Exhibit 99.1
Argan, Inc. Reports Third Quarter Fiscal 2024 Results
December 6, 2023 – ROCKVILLE, MD – 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.
Company Contact: |
David Watson |
301.315.0027 Investor Relations Contacts: John Nesbett/Jennifer Belodeau IMS Investor Relations 203.972.9200 |
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 |