufacturing clients and by and and as The power the and number Field Roberts Fabrication fabrication. revenue. of solutions which focus provide agriculture, to

is our security sectors. Infrastructure locations as and our Lastly, first requiring federal operating construction our contributed high-level in of military segment, brand for as smallest and outside wiring providing services Infrastructure X% government It's utility Solutions inside-the-premise for our Telecommunications which telecommunications the clearance segment, installations well this SMC group. services have quarter we revenues. services

construction us transition of from range as renewable management project broad continues a plants gas strongly to energy industry positioning and the capabilities, coal-fired natural to brings plants. Argan and power

and With developing increase power activity space. partner and around increased friendly as we more are a to on expertise in reputation position our leveraging leadership our the environmentally focused resources, our construction proven reliable

accelerate new includes facilities. the debt to energy-generating the permitting Additionally, for legislation designed reforms process and ceiling streamline

these our positive industry from included, provisions tailwinds. should With benefit

alternatives, slide growth power benefit positioned reiterate the I've and the and to are decline decline this more the shown generation. it's power sustainable where you future coal-fired and to to-date think generation the of before We from in both coal-fired anticipated decline of important

transition neutrality for our additional XX% to potential Carbon represent in significant for power US other business. will XXXX, goal US countries. coal-fired many electricity net believe environmental an tailwinds to the We and the the create expected an is By important X% drop this is generation by generation. of only

As power our represents $X.X the of to cleaner transition the new generation important in support leadership note billion carbon it's role lower current XX% to to that shifts that backlog our technologies, industry our projects over of power emissions, generation. illustrating

for On So fiscal XXXX. nine, income our to the performance. now we first quarter present turning our financial slide statement consolidated of

X% to revenues First $XXX increased million. quarter XXXX

revenue traditionally quarter we're the projects largely top smaller to ability driven which of projects. with, our larger drive involved Our the some augments growth from was line by in our

our incremental base, are These growth. smaller create revenue only also stability but in driving projects not

revenues than to customers the revenues, Often ability not due right just mean have flexible contracted these means variability does are Our lost for construction allows requests in out the pushed we competitive it be to from is meet it them to and revenues a to expected, contracts. projects. when advantage less competing additional when are

margins are as to to see XX.X% revenue XXXX, to compared we well certain others in recognized quarter some in and to changes projects primarily mix. in first get were the XX.X%, decline of due a Gross our gross quarter margins beginning So revenues close as to fiscal expect variability as as completion just in ramp. in the first

terms As fluctuate associated and we've related quarter-to-quarter margins mentioned expectations. profiles, our mix, risk margin the previously, revenue commercial current can to project

and fixed price, time which basis. less risk-adjusted lower a For margin therefore, and material example, on generate a is contracts risky acceptable profile are than

Additionally, lifecycle. the also by be may in margins are project we impacted where

focus margin and strength performance remains Argan. regardless, So at here a historical

Selling, prior-year general and administrative expenses million of $XX quarter. consistent comparable with were the

transfers, approximately to quarter, share one-time reflected loss induced the we During is reported $X.XX the other per also which fraudulently a line had pre-tax of charge diluted a million item. $X.X wire in related or previously

to first diluted share quarter is XXXX XXXX. for and for $X amortization, the change in revenue net quarter first $XX for The diluted income the or per XXXX, was to first $X.XX in of taxes, to lower fiscal decrease fiscal in the the net which income mix before and compared income Net interest, first million due XXXX. of fiscal as $X.X was of earnings the $X quarter, EBITDA, $X.XX per quarter the quarter in of share million primarily depreciation first or compared the EBITDA in margin loss. gross million million the was fraud

at momentum committed 'XX Industrial opportunities is the Our backlog billion where our consolidated $X.X we we're in Services project segments. stood fully reflects pipeline in fiscal XXXX, consistent by characterized backlog seeing Power the XX, of and of as and is ongoing April and longer-term over business. projects with year-end our both solid Notably, of the

currently the Guernsey Station, present in On included in tremendous our backlog, is project which we project single-phase plant has gas-fired certain projects the Power the slide been major for us. largest US a XX, power

earlier This just and next commercial In the there state-of-the-art reliability months, million over operations. completed plant grid. fact, this power week celebrating some over ceremony efficient of region ribbon-cutting of supports highly homes the power work is I will several the while enough there PGA to was to provide for the the be X.X in start

is The representation in which Maple our the also renewable of completion. a is Hill capabilities Solar facility, nearing space nice

the reduced in swing. those full Maple Power So as the Solar of compared on first year from activities last Hill the both were when we facility, Guernsey construction XXXX projects saw revenues in Station fiscal quarter to and

is of ramp-up to Trumbull of the increased is the Gemma's expected new the to stages continue significant project, the early contributed over Center revenues Energy construction, and in year. course

Power Kilroot are activity. or peak The Peaker and projects that Station Plants FlexGen ESB Power near the at are

earlier, projects receive full we and the in providing spaces certain look gas-fired the proceed and forward mentioned projects we performing to are I traditional also renewable to several them. when both As these undisclosed notices to tasks related more on with we details

that projects fiscal as revenues. backlog. solid Additionally, we Company projects of plant believe our through Roberts has visibility will been two and growth water increasing distinct a treatment diversity move the and portfolio we for today, provide base future consolidated With of our XXXX, our awarded strength our

Our remained balance sheet strong.

million $XXX for $XXX liquidity cash with of equivalents, As million totaled and debt. XX, sale securities short-term available net was April cash, and no XXXX, investments

equity XXXX. was at $XXX million XX, Stockholders' April

model liquidity see you ordinarily low of requires a expenditures. business can this very As level from our bridge, capital

consistent remains and Our a with as $XXX.X net year-end was robust April XXXX. of XX, liquidity million

Since approximately beginning or to of shares the we've XXXX, equates $XX XX% returned price at a of per million common shareholders $XX.XX stock approximately total have which of share. November as million repurchased approximately to of of shares we an our outstanding the X.X program average

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

value has Argan shareholders. focused always creation very long-term for on been

tangible Since on book to As to remain bit we delivering XXXX, be and share at focused of due timing considerably. all a know, will and value have value contracts cumulative the grown per results we lumpy quarterly shareholders. our operating times we dividends long-term

Fiscal $X.X start XXXX a maintaining project is at backlog billion. over off solid with to

to consistency projects revenue is new certain and Our robust project pipeline diverse as up. drive performance to in up ability our projects and finish ramp our contributing

performance primarily quarter, Our slightly margin to moderated mix. revenue in the related

Our strength. a has historical demonstrated focus and margin remains profile

evolving built We for and we're reliable increases, grid worldwide and well energy are on as as project a construction seeing management to to a customers they seeing stability for energized strong opportunities assist the partner as demands the demand and we're technology reputation transition Argan upgrade the the the and has by as our forward look as to opportunities capitalize energy services meet landscape. of continuing to we

and emerging long-term net maintaining core disciplined of while To to our with of organic and generation low project of minimizing mission the existing risk reliability, focused strategy, costly make to growth strengthen sense lastly, goal also opportunities acquisition on choice to management close, opportunities, leverage construction alternatives our drive effectiveness industry our energy a growth maintain partner transitions remain and competencies thoughtful cleaner on project of through improving while being capitalize position grid as business zero allocation. we the our power management capital the as that new and in our mindful market for facilities overruns,

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

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

comes from Street question will Brown At first we proceed. be with Please this Instructions] time, Lake Rob question-and-answer session. a [Operator conducting The Capital.

afternoon. Good

Good afternoon, Rob.

a of has is of I sort the in and bit wanted that sort how into that and about to that just little point? you've on. the that the see dig things do of are or moving some and along developing, more improving talked pipeline pipeline How new of with other at stuff market sort the IRA of the you working projects this

of new Keep and backlog our by pipeline. year in backlog today. the to our two reduction backlog. about current we customer, reported see we're projects. We Yeah, difficult makes next project our to mind certain we as expect wins material future We over our where visibility in current into of or on and are quarter our ultimately into controlled the a the which projects the large next see our expect our size excited current but it forecast do of meaningfully our given some backlog convert pipeline are starts based into to revenue, the backlog exceed during may add

And Okay, great. and it's nicely. you. continues strong Roberts The fab to industrial then Thank quite grow business, on

for projects was $XXX has would there annualized, other level, that of won. million grow line continued a How run said to do new You this so that I sort you you see sort trend business? of characterize you or guess, a business rate that and in that on couple revenue of

the to $XXX over XX backlog has I XXX% past their grow Yeah, months, over mean seen TRC million.

TRC already to have projects could to their both recession they So, a year. larger some to the tighten smaller over course tremendous backlog cause the certain I add expect to diverse growth, of their set experienced and potential continue while customers belts. of

for mention that a region growth in to is like us. provides also located tremendous good I'd tailwinds experiencing which TRC really

range. does run So would backlog, be million seem the new to the larger rate, based projects are skew their the $XXX on I possible the it with and to million your to that TRC is on current that later of side visibility, about to the of $XXX suggest stages year towards in point timing that

Okay, is lot of margin? there the activity a are or or on the project On expect you great. some quarter, talked that ins sort mix-shifting seeing my quarter margin level, in And Thank the margins last outs those around. them question a in about you. you you the were depressed and

margins. Yeah,

First and margins. to are is get foremost, future for success on success, one project customers and the way number gross we focused project repeat business our

earlier I on As call, quarter-to-quarter we because on look revenue basis. a terms remarks, to this, but can mentioned our prepared tend the mix, expectations margins longer-term profiles, and current to of the fluctuate risk related associated project margins margin commercial at

improve XX.X% our for to QX. the our be year so profile early we And reasonable while reported and still year higher will XXXX and we're fiscal just margin to that this it's margins fluctuate, expect current continue than to full fiscal in in

turn Thank you, I'll it great. over. David. Okay,

Great. Thanks Rob.

next Chris The Securities. Chris, from comes proceed. question with CJS Moore Okay. please

taking Hey, and thanks questions. good few afternoon, for a

and few is maybe completion any substantial excess any from a revenue on Is do? risk Guernsey, there? Guernsey there coming finally, additional So, there, things for is potential left there so margin left, there additional any what's to

number a operations, complete reach primary that event items are our customer really this always close out is of job successfully is success commercial us. the earlier take the a great for cadence see it them after for a there was to of Yeah, to success week and time portions

punch have need cases, some settle our out the the have take and multiple quarters. project. up that list OEM and with we do to close with matters we only in efforts not been even but subcontractors, complete customer, parties other these suppliers, involved But to with items months, can and And

So just our a which such are history. and Guernsey, largest any steps in as final projects is these natural on major

revenue result day, and to got that months the the time of always every go. end each there to additional the given to at project is we committed expected still best and delivering So we're possible be several

or it. And an excess at anything this margin thoughts from additional there? any time in Got likely standpoint not point

accounting, The of do. a out ultimately, closing we've to got lot

they So of base off as current the accounting are margins are. X/XX, currently the of what

you in kind my it's fiscal of Got a Trumbull. when there, at timeframe? but time, that get would trying sense to might it. fiscal peak could when happen is is to From just guesstimate -- Switch likely understanding that to something a as point 'XX, to a get you in this more 'XX be that later

throughout start. Yeah. bit one off a timeline is up beginning ramp Trumbull expected of is and meeting to a little ramping has up and till to isn't good longer It's our XXXX. the year. This expectations as to a it's the expected finish of

fiscal would or everything difficult activity, be supply the may peak fiscal the cadence given year. chain, a the our else that always And a so it's determine current of to project and of during be may more activity when not versus year control, in XXXX probably

to back second. gross just let's margin maybe And go it. the a Got for

margin better the terms here, Gemma things going revenues some of businesses. that margins the than in the obviously the to are drive has from of So other

ramping one key Trumbull time? this point be So would at the in

mean the margins to I at in-house, keep of current backlog, that where Trumbull on. number number mind, really looking that working the that Gemma in back be at do about jobs major back to in we have and we opportunities related to are a fiscal job, Yeah, one looking is project the that's year we're the which excited I we're margins with will but non-disclosed what of you're realize and

business for to and driver change continues this and revenues shouldn't year. Gemma be our that the our So core for

Argan? they maybe to about pipeline bill, to or Valley sense trying are Mountain so gas get talking might just might about expedited ceiling you've that And natural debt the it. impact the talked Got there, how a as be within just to not

Yeah, development the project result speed should Valley Pipeline up run. for be or MVP Argan the indirectly the the help permitting costs us. should for reform over in and opportunities the reform in associated EPC long and gas-fired should and positive permitting The renewable process Mountain

near as Mountain along plant be makes it to others it to not sense and Pipeline developers lot access reform that infrastructure the have been located to a gas-fired the the and needs While Mountain lines the opportunity projects have is minimal permitting is addition positive, who which path certain do, the source in any the key for for Pipeline transmission Valley of pipelines, are located past there really with Valley address development. whole does of fuel power announced additional pipeline

So I potential customers road. see down positive it the as a for

last one And final it. just Got on cash flow. one maybe

of kind are 'XX project at cash a often was up $XX access versus end. think think flow at When guys how we picks 'XX little is negative stronger early versus you it the million. I you So million? flow much generation, million you QX versus than almost it -- How from think about think operations, that negative $X.X if and fiscal cash 'XX operations in should a cash about about certainly of $XX negative do from 'XX sometimes flow fiscal you fiscal look

a by tremendous of because are our to our projects. very line contractual out flow driven difficult and they model question That's cash major top terms always the are much numbers

has but making what than in greater are on 'XX. cost With keep later mind, always and as experienced Trumbull, is towards positive, been the our cash significant the typically inflows, the outflows we're we start-up customers, but fiscal projects behalf in cash commitments cash stages, flow progress which of

half for that greater Argan later new in on result towards over off cash of of major especially jobs do of and balances the course the visibility overall. where our year depends year, based project expect the should we the new of it and the timing year So, this starts

appreciate there. it. right. Got will I it. leave All I it

Thanks Chris.

and question-and-answer the now over turn will of end session I to the for have reached closing remarks. David Watson the call We

in John, Thanks all you for Great. and call. thank today's participating

and us Stockholders Annual a Rockville, nation's Maryland Meeting this of come As reminder, our June at shares offices vote please your at capital. just outside our join XXth our

when So with earnings. fiscal forward XXXX you great with again speaking look to our Have report QX that, we we evening. a

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