Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announces financial results for its third quarter of fiscal year
2024, ended October 31, 2023. The Company will host an investor
conference call today, December 6, 2023, at 5 p.m. ET.
Consolidated Financial
Highlights
($ in thousands, except per share
data)
October 31,
For the Quarter Ended:
2023
2022
Change
Revenues
$
163,755
$
117,875
$
45,880
Gross profit
19,235
22,208
(2,973
)
Gross margin %
11.7
%
18.8
%
(7.1
)%
Net income
$
5,464
$
7,758
$
(2,294
)
Diluted per share
0.40
0.56
(0.16
)
EBITDA
12,180
11,261
919
Cash dividends per share
0.30
0.25
0.05
October 31,
For the Nine Months Ended:
2023
2022
Change
Revenues
$
408,779
$
336,262
$
72,517
Gross profit
57,201
66,333
(9,132
)
Gross margin %
14.0
%
19.7
%
(5.7
)%
Net income
$
20,340
$
19,465
$
875
Diluted per share
1.50
1.36
0.14
EBITDA
33,774
36,882
(3,108
)
Cash dividends per share
0.80
0.75
0.05
October 31,
January 31,
As of:
2023
2023
Change
Cash, cash equivalents and investments
$
397,515
$
325,458
$
72,057
Net liquidity (1)
240,177
236,199
3,978
Share repurchase treasury stock, at
cost
93,531
88,641
4,890
Project backlog
730,000
822,000
(92,000
)
(1)
Net liquidity, or working capital, is
defined as total current assets less total current liabilities.
David Watson, President and Chief Executive Officer of Argan,
commented, “During the third quarter, we delivered substantial
revenue growth of 39% to $164 million, demonstrating the underlying
strength of our major businesses. However, as we have previously
mentioned, our international subsidiary, Atlantic Projects Company
(“APC”), has been impacted by operational and contractual
challenges related to its Kilroot Power Station project in Northern
Ireland (the “Kilroot” project), including supply chain delays,
material changes to the project, the COVID-19 omicron outbreak, the
war in Ukraine and extreme weather. Certain of these challenges
have escalated, and as a result, in the third quarter we recorded a
pre-tax loss of approximately $10.7 million associated with the
Kilroot project. Naturally, we are disappointed by these
developments and are focused on navigating the completion of this
project by early next year and making every effort to mitigate
these losses to improve the final results of the project. Excluding
the Kilroot project, Argan achieved strong consolidated gross
margin, as execution was solid across all of our businesses in the
third quarter.
“Our businesses continue to successfully develop new
opportunities in their end markets, maintaining our backlog of over
$0.7 billion, which we expect to increase during the fourth quarter
and next year. Our capabilities and proven track record as a
full-service construction and project management partner for
various types of power facilities are capturing interests and
strengthening our pipeline. Importantly, our facility design and
construction capabilities are energy diverse, positioning Argan as
an ideal partner for the growing demand for reliable power grids
and enhanced emergency power resources. We are excited about the
prospects we’re seeing to help the energy industry as it
transitions to meet increased demand through the establishment of
both low emission and renewable power sources. With the growth in
our business and strength of our balance sheet, we are pleased to
enhance our commitment of returning value to our stockholders
through a 20% increased quarterly dividend coupled with our
currently active $125 million share repurchase program.”
Third Quarter Results
Consolidated revenues for the quarter ended October 31, 2023
were $163.8 million, an increase of $45.9 million, or 38.9%, from
consolidated revenues of $117.9 million reported for the comparable
prior year period. The Company experienced increased revenues at
several projects, including the Shannonbridge Power Project; the
Trumbull Energy Center, a large combined cycle, gas-fired power
plant under construction near Lordstown, Ohio; and the three ESB
FlexGen peaker plants being built in Dublin, Ireland. The increases
in revenues were partially offset by decreased revenues at the
Guernsey Power Station and the Maple Hill Solar energy facility, as
those projects are near or at completion.
For the three-month period ended October 31, 2023, Argan
reported consolidated gross profit of approximately $19.2 million,
which represented a gross profit percentage of approximately 11.7%
and reflected positive contributions from all three reportable
business segments. However, consolidated gross profit for the
quarter was adversely impacted by the Kilroot loss. Consolidated
gross profit for the quarter ended October 31, 2022 was $22.2
million, representing a gross profit percentage of 18.8%.
Selling, general and administrative expenses declined by $1.3
million, to $11.4 million for the quarter ended October 31, 2023,
from $12.7 million in the comparable prior year period.
For the quarter ended October 31, 2023, Argan achieved net
income of $5.5 million, or $0.40 per diluted share, compared to
$7.8 million, or $0.56 per diluted share, for last year’s
comparable quarter. EBITDA (earnings before interest, taxes,
depreciation and amortization) for the quarter ended October 31,
2023 increased to $12.2 million compared to $11.3 million in the
same period of last year.
First Nine Months Results
Consolidated revenues for the nine months ended October 31, 2023
were $408.8 million, an increase of $72.5 million, or 21.6%, from
consolidated revenues of $336.3 million reported for the comparable
prior year period, with the power industry and industrial
construction services segments both contributing to the
increase.
For the nine months ended October 31, 2023, consolidated gross
profit declined to approximately $57.2 million, or consolidated
gross margin of 14.0%, compared to consolidated gross profit of
$66.3 million, or consolidated gross margin of 19.7%, reported for
the nine months ended October 31, 2022. The decline reflects both a
change in the mix of revenues and the abovementioned Kilroot
project loss.
Selling, general and administrative expenses declined to $32.5
million for the nine months ended October 31, 2023, compared to
$34.2 million in the comparable prior year period.
For the nine months ended October 31, 2023, Argan achieved net
income of $20.3 million, or $1.50 per diluted share, versus net
income of $19.5 million, or $1.36 per diluted share, for last
year’s comparable period. EBITDA for the nine months ended October
31, 2023 was $33.8 million compared to $36.9 million in the same
period of last year.
As of October 31, 2023, cash and liquid investments totaled
$397.5 million and balance sheet net liquidity was $240.2 million;
furthermore, the Company had no debt.
Conference Call and Webcast
Argan will host a conference call and webcast for investors
today, December 6, 2023, at 5 p.m. ET.
Domestic stockholders and interested parties may participate in
the conference call by dialing (888) 506-0062 and international
participants should dial (973) 528-0011; all callers shall use
access code: 222989. The call and the accompanying slide deck will
also be webcast at:
https://www.webcaster4.com/Webcast/Page/2961/49461
The conference call and slide deck may also be accessed via the
Investor Center section of the Company’s website at
https://arganinc.com/investor-center. Please allow extra time prior
to the call to visit the site.
A replay of the teleconference will be available until December
20, 2023, and can be accessed by dialing 877-481-4010 (domestic) or
919-882-2331 (international). The replay access code is 49461. A
replay of the webcast can be accessed until December 6, 2024.
About Argan
Argan’s primary business is providing a full range of
construction and related services to the power industry. Argan’s
service offerings focus on the engineering, procurement and
construction of natural gas-fired power plants and renewable energy
facilities, along with related commissioning, maintenance, project
development and technical consulting services, through its Gemma
Power Systems and Atlantic Projects Company operations. Argan also
owns The Roberts Company, which is a fully integrated industrial
construction, fabrication and plant services company, and SMC
Infrastructure Solutions, which provides telecommunications
infrastructure services.
Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal
securities laws. Reference is hereby made to the cautionary
statements made by the Company with respect to risk factors set
forth in its most recent reports on Form 10-K, Forms 10-Q and other
SEC filings. The Company’s future financial performance is subject
to risks and uncertainties including, but not limited to, the
successful addition of new contracts to project backlog, the
receipt of corresponding notices to proceed with contract
activities, and the Company’s ability to successfully complete the
projects that it obtains. Actual results and the timing of certain
events could differ materially from those projected in or
contemplated by the forward-looking statements due to the risk
factors highlighted above and described regularly in the Company’s
SEC filings.
ARGAN, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Nine Months Ended
October 31,
October 31,
2023
2022
2023
2022
REVENUES
$
163,755
$
117,875
$
408,779
$
336,262
Cost of revenues
144,520
95,667
351,578
269,929
GROSS PROFIT
19,235
22,208
57,201
66,333
Selling, general and administrative
expenses
11,375
12,667
32,467
34,226
INCOME FROM OPERATIONS
7,860
9,541
24,734
32,107
Other income, net
3,733
768
7,222
1,868
INCOME BEFORE INCOME TAXES
11,593
10,309
31,956
33,975
Income tax expense
6,129
2,551
11,616
14,510
NET INCOME
5,464
7,758
20,340
19,465
Foreign currency translation
adjustments
(882)
(650)
(627)
(2,601)
Net unrealized losses on
available-for-sale securities
(427)
—
(1,147)
—
COMPREHENSIVE INCOME
$
4,155
$
7,108
$
18,566
$
16,864
NET INCOME PER SHARE
Basic
$
0.41
$
0.56
$
1.52
$
1.36
Diluted
$
0.40
$
0.56
$
1.50
$
1.36
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic
13,328
13,781
13,381
14,268
Diluted
13,559
13,812
13,549
14,350
CASH DIVIDENDS PER SHARE
$
0.30
$
0.25
$
0.80
$
0.75
ARGAN, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands, except
per share data)
October 31,
January 31,
2023
2023
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
185,569
$
173,947
Investments
211,946
151,511
Accounts receivable, net
49,922
50,132
Contract assets
25,391
24,778
Other current assets
41,243
38,334
TOTAL CURRENT ASSETS
514,071
438,702
Property, plant and equipment, net
10,786
10,430
Goodwill
28,033
28,033
Intangible assets, net
2,315
2,609
Deferred taxes, net
3,132
3,689
Right-of-use and other assets
5,315
6,024
TOTAL ASSETS
$
563,652
$
489,487
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable
$
34,532
$
56,375
Accrued expenses
83,193
49,867
Contract liabilities
156,169
96,261
TOTAL CURRENT LIABILITIES
273,894
202,503
Noncurrent liabilities
4,925
6,087
TOTAL LIABILITIES
278,819
208,590
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.10 per share
– 500,000 shares authorized; no shares issued and outstanding
—
—
Common stock, par value $0.15 per share –
30,000,000 shares authorized; 15,828,289 shares issued; 13,332,747
and 13,441,590 shares outstanding at October 31, 2023 and January
31, 2023, respectively
2,374
2,374
Additional paid-in capital
163,154
162,208
Retained earnings
217,486
207,832
Less treasury stock, at cost – 2,495,542
and 2,386,699 shares at October 31, 2023 and January 31, 2023,
respectively
(93,531)
(88,641)
Accumulated other comprehensive loss
(4,650)
(2,876)
TOTAL STOCKHOLDERS' EQUITY
284,833
280,897
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
563,652
$
489,487
ARGAN, INC. AND
SUBSIDIARIES
RECONCILIATIONS TO
EBITDA
(In thousands)
(Unaudited)
Three Months Ended
October 31,
2023
2022
Net income, as reported
$
5,464
$
7,758
Income tax expense
6,129
2,551
Depreciation
489
740
Amortization of intangible assets
98
212
EBITDA
$
12,180
$
11,261
Nine Months Ended
October 31,
2023
2022
Net income, as reported
$
20,340
$
19,465
Income tax expense
11,616
14,510
Depreciation
1,524
2,296
Amortization of intangible assets
294
611
EBITDA
$
33,774
$
36,882
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231206571710/en/
Company: David Watson 301.315.0027
Investor Relations: John Nesbett/Jennifer Belodeau IMS
Investor Relations 203.972.9200
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