8-K
ARGAN INC (AGX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of Earliest Event Reported): December 5, 2024
ARGAN, INC.
(Exact Name of Registrant as Specified in its Charter)
| | | | | |
|---|---|---|---|---|
| Delaware | 001-31756 | 13-1947195 | ||
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) | ||
| | | | ||
| --- | --- | --- | ||
| One Church Street, Suite 201, Rockville, MD | 20850 | |||
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (301) 315-0027
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
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|---|---|
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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|---|---|---|---|---|
| Title of Each Class: | | Trading Symbol(s): | | Name of Each Exchange on Which Registered: |
| Common Stock, $0.15 Par Value | | AGX | | New York Stock Exchange |
Item 2.02. Results of Operations and Financial Condition.
On December 5, 2024, Argan, Inc. (“Argan”) issued a press release announcing its financial results for the three months ended October 31, 2024. A copy of Argan’s press release is attached to this report as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits
| Exhibit No. | Description | |
|---|---|---|
| 99.1 | Press Release issued by Argan on December 5, 2024 | |
| 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ARGAN, INC. | |||||
|---|---|---|---|---|---|
| | | | | ||
| Date: December 5, 2024 | By: | /s/ Joshua S. Baugher | |||
| Joshua S. Baugher | |||||
| Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit 99.1
Argan, Inc. Reports Third Quarter Fiscal 2025 Results
December 5, 2024 – ROCKVILLE, MD – Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today announces financial results for its third quarter of fiscal year 2025 ended October 31, 2024. The Company will host an investor conference call today, December 5, 2024, at 5:00 p.m. ET.
Consolidated Financial Highlights
($ in thousands, except per share data)
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | October 31, | | | | |||||
| For the Quarter Ended: | 2024 | 2023 | Change | |||||||
| Revenues | | $ | 257,008 | | $ | 163,755 | | $ | 93,253 | |
| Gross profit | | 44,327 | | 19,235 | | 25,092 | | |||
| Gross margin % | | 17.2 | % | 11.7 | % | 5.5 | % | |||
| Net income | | $ | 28,010 | | $ | 5,464 | | $ | 22,546 | |
| Diluted income per share | | 2.00 | | 0.40 | | 1.60 | | |||
| EBITDA | | | 37,509 | | | 12,180 | | | 25,329 | |
| Cash dividends per share | | 0.375 | | 0.300 | | 0.075 | |
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | October 31, | | | | | ||||
| For the Nine Months Ended: | | 2024 | | 2023 | | Change | | |||
| Revenues | | $ | 641,705 | | $ | 408,779 | | $ | 232,926 | |
| Gross profit | | 93,376 | | 57,201 | | 36,175 | | |||
| Gross margin % | | 14.6 | % | 14.0 | % | 0.6 | % | |||
| Net income | | $ | 54,090 | | $ | 20,340 | | $ | 33,750 | |
| Diluted income per share | | 3.91 | | 1.50 | | 2.41 | | |||
| EBITDA | | | 74,241 | | | 33,774 | | | 40,467 | |
| Cash dividends per share | | 0.975 | | 0.800 | | 0.175 | |
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | **** | October 31, | | January 31, | | | ||||
| As of: | | 2024 | | 2024 | | Change | **** | |||
| Cash, cash equivalents and investments | | $ | 506,282 | | $ | 412,405 | | $ | 93,877 | |
| Net liquidity ^(1)^ | | 280,977 | | 244,919 | | 36,058 | | |||
| Share repurchase treasury stock, at cost | | | 102,746 | | | 97,528 | | | 5,218 | |
| Project backlog | | 800,000 | | 757,000 | | 43,000 | |
| ^(1)^ | | Net liquidity, or working capital, is defined as total current assets less total current liabilities. |
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David Watson, President and Chief Executive Officer of Argan, commented, “Our third quarter revenues and earnings, each the second highest in Company history, reflect strong execution across all of our businesses, which drove consolidated revenues growth of 57% to $257 million, gross margin of 17.2%, net income of $28.0 million, or $2.00 per diluted share, and EBITDA of $37.5 million. Our power industry services segment had a particularly strong quarter as evidenced by revenue growth of 75% to $212 million with gross margin of 18.3%, demonstrating our ability to drive enhanced profitability on our renewable as well as on our natural gas projects.
“Our backlog of $0.8 billion at the close of the quarter increased 6% compared to backlog entering fiscal year 2025, and includes $478 million of renewable projects, reflecting the market appeal of our energy agnostic capabilities and our ability to diversify our backlog mix. The industry is seeing strong demand for natural gas projects and we believe that our expertise, well-established industry relationships and reputation for enabling efficient and on-budget project completion provide a competitive advantage as we pursue new opportunities.
“As we move through the close of our fiscal year, we are encouraged by the strengthening pipeline of planned energy facilities as the industry prepares for the anticipated unprecedented growth in power demand driven by data centers, reshoring of manufacturing operations and increased EV charger utilization. We believe our successful track record as an effective partner in the construction of both traditional and renewable power facilities position us well to capitalize on the current and future need for high quality energy resources to support the power grid.”
Third Quarter Results
Consolidated revenues for the quarter ended October 31, 2024 were $257.0 million, an increase of $93.3 million, or 57%, from consolidated revenues of $163.8 million reported for the comparable prior year quarter. The Company achieved increased revenues with heightened quarterly construction activities at several projects, including the Midwest Solar and Battery Projects; the Trumbull Energy Center, a large combined cycle, gas-fired power plant under construction near Lordstown, Ohio; the 405 MW Midwest Solar Project; and the Louisiana LNG Facility. The overall increase in consolidated revenues between quarters was partially offset by decreased construction revenues associated with the Guernsey Power Station project, the Shannonbridge Power Project and the ESB FlexGen Peaker Plants, as those projects have been completed.
For the quarter ended October 31, 2024, Argan’s consolidated gross profit was approximately $44.3 million, or 17.2% of consolidated revenues, reflecting profit contributions from all three reportable business segments. The consolidated gross margin for the quarter reflects the changing mix of projects, strong execution and certain positive job closeouts. Last year, during the third quarter ended October 31, 2023, gross profit was negatively impacted by a loss on the Kilroot project, which reduced gross profit by approximately $10.7 million. Consolidated gross profit for the quarter ended October 31, 2023 was $19.2 million, or 11.7% of consolidated revenues.
Selling, general and administrative expenses increased by $2.6 million to $14.0 million for the quarter ended October 31, 2024, from $11.4 million in the comparable prior year quarter. However, as a percentage of revenues, these expenses declined to 5.4% in the third quarter of fiscal 2025 as compared to 6.9% in the third quarter of fiscal 2024.
Other income, net, for the three months ended October 31, 2024 was $6.6 million, which reflected income earned during the period on invested funds in the total amount of approximately $4.8 million. During the quarter ended October 31, 2024, the Company recorded income tax expense of $9.0 million, primarily due to consolidated pre-tax book income of $37.0 million. For the comparable period last year, the effective tax rate was higher primarily due to the unrecognized tax loss benefit related to the Kilroot project.
For the quarter ended October 31, 2024, Argan achieved net income of $28.0 million, or $2.00 per diluted share, compared to $5.5 million, or $0.40 per diluted share, for last year’s third quarter. EBITDA for the quarter ended October 31, 2024 increased to $37.5 million compared to $12.2 million in the same quarter of last year.
Argan maintained a substantial total balance of cash, cash equivalents and investments during the quarter. The total balances were $506.3 million and $412.4 million as of October 31 and January 31, 2024, respectively. Balance sheet net liquidity was $281.0 million at October 31, 2024 and $244.9 million at January 31, 2024; furthermore, the Company had no debt.
First Nine Months Results
Consolidated revenues for the nine months ended October 31, 2024 were $641.7 million, an increase of $232.9 million, or 57.0%, from consolidated revenues of $408.8 million reported for the comparable prior year period.
For the nine months ended October 31, 2024, consolidated gross profit increased to approximately $93.4 million, which represented a consolidated gross margin of 14.6%, compared to consolidated gross profit of $57.2 million, or consolidated gross margin of 14.0%, reported for the nine months ended October 31, 2023. The gross profit percentage increased between periods primarily due to the changing mix of projects and contract types. Additionally, during the nine-month periods ended October 31, 2024 and 2023, gross profit was negatively impacted by a loss recorded on the Kilroot Project, which reduced gross profit by approximately $2.6 million and $11.5 million, respectively.
Selling, general and administrative expenses increased by $5.4 million to $37.8 million for the nine months ended October 31, 2024, from $32.5 million in the comparable prior year period. However, as a percentage of revenues, these expenses declined to 5.9% from 7.9% between the periods.
Other income, net, for the nine months ended October 31, 2024 was $17.0 million, which reflected income earned during the period on invested funds of approximately $14.0 million, as the weighted average balances of investments are meaningfully higher this year.
The Company recorded income tax expense of $18.5 million for the nine months ended October 31, 2024 primarily due to corresponding consolidated pre-tax book income of $72.6 million. For the comparable period last year, the effective tax rate was higher primarily due to the unrecognized tax loss benefit related to the Kilroot project.
For the nine months ended October 31, 2024, Argan achieved net income of $54.1 million, or $3.91 per diluted share, versus net income of $20.3 million, or $1.50 per diluted share, for last year’s comparable period. EBITDA for the nine months ended October 31, 2024 was $74.2 million compared to $33.8 million in the same period of last year.
Conference Call and Webcast
Argan will host a conference call and webcast for investors today, December 5, 2024, at 5:00 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: 925404.
The call and the accompanying slide deck will also be webcast at:
https://www.webcaster4.com/webcast/page/2961/51625
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 19, 2024, and can be accessed by dialing 877-481-4010 (domestic) or 919-882-2331 (international). The replay access code is 51625. A replay of the webcast can be accessed until December 5, 2025.
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.
Non-GAAP Financial Measures
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Within this press release, the Company makes reference to earnings before interest, taxes, depreciation and amortization (“EBITDA”), a non-GAAP financial measure. The Company believes that the non-GAAP financial measure described in this press release is important to management and investors because the measure supplements the understanding of Argan’s ongoing operating results, excluding the effects of capital structure, depreciation, amortization, and income tax rates. The non-GAAP financial measure referred to above should be considered in conjunction with, and not as a substitute for, the GAAP financial information presented in this press release. Financial tables at the end of this press release provide a reconciliation of the non-GAAP financial measures to the comparable GAAP measures.
Safe Harbor Statement
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, the Company’s ability to successfully complete the projects that it obtains, and the Company’s effectiveness in mitigating future losses related to the Kilroot loss contract. 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.
| <br><br><br><br><br><br> |
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| <br><br><br><br><br><br> |
| Company Contact: |
| David Watson |
| 301.315.0027<br><br><br><br>Investor Relations Contacts:<br><br>John Nesbett/Jennifer Belodeau<br><br>IMS Investor Relations<br><br>203.972.9200 |
| argan@imsinvestorrelations.com |
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, | ||||||||
| | 2024 | 2023 | 2024 | 2023 | ||||||||
| REVENUES | | $ | 257,008 | | $ | 163,755 | | $ | 641,705 | | $ | 408,779 |
| Cost of revenues | | 212,681 | | 144,520 | | 548,329 | | 351,578 | ||||
| GROSS PROFIT | | 44,327 | | 19,235 | | 93,376 | | 57,201 | ||||
| Selling, general and administrative expenses | | 13,995 | | 11,375 | | 37,848 | | 32,467 | ||||
| INCOME FROM OPERATIONS | | 30,332 | | 7,860 | | 55,528 | | 24,734 | ||||
| Other income, net | | 6,646 | | 3,733 | | 17,044 | | 7,222 | ||||
| INCOME BEFORE INCOME TAXES | | 36,978 | | 11,593 | | 72,572 | | 31,956 | ||||
| Income tax expense | | 8,968 | | 6,129 | | 18,482 | | 11,616 | ||||
| NET INCOME | | | 28,010 | | | 5,464 | | | 54,090 | | | 20,340 |
| | | | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME, NET OF TAXES | | | | | | | | | | | | |
| Foreign currency translation adjustments | | (957) | | | (882) | | | (1,933) | | | (627) | |
| Net unrealized losses on available-for-sale securities | | | (659) | | | (427) | | | (169) | | | (1,147) |
| COMPREHENSIVE INCOME | | $ | 26,394 | | $ | 4,155 | | $ | 51,988 | | $ | 18,566 |
| | | | | | | | | | | | | |
| NET INCOME PER SHARE | | | | | | |||||||
| Basic | | $ | 2.07 | | $ | 0.41 | | $ | 4.04 | | $ | 1.52 |
| Diluted | | $ | 2.00 | | $ | 0.40 | | $ | 3.91 | | $ | 1.50 |
| | | | | | | | | | | | | |
| WEIGHTED AVERAGE SHARES OUTSTANDING | | | | | | |||||||
| Basic | | 13,530 | | 13,328 | | 13,398 | | 13,381 | ||||
| Diluted | | 14,034 | | 13,559 | | 13,830 | | 13,549 | ||||
| | | | | | | | | | | | | |
| CASH DIVIDENDS PER SHARE | | $ | 0.375 | | $ | 0.300 | | $ | 0.975 | | $ | 0.800 |
ARGAN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | October 31, | | January 31, | ||
| | **** | 2024 | **** | 2024 | ||
| | | (Unaudited) | | | | |
| ASSETS | | | ||||
| CURRENT ASSETS | | | ||||
| Cash and cash equivalents | | $ | 175,349 | | $ | 197,032 |
| Investments | | 330,933 | | | 215,373 | |
| Accounts receivable, net | | 131,660 | | 47,326 | ||
| Contract assets | | 44,620 | | 48,189 | ||
| Other current assets | | 34,579 | | 39,259 | ||
| TOTAL CURRENT ASSETS | | 717,141 | | 547,179 | ||
| Property, plant and equipment, net | | 14,147 | | 11,021 | ||
| Goodwill | | 28,033 | | 28,033 | ||
| Intangible assets, net | | 1,924 | | | 2,217 | |
| Deferred taxes, net | | | 1,254 | | | 2,259 |
| Right-of-use and other assets | | 6,365 | | | 7,520 | |
| TOTAL ASSETS | | $ | 768,864 | | $ | 598,229 |
| | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | ||||
| CURRENT LIABILITIES | | | ||||
| Accounts payable | | $ | 87,085 | | $ | 39,485 |
| Accrued expenses | | 78,393 | | 81,721 | ||
| Contract liabilities | | 270,686 | | 181,054 | ||
| TOTAL CURRENT LIABILITIES | | 436,164 | | 302,260 | ||
| Noncurrent liabilities | | 3,996 | | | 5,030 | |
| TOTAL LIABILITIES | | 440,160 | | 307,290 | ||
| | | | | | | |
| 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; 13,569,104 and 13,242,520 shares outstanding at October 31, 2024 and January 31, 2024, respectively | | 2,374 | | 2,374 | ||
| Additional paid-in capital | | 168,441 | | 164,183 | ||
| Retained earnings | | 266,334 | | 225,507 | ||
| Treasury stock, at cost – 2,259,185 and 2,585,769 shares at October 31, 2024 and January 31, 2024, respectively | | | (102,746) | | | (97,528) |
| Accumulated other comprehensive loss | | (5,699) | | | (3,597) | |
| TOTAL STOCKHOLDERS’ EQUITY | | 328,704 | | 290,939 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 768,864 | | $ | 598,229 |
ARGAN, INC. AND SUBSIDIARIES
RECONCILIATION TO EBITDA
(In thousands) (Unaudited)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Three Months Ended | ||||
| | | October 31, | ||||
| | **** | 2024 | **** | 2023 | ||
| Net income, as reported | | $ | 28,010 | | $ | 5,464 |
| Income tax expense | | 8,968 | | 6,129 | ||
| Depreciation | | 433 | | 489 | ||
| Amortization of intangible assets | | 98 | | 98 | ||
| EBITDA | | $ | 37,509 | | $ | 12,180 |
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | Nine Months Ended | ||||
| | | October 31, | ||||
| | **** | 2024 | **** | 2023 | ||
| Net income, as reported | | $ | 54,090 | | $ | 20,340 |
| Income tax expense | | 18,482 | | 11,616 | ||
| Depreciation | | 1,376 | | 1,524 | ||
| Amortization of intangible assets | | 293 | | 294 | ||
| EBITDA | | $ | 74,241 | | $ | 33,774 |