Argan (AGX) 1 Sep 232024 Q2 Earnings call transcript

Good evening, ladies and gentlemen, and welcome to the Argan, Inc. [Technical Difficulty] Conference Call for the Second Quarter of Fiscal 2024, which ended July 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

of Please It floor host Nesbett over my to Investor is pleasure your for to today, ahead, sir. go turn the IMS, Relations. John

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

On Deily, Chief Hank Executive Officer; the and call today, Officer. we have David Watson, Chief Financial

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

company's from materially in such statements and press may and contribute cause Argan's results, those these in this release performance some or U.S. expressed risks of The or forward-looking achievements the been described by Exchange factors differences have Commission. with and the could and implied differ Securities afternoon's actual that material filing or to

its announcing today undertake second believe forward-looking are and and Exchange we statements information as quarter its results this afternoon, understandings XX-Q second and Earlier filed any Commission. Form a statements. not of release that quarter be issued These do duty press on to accurate with such we the based to update company and Securities the financial

ahead, the CEO David David. of turn to Watson, that call Argan. way, the I'll out Go over of With

XXXX of Deily, operations some up July today. will for XX, Then results open the joining over our of our call the of and everyone XXXX. activities. Thanks, the Jen, thank you Hank fiscal I'll quarter start second and brief by for financial ended a go we'll CFO Q&A. And reviewing our highlights for

sheet. consolidated to compared based XX% quarter by is strength as great and approximately of in as growth improved bottom sequentially line a see We're significantly line pleased our revenues. We profitability revenue second of expectations at $XXX during diversified the the to progress our million quarter quarter the also during continued balance evidenced with XXXX gross made mix first improved coming XX.X%, with which on generally of margin in to in

our billion. Additionally, $X.X quarter, we in of marked third backlog excess consecutive maintaining

with backlog Project in the current Ireland, is Shannonbridge Our critical investments XX, July of power supply ensure will electricity to notices three of and includes that limited we plus and situations the Power battery plant net balance power the a million of reliable XXXX. Vistra which $XXX also proceed received emergencies for in and includes our that during value cash facilities sheet $XXX million solar liquidity and strong Illinois Energy. remains And with at

we , carry Lastly debt. no

during we approximately power segment income spend year. pre-tax both to our this and respectively compared approximately quarter by our quarter, XX.X% share. of revenues second million or segments, reported as and of $XX.X services $X amounts Revenues of for increased second the business repurchased Reviewing XX,XXX the reported income book million. for last shares of second per three the reportable common stock our XX% During a represented industry total $XX.XX quarter for quarter comparable and XX.X% the

construction This gas-fired including units of operating Power wind facilities plants, is facilities solar farms. focuses fields, biomass efficient types Projects Gemma and segment of Company power comprised and Atlantic and power of System our energy all the on

projects solar to a received Vistra notices the full I the just to for project Ireland As APC quarter's the and proceed close, notice in on Shannonbridge limited Energy. following and Gemma proceed mentioned, battery received on

million. the Revenues reported respectively compared by reported which the our It second segment to pre-tax and quarter of XX.X% both strong XX.X% income quarter for XX% contributed Company, services, construction Roberts quarter as and represented year. $X.X by and increased amounts a second revenue. last industrial the The during of quarter for is book this had the income comparable

clients. and well projects as production as and facilities power well vessel paper, mobilization, of agriculture, segment pulp shutdowns focus focuses on in Southeast. solutions The on fabrication. number They the industries the provide water pipe to like turnarounds, and manufacturing mostly and petrochemical, other Roberts emergency other and to adding expanding industrial industries, plant field services construction as provides maintenance as newer or

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

coal-fired is Argan additional The XX% represent the X% alternatives paramount. net is the transitions electricity And believe future is positioned energy is to cleaner natural We and renewables. by anticipated environmentally coal resources from an more power strongly the by in in drop to ability gas generation with the friendly to landscape the to as U.S. provide like coal fired expected generation generation power significant only important, power power to power generation while XXXX. of move liable decline

our demand track with they cleaner a of levels the success We as and have for proven the increasing partners supply. energy of address assisting capabilities power record balance consumption power and in

the playing on project Vistra leadership Energy. a our already to recent see role notices on six highlighted is we've limited slide business in this transition with proceed Our details you'll where of a as

with plus megawatts work to XX our capability, project cleaner [Indiscernible] work power in growth power. megawatts and storage. in specifically executing XXX space. electrical generation three and the complete renewable another will power of Vistra energy move We're solar power excited storage solar drive look of the facilities to to of located with provide representing to with Vistra Illinois We battery customer forward new the to another energy to successful

and Project project a EPC megawatt XXX Power of Shannonbridge We're in plant. seven, to combine have power slide the of project's year design, including opportunity APC Ireland. to customers for schedule and commissioning. project, recently to a procurement, excited began with target compressed expertise construction which we lifecycle this on we notice Gemma earlier On next full dynamically on the for ability a APC for in our of we work as services oversight details the demonstrates to completion received provide limited our this proceed year. capacity, the work early This for

electricity to the supply expected merchant power fees. is project strengthen Shannonbridge times high infrastructure during utilization enhance of and The reliable or regions'

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

to hand call I'll over Now, over the Deily our financial to performance. go Hank

On nine, we statement the everyone. consolidated second afternoon, good and XXXX. for David, present and the quarter fiscal income of slide our months first Thanks, six

of revenues the an in reflecting $XXX to our fiscal increase compared XXXX second fiscal Services revenues both XXXX. quarter XX% Industrial Second Power million, increased Services and of to as quarter from segments

those increase Construction quarter, in segment, Station Energy fabrication the decreased projects projects the in and Guernsey Power XX% the Industrial revenues segment, second closer company services work. Services Power we get the revenue completion. In Trumbull under primarily a field and Solar offset revenues related in achieved partially as of and XX% driven our achieved increase the by associated to Hill facility meaningful overseas to a Center, final with growth In Maple by our construction Services Industry

our to Gross of the related margin revenues. second to in the compared of primarily XX.X%, fiscal mix was decline that a in second changes the quarter as XX.X% quarter in XXXX

project As many of margins related you and profiles, mix, margin terms can current our fluctuate quarter-to-quarter know, associated risk revenues the expectations. commercial to

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

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

diversified rebound fiscal in XXXX, margins down see SG&A which second our million the While expenses a million generally with quarter sequentially compared in quarter of revenues. be did XX.X% fiscal second Selling, first of XXXX, of the decreased quarter mix as to administrative to as of on and fiscal compared of to more fiscal the were the we XXXX. of to based line of were $XX XXXX compared general $XX.X quarter margins for second expectations as

periods was XXXX of Net diluted significantly diluted increase of $X.XX These share between the in to income quarter the $XX.X is in amortization, development net share of meaningfully million XXXX. second quarter second an income tax expense results in increased research $X.XX as unfavorable EBITDA, to improved periods in to and fiscal reduction funds the compared per as the quarter. income $XX.X year before and interest, yields the credits defined fiscal second million adjustment our fiscal in taxes, between fiscal the earnings invested or quarter compared for as of of as from $X.X per quarter million XXXX earnings on for due and to from XXXX. prior a recorded which benefited $XX.X or depreciation million the second

at in our the revenues by The the Services increased Energy in in fiscal partially increase million Looking Revenues Shannonbridge XX% Construction plants the increased $XXX wind prior Industry year-to-date the increased the at the peaker of in facility Maple segment FlexGen increased projects Station. for and down. the $XX.X Hill Trumbull the Power million $XXX activities due to period. for Guernsey first by Power of have to as ESB compared were Station the decreased of the Solar to the XXXX EPC six performance, the effects by those Center, our as quarter. current offset million months revenues second activities energy year project, Kilroot and year Power revenues

XXXX, changes margin in meaningfully of which Our profits profit decreased, are the primarily of encountered the which the six fiscal the fiscal project, has contract consolidated number of compared reduction of of six mix schedule. gross unanticipated as and revenues months XX.X% first on due for Kilroot the cost gross the impacting and challenges, of a in to our to margin XXXX months of first XX.X%

XX%, margins Gross the months Industry XX% XX.X% and segments compared Services the XX.X%, for our XXXX first XXXX. our and six and in Services Infrastructure first our fiscal respectively are six XX.X% for fiscal to as months respectively Power Industrial XX.X% Telecommunications of of Services,

of $X.XX or first million six SG&A with of $XX.X fiscal to per $XX.X XXXX. expenses or compared income million of in for diluted fiscal the months $XX.X the first EBITDA million $X.XX EBITDA XXXX and for share months the to per $XX.X for six million first was decreased million of of $XX.X first-half compared year diluted months to of $XX.X first half share XXXX, fiscal last the six compared for fiscal million was the Net XXXX. as

and research between consolidated between recorded These by periods, the invested the funds our on reduction development earnings year. reduction the periods adjustment offset reflect in tax credits in results due prior gross to increase the aforementioned expense and income profit an in in

With to to the turn back that, going I'm call David.

Hank. Thanks,

slide where to backlog remains of fiscal Turning of project XXXX, and business. with as momentum opportunities at year solid billion XX, over we ongoing stood our XX, of July end our pipeline the seeing and $X.X the XXXX we're reflects consolidated in of consistent

term the continues Our Service fully segments. Industrial to and in backlog projects Construction reflect Power longer both committed

On in slide our currently XX, backlog. included projects we certain present major

is nearing Solar two which peak Kilroot largest plants in final facility. peaker Station at U.S. substantially Station FlexGen are have the winding Maple currently plant We the complete near projects the project power are that phase or Power projects ESB and The activity. are and Hill power and single down, gas-fired Guernsey Power completion. the the Both

major projects list to already Illinois, Ireland Vistra Shannonbridge battery the we've plant and projects New in talked of of plus the in above. which detail both in are solar power the about

treatment list, The water separate Roberts on two projects you'll Finally by plant are this performed that being Company. see

industry in strong backlog as and with Ireland of the and remains project the and U.K. efficient which capabilities reliable the a market of here selection work, a our in US our So our and demonstrates the recognition diverse of breadth company partner

Our balance sheet remains strong.

equivalents no As totaled million XXXX, of debt. cash Stockholders' $XXX and with million $XXX investments equity XXXX. July XX, was was XX, $XXX cash, million July and at liquidity net

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

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

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

dividends. cash fiscal $X since have XXXX, share quarterly Additionally, paid per we through annually

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

and have results XXXX, can vary book considerably. cumulative we contracts, timing long-term our While dividends related increased we to to Since shareholders. quarter from operating focused remain value per to on tangible of quarter value our delivering the share

at XXXX, momentum have the quarters. of project the maintained consecutive backlog continued and for drive business During three $X.X we've billion first-half fiscal over to in

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

profile, And focused line second our with earlier, mentioned sequentially on rebounded mix. to diverse has on the is while as I down compared driving XXXX, and margin quarter generally remain based fiscal expectations slightly margins. We the in improved of revenue

confident will plant construction energy capture the conversion technology only and seeing we partner for opportunities us worldwide that services stability reliable as and that demand are we reliable our we're reputation management, Additionally, project marketplace. well increase in sources and activities positions a and to grid for the believe

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

let's for their that, thank to our support up a continued shareholders power like for position questions. it and their in With I'd hard building employees partner. our as work for to valued dedication a Argan operator, industry open and

we'll time, session. today first Brown question-and-answer Rob from this coming question Lake Instructions] a your you. Rob, Street [Operator conducting from At Markets. the live. be And Thank is is line

good Hi, afternoon.

Good afternoon, Rob.

pipeline. on of to the Just wanted kind get little detail a more bit

to of are preparation for it in I update think Are the strong your you've been timing more on and terms of pipeline. project you it's the in of recently. the conversions awards? sort pipeline seeing being new to activity What about there, see starting strong wanted kind get I talked more activity? just of you

that Yes, demonstrated this jobs. job we as announced seen as conversions we some have Shannonbridge Vistra the solar earlier as well battery by the month

we on into pipeline. expect exceed of backlog based in we into over reported see are projects today. the backlog current the some where year next the So our larger expect and to a our quarter the convert but may visibility our new ultimately towards end We reduction current meaningfully backlog revenue, we do our into as next do see

size to Keep Thermal which the in overloaded. would the the longer the auctions like easy an mind, our future restructuring of backlog project are take been job, wins it's process, the jobs starts controlled further by customer, till certain projects. makes material XXXX, forecast is interconnect of And delayed always it given of than but the given job. not PJM to, MISO we have given generally developmental difficult summer

later but year So, next. this jobs new bullish lot very the seeing that we at things play, are of there's a of are the day, on end into at and

Vistra and out does limited thanks the that's kind great. And of proceed. it And was to I how color in full I interesting play proceed? think the notice the an Okay, work. that guess then to What's there. on that project the project, terms of or mechanics timeline for how Excellent, of notice

equipment that with schedule mean, made. of long or of Sure. to so we procured a that that early supply is a lead sure to today are chain lot to given number materials be make projects timeline and earlier, the that bunch similar of notice the elongated can some the projects project I proceed time a Shannonbridge ultimately of going face, limited

no LNTPs on LNTP multiple than is -- or different we So had Shannonbridge. Vistra

really bread this an be historically and our is working and to been to step has the day, to to are So continues of we and butter customer. We're committed energy while that forward for exciting transition building thermal Vistra kind looking with us.

has you those like guess, question overall. there areas There describe control? some the Are you My I is are challenges for at cost of this see feel last how those Okay. cited risk, Kilroot. would or that? under point, on sort of challenges you that kind

are disappointed clearly we're mean, where with the I project. Yes, we in

Just existing Belfast a XX's Kilroot in on a built gas-fired just to background to plant XXX-megawatt power an house assets. generation structure in built coal-fired power give the of job, early the is being little outside

So asset scheduled year. next a for completed, new once generation it's for electricity are create significant completion We plus it island in will late with XX of percent Ireland. the complete XXXX the project and early started approximately

on rains site of XX-year global the and number the on war encountered building meaningful Ukraine Omicron You challenges chains their job, including other and COVID-XX, building and prices, think supply a a factors. variant, the on impacts among the Brownfield

those certain to of and on the way resulted in the -- previously have the in achieve that project all reasonably completion are job recorded we is working reverse that challenges to to us So, a having acceptable hard stakeholders. profit

it you. turn thank I'll Okay, over.

Thanks, Rob.

you. the is line Thank And Securities. question coming live. [Operator from is Chris Moore CJS your Chris, Instructions] from next

questions. Good a for afternoon, Thanks few guys. taking

afternoon, Chris. Good

afternoon. Good

So, turn. going Shannonbridge it's a pretty looks like quick be to

So will QX? that quarter start or ramping this

a is site mean, already I about question. good next ramped, was short year the finish a has so yes ago activity there activity job, ramping by period been job is work limited is performed site to month I everywhere, to and notices -- rush lot And pursuant given a is pursuant this And schedule impressive. to walked happening that proceed. Chris. so or year, job the to early of an -- mean, We it's significant. Yes, of LNTP earlier I emergency on or started being in the this time. the really it

the this lower gas with are U.S. associated margins natural than projects? little it. Got assume project I bigger the bit

on. commercial terms -- the risk and the take that we It depends the risks all contractual on

be that so to able hard differentiation. to And make it's

excess potential a gas contract? natural at is end the there for So traditional like margin U.S.

account is it we have It for goal can. we everyone do that as that our to to project and best successful a for

about the timing How timeframe ramp? just on it the be -- of for quarterly in at to will get your enough. Fair obviously revenue of a peak better just of kind Trumbull, the sense terms when sheet? to little you kind of think I'm trying and

plant very right well, of another progress happy are expect I would job, schedule and year any job given fiscal will latter of this schedule of for on and the we into job 'XX on the -- and during the fiscal cadence the peak huge year So activity 'XX. power half cadence with us in the gas-fired that be the of Ohio. Trumbull reached

Got meaningfully it. that was That I fiscal sustainable $X.X 'XX? for higher than Other modeled. is of had the that -- income balance million, is

It's we're the money seeing funds average on sheet not and money to or around and yields CDs, in in bills -- to that strong only that so. putting purposeful we're market longer seeing, of and the we balance like north only also been short-term treasury but have pleased have that we've work, everywhere is duration X% in you're

So a majority the investments. is couple that things run line other interest from our were sustainable? other is income There through but Chris, of the of the it income the item, $X.X million dividend and

And so that's meaningful. it's something

last. one it. my just the to Rob's Want on on maybe Got pipeline. And follow-up to

year new this of guess, or like projects days of question to overall looking a gas are hopefully decks U.S.? trying in slide just it like. So backdrop of terms -- many next. sounds projects natural early many what significant fiscal the is there how in the or I these get the -- kind looks you're there -- potential Are I'm for later sense

some are that converging so Yes, challenging. forces are some, number a of that some positive, there's

Chris again. OEMs data full positive busy lines really production is getting basically And the their speed ahead. of the Some points are are

need or get wants thermal early plant, a the some they build gas-fired in if So, a a ordered turbine process. to to power

So telling is that be but and power not the very as gas-fired U.S., where to plants, in in should the interest in just internationally.

capacity from as the there that's restructuring PJM, there's process said, that's there being earlier been the the the question I responding up. is auctions. of to was Rob, interconnection is gummed when middle delays mentioned -- getting is in I That in the There a

in of MISO overloaded. being there's So a number

private, that against in to seeing just plants, general, So developers up, being and number and see there's we're a of of next developers go not -- of them kind on. what couple And a cited that power years then over gas utilities -- trying they also we're but number are things the that. of there public excited we set about

helpful. I will it. David. there. leave That's Got it Thanks,

Chris. Thanks,

I in Thank to you. Watson no There like other hand the David call for the time. were this would closing questions now remarks. queue to back at

earnings have of speaking everybody I the Great. interest look for appreciate the in we QX you with joining for Thank to call. fiscal our us company. Take time call. participation I 'XX next each and you forward our care. a

This conference. does you. Thank conclude today's

at and this time a You you may Thank participation. disconnect your your for have wonderful lines day.