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Argan, Inc. Reports Third Quarter Results

Argan, Inc. Reports Third Quarter Results

Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announces financial results for its third quarter ended October 31, 2022. For additional information, please read the Company’s Quarterly Report on Form 10-Q, which the Company intends to file today with the U.S. Securities and Exchange Commission (the “SEC”). The Quarterly Report can be retrieved from the SEC’s website at www.sec.gov or from the Company’s website at www.arganinc.com.

Summary Information (dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

 

 

 

 

2022

 

2021

 

Change

 

For the Quarter Ended:

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

117,875

 

$

124,451

 

$

(6,576)

 

Gross profit

 

 

22,208

 

 

26,135

 

 

(3,927)

 

Gross margin %

 

 

18.8

%

 

21.0

%

 

(2.2)

%

Net income

 

$

7,758

 

$

12,393

 

$

(4,635)

 

Diluted per share

 

 

0.56

 

 

0.78

 

 

(0.22)

 

EBITDA

 

 

11,261

 

 

16,708

 

 

(5,447)

 

Cash dividends per share

 

 

0.25

 

 

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

January 31,

 

 

 

 

As of:

 

2022

 

2022

 

Change

 

Cash, cash equivalents and short-term investments

 

$

286,631

 

$

440,498

 

$

(153,867)

 

Net liquidity (1)

 

 

230,423

 

 

284,257

 

 

(53,834)

 

Share repurchase treasury stock, at cost

 

 

83,657

 

 

20,405

 

 

63,252

 

Project backlog

 

 

839,000

 

 

714,000

 

 

125,000

 

(1)

 

Net liquidity, or working capital, is defined as total current assets less total current liabilities.

“We were pleased to announce last month that our Gemma Power Systems subsidiary received full notice to proceed on an engineering, procurement and construction (“EPC”) services contract to build the Trumbull Energy Center, a 950 MW natural gas-fired power plant in Lordstown, Ohio, which increased our project backlog to exceed $0.8 billion,” David Watson, President and Chief Executive Officer of Argan, said. “All of our companies are generally experiencing increasing amounts of project backlogs this year and continue to see significant opportunities in their markets. We believe this increase is a reflection, in part, on our ability to execute effectively and efficiently for our customers. For example, the Guernsey Power Station, the largest single-phase, gas-fired, power plant project in the U.S. has been under construction throughout the entire COVID-19 pandemic with limited schedule delays to date and recently reached first fire on all three units, major milestones for the project. Due to increased project backlog and market opportunities, our dedicated and talented employees and our strong balance sheet, we are positioned to finish out the year strong and for growth into the future.”

Consolidated revenues for the quarter ended October 31, 2022 were $117.9 million, which represented a decrease of $6.6 million, or 5.3%, from consolidated revenues of $124.5 million reported for the three months ended October 31, 2021. Consolidated revenues of our power industry services segment decreased by $8.9 million as the quarterly construction activities associated with the Guernsey Power Station project and the Equinix data center project have passed peak levels. The reduction in revenues between the quarters was partially offset by increasing revenues at several projects including the Kilroot Power Station, the ESB FlexGen peaker plants and the Maple Hill Solar energy facility. The Company’s consolidated project backlog was approximately $839 million as of October 31, 2022.

For the quarter ended October 31, 2022, we reported a consolidated gross profit of approximately $22.2 million which represented a gross profit percentage of approximately 18.8% of corresponding consolidated revenues. The gross profit percentages of corresponding revenues for the power industry services, industrial services and the telecommunications infrastructure segments were 19.8%, 15.4% and 16.8%, respectively, for the current quarter.

Selling, general and administrative expenses for the three months ended October 31, 2022 and 2021, were $12.7 million and $11.6 million, respectively, representing an increase of $1.1 million between the quarters, or 9.3%, which was due primarily to the accrual of costs associated with the retirement of the Company’s former chief executive officer in August 2022.

For the three months ended October 31, 2022, net income was $7.8 million, or $0.56 per diluted share. For the three months ended October 31, 2021, we reported net income in the amount of $12.4 million, or $0.78 per diluted share. EBITDA for the quarter ended October 31, 2022 decreased to $11.3 million from $16.7 million for the prior year quarter. The Company paid its regular quarterly cash dividend of $0.25 per share in October 2022.

For the nine months ended October 31, 2022, we reported net income in the amount of $19.5 million, or $1.36 per diluted share, compared to $36.0 million of net income, or $2.25 per diluted share, in the prior year period. EBITDA for the nine months ended October 31, 2022 decreased to $36.9 million from $50.5 million for the prior year period.

As of October 31, 2022, cash, cash equivalents and short-term investments totaled $287 million and net liquidity was $230 million; furthermore, the Company had no debt. The $154 million reduction in cash, cash equivalents and short-term investments from January 31, 2022 reflected the expected cash flow cycle of two significant projects, the payment of dividends and the repurchase of shares. During the three months ended October 31, 2022, the Company repurchased 308,423 shares of common stock at a cost of $10 million. Since last November, the Company has repurchased 2,248,767 shares of common stock, or approximately 14% of its outstanding shares, at a cost of approximately $84 million under the now $100 million share repurchase program authorization.

About Argan

Argan’s primary business is providing a full range of services to the power industry, including the renewable energy sector. 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, operations management, maintenance, project development and consulting services, through its Gemma Power Systems and Atlantic Projects Company operations. Argan also owns The Roberts Company, which is a fully integrated fabrication, construction and industrial 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. The Company has several signed EPC contracts that have not started and may not start as forecasted due to market and other circumstances beyond its control. 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,

 

 

2022

 

2021

 

2022

 

2021

REVENUES

 

$

117,875

 

$

124,451

 

$

336,262

 

$

383,800

Cost of revenues

 

 

95,667

 

 

98,316

 

 

269,929

 

 

306,299

GROSS PROFIT

 

 

22,208

 

 

26,135

 

 

66,333

 

 

77,501

Selling, general and administrative expenses

 

 

12,667

 

 

11,590

 

 

34,226

 

 

31,813

INCOME FROM OPERATIONS

 

 

9,541

 

 

14,545

 

 

32,107

 

 

45,688

Other income, net

 

 

768

 

 

1,117

 

 

1,868

 

 

1,569

INCOME BEFORE INCOME TAXES

 

 

10,309

 

 

15,662

 

 

33,975

 

 

47,257

Income tax expense

 

 

(2,551)

 

 

(3,269)

 

 

(14,510)

 

 

(11,228)

NET INCOME

 

 

7,758

 

 

12,393

 

 

19,465

 

 

36,029

Foreign currency translation adjustments

 

 

(650)

 

 

(471)

 

 

(2,601)

 

 

(728)

COMPREHENSIVE INCOME

 

$

7,108

 

$

11,922

 

$

16,864

 

$

35,301

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.56

 

$

0.79

 

$

1.36

 

$

2.29

Diluted

 

$

0.56

 

$

0.78

 

$

1.36

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,781

 

 

15,774

 

 

14,268

 

 

15,757

Diluted

 

 

13,812

 

 

15,963

 

 

14,350

 

 

15,980

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH DIVIDENDS PER SHARE

 

$

0.25

 

$

0.25

 

$

0.75

 

$

0.75

ARGAN, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

October 31,

 

January 31,

 

 

2022

 

2022

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

136,065

 

$

350,472

Short-term investments

 

 

150,566

 

 

90,026

Accounts receivable, net

 

 

37,899

 

 

26,978

Contract assets

 

 

11,551

 

 

4,904

Other current assets

 

 

28,884

 

 

34,904

TOTAL CURRENT ASSETS

 

 

364,965

 

 

507,284

Property, plant and equipment, net

 

 

10,504

 

 

10,460

Goodwill

 

 

28,033

 

 

28,033

Other purchased intangible assets, net

 

 

2,730

 

 

3,322

Right-of-use, deferred tax and other assets

 

 

4,671

 

 

4,486

TOTAL ASSETS

 

$

410,903

 

$

553,585

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

45,268

 

$

41,822

Accrued expenses

 

 

40,243

 

 

53,315

Contract liabilities

 

 

49,031

 

 

127,890

TOTAL CURRENT LIABILITIES

 

 

134,542

 

 

223,027

Noncurrent liabilities

 

 

4,621

 

 

4,963

TOTAL LIABILITIES

 

 

139,163

 

 

227,990

 

 

 

 

 

 

 

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; 15,827,772 and 15,788,673 shares issued at October 31, 2022 and January 31, 2022, respectively; 13,575,772 and 15,257,688 shares outstanding at October 31, 2022 and January 31, 2022, respectively

 

 

2,374

 

 

2,368

Additional paid-in capital

 

 

161,305

 

 

158,190

Retained earnings

 

 

197,567

 

 

188,690

Less treasury stock, at cost – 2,252,000 and 530,985 shares at October 31, 2022 and January 31, 2022, respectively

 

 

(83,657)

 

 

(20,405)

Accumulated other comprehensive loss

 

 

(5,052)

 

 

(2,451)

TOTAL STOCKHOLDERS’ EQUITY

 

 

272,537

 

 

326,392

Non-controlling interest

 

 

(797)

 

 

(797)

TOTAL EQUITY

 

 

271,740

 

 

325,595

TOTAL LIABILITIES AND EQUITY

 

$

410,903

 

$

553,585

ARGAN, INC. AND SUBSIDIARIES

Reconciliations to EBITDA

(In thousands)(Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

October 31,

 

 

2022

 

2021

Net income, as reported

 

$

7,758

 

$

12,393

Income tax expense

 

 

2,551

 

 

3,269

Depreciation

 

 

740

 

 

819

Amortization of purchased intangible assets

 

 

212

 

 

227

EBITDA

 

$

11,261

 

$

16,708

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

October 31,

 

 

2022

 

2021

Net income, as reported

 

$

19,465

 

$

36,029

Income tax expense

 

 

14,510

 

 

11,228

Depreciation

 

 

2,296

 

 

2,560

Amortization of purchased intangible assets

 

 

611

 

 

680

EBITDA

 

$

36,882

 

$

50,497

 

Company Contact:
David Watson
301.315.0027

View source version on businesswire.com: https://www.businesswire.com/news/home/20221207005713/en/

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