Argan Inc 10-Q for FY2025 Q2

Argan Inc (AGX)

10-Q 2024-09-05 For: 2024-07-31

Added on April 04, 2026

About this 10-Q

Argan Inc filed this 10-Q on September 5, 2024, covering the quarter ended July 31, 2024 (FY2025 Q2).

Headline figures

Quarter ended July 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $227.02M; up 60.6% from $141.35M a year earlier
Net income: $18.2M; up 42.5% from net income of $12.77M a year earlier
Diluted EPS: $1.31; up 39.4% from $0.94 a year earlier

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Delaware		13-1947195
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification No.)


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


	Three Months Ended				Six Months Ended
	July 31,				July 31,
	2024		2023		2024		2023
REVENUES	$	227,015	$	141,349	$	384,697	$	245,024
Cost of revenues		195,910		117,607		335,648		207,058
GROSS PROFIT		31,105		23,742		49,049		37,966
Selling, general and administrative expenses		12,428		10,501		23,853		21,092
INCOME FROM OPERATIONS		18,677		13,241		25,196		16,874
Other income, net		5,604		4,118		10,398		3,489
INCOME BEFORE INCOME TAXES		24,281		17,359		35,594		20,363
Income tax expense		6,083		4,592		9,514		5,487
NET INCOME		18,198		12,767		26,080		14,876

OTHER COMPREHENSIVE INCOME, NET OF TAXES
Foreign currency translation adjustments		(186)		(185)		(976)		255
Net unrealized gains (losses) on available-for-sale securities		1,459		(683)		490		(720)
COMPREHENSIVE INCOME	$	19,471	$	11,899	$	25,594	$	14,411

NET INCOME PER SHARE
Basic	$	1.36	$	0.95	$	1.96	$	1.11
Diluted	$	1.31	$	0.94	$	1.90	$	1.10

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		13,403		13,403		13,331		13,408
Diluted		13,880		13,542		13,727		13,544

CASH DIVIDENDS PER SHARE	$	0.30	$	0.25	$	0.60	$	0.50


	July 31,		January 31,
	2024		2024
	(Unaudited)		(Note 1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	232,685	$	197,032
Investments		251,997		215,373
Accounts receivable, net		95,315		47,326
Contract assets		46,086		48,189
Other current assets		48,871		39,259
TOTAL CURRENT ASSETS		674,954		547,179
Property, plant and equipment, net		12,098		11,021
Goodwill		28,033		28,033
Intangible assets, net		2,022		2,217
Deferred taxes, net		1,637		2,259
Right-of-use and other assets		7,830		7,520
TOTAL ASSETS	$	726,574	$	598,229

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	99,693	$	39,485
Accrued expenses		61,698		81,721
Contract liabilities		253,736		181,054
TOTAL CURRENT LIABILITIES		415,127		302,260
Noncurrent liabilities		3,379		5,030
TOTAL LIABILITIES		418,506		307,290

COMMITMENTS AND CONTINGENCIES (see Notes 8 and 9)

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; 13,497,550 and 13,242,520 shares outstanding at July 31, 2024 and January 31, 2024, respectively		2,374		2,374
Additional paid-in capital		165,902		164,183
Retained earnings		243,519		225,507
Less treasury stock, at cost – 2,330,739 and 2,585,769 shares at July 31, 2024 and January 31, 2024, respectively		(99,644)		(97,528)
Accumulated other comprehensive loss		(4,083)		(3,597)
TOTAL STOCKHOLDERS’ EQUITY		308,068		290,939
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	726,574	$	598,229


	Common Stock			Additional						Accumulated Other
	Outstanding	Par		Paid-in		Retained		Treasury		Comprehensive		Total
	Shares	Value		Capital		Earnings		Stock		Loss		Equity
Balances, May 1, 2024	13,350,180	$	2,374	$	164,501	$	229,364	$	(97,728)	$	(5,356)	$	293,155
Net income	—		—		—		18,198		—		—		18,198
Foreign currency translation loss	—		—		—		—		—		(186)		(186)
Net unrealized gains on available-for-sale securities	—		—		—		—		—		1,459		1,459
Stock compensation expense	—		—		1,004		—		—		—		1,004
Stock option exercises and restricted stock unit settlements, net	147,370		—		397		—		(1,916)		—		(1,519)
Cash dividends	—		—		—		(4,043)		—		—		(4,043)
Balances, July 31, 2024	13,497,550	$	2,374	$	165,902	$	243,519	$	(99,644)	$	(4,083)	$	308,068

Balances, May 1, 2023	13,414,404	$	2,374	$	161,347	$	206,584	$	(89,883)	$	(2,473)	$	277,949
Net income	—		—		—		12,767		—		—		12,767
Foreign currency translation loss	—		—		—		—		—		(185)		(185)
Net unrealized losses on available-for-sale securities	—		—		—		—		—		(683)		(683)
Stock compensation expense	—		—		1,184		—		—		—		1,184
Stock option exercises and restricted stock unit settlements	16,381		—		(208)		—		611		—		403
Common stock repurchases	(77,132)		—		—		—		(3,057)		—		(3,057)
Cash dividends	—		—		—		(3,342)		—		—		(3,342)
Balances, July 31, 2023	13,353,653	$	2,374	$	162,323	$	216,009	$	(92,329)	$	(3,341)	$	285,036

Balances, February 1, 2024	13,242,520	$	2,374	$	164,183	$	225,507	$	(97,528)	$	(3,597)	$	290,939
Net income	—		—		—		26,080		—		—		26,080
Foreign currency translation loss	—		—		—		—		—		(976)		(976)
Net unrealized gains on available-for-sale securities	—		—		—		—		—		490		490
Stock compensation expense	—		—		2,215		—		—		—		2,215
Stock option exercises and restricted stock unit settlements, net	260,630		—		(496)		—		(1,929)		—		(2,425)
Common stock repurchases	(5,600)		—		—		—		(187)		—		(187)
Cash dividends	—		—		—		(8,068)		—		—		(8,068)
Balances, July 31, 2024	13,497,550	$	2,374	$	165,902	$	243,519	$	(99,644)	$	(4,083)	$	308,068

Balances, February 1, 2023	13,441,590	$	2,374	$	162,208	$	207,832	$	(88,641)	$	(2,876)	$	280,897
Net income	—		—		—		14,876		—		—		14,876
Foreign currency translation gain	—		—		—		—		—		255		255
Net unrealized losses on available-for-sale securities	—		—		—		—		—		(720)		(720)
Stock compensation expense	—		—		2,218		—		—		—		2,218
Stock option exercises and restricted stock unit settlements	81,851		—		(2,103)		—		3,050		—		947
Common stock repurchases	(169,788)		—		—		—		(6,738)		—		(6,738)
Cash dividends	—		—		—		(6,699)		—		—		(6,699)
Balances, July 31, 2023	13,353,653	$	2,374	$	162,323	$	216,009	$	(92,329)	$	(3,341)	$	285,036


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT


	Six Months Ended July 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	26,080	$	14,876
Adjustments to reconcile net income to net cash provided by operating activities
Changes in accrued interest on investments		2,716		(341)
Stock compensation expense		2,215		2,218
Lease expense		1,415		884
Depreciation		943		1,035
Deferred income tax expense (benefit)		469		(196)
Amortization of intangible assets		195		196
Other		995		162
Changes in operating assets and liabilities
Accounts receivable		(48,492)		5,600
Contract assets		2,103		4,031
Other assets		(10,661)		(5,176)
Accounts payable and accrued expenses		40,521		(8,931)
Contract liabilities		72,682		20,195
Net cash provided by operating activities		91,181		34,553

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments		(57,500)		(90,000)
Maturities of short-term investments		95,000		159,750
Purchases of available-for-sale securities		(85,309)		(60,261)
Maturities of available-for-sale securities		9,230		—
Purchases of property, plant and equipment		(2,671)		(1,031)
Investments in solar energy projects		(3,312)		—
Net cash (used in) provided by investing activities		(44,562)		8,458

CASH FLOWS FROM FINANCING ACTIVITIES
Common stock repurchases		(187)		(6,738)
Payments of cash dividends		(8,068)		(6,699)
Proceeds from share-based award settlements, net of withholding taxes paid		(2,425)		947
Net cash used in financing activities		(10,680)		(12,490)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH		(286)		331
NET INCREASE IN CASH AND CASH EQUIVALENTS		35,653		30,852
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		197,032		173,947
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	232,685	$	204,799

NON-CASH INVESTING AND FINANCING ACTIVITIES
Right-of-use assets obtained in exchange for lease obligations	$	1,531	$	665
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes, net of refunds	$	9,138	$	3,270
Cash paid for operating leases	$	1,410	$	888


	Three Months Ended July 31,				Six Months Ended July 31,
	2024		2023		2024		2023
United States	$	195,249	$	80,281	$	319,580	$	147,800
Republic of Ireland		28,167		48,075		57,058		70,656
United Kingdom		3,599		12,993		8,059		26,568
Consolidated Revenues	$	227,015	$	141,349	$	384,697	$	245,024


	July 31, 2024
			Allowance for		Gross		Gross		Estimated
	Amortized		Credit		Unrealized		Unrealized		Fair
	Cost		Losses		Gains		Losses		Value
U.S. Treasury notes:
Due within one year	$	25,200	$	—	$	3	$	94	$	25,109
Due in one to three years		91,045		—		449		202		91,292
Due in three to five years		55,502		—		755		—		56,257
U.S. corporate debt security:
Due in one to three years		10,046		—		1		—		10,047
Totals	$	181,793	$	—	$	1,208	$	296	$	182,705


	January 31, 2024
			Allowance for		Gross		Gross		Estimated
	Amortized		Credit		Unrealized		Unrealized		Fair
	Cost		Losses		Gains		Losses		Value
U.S. Treasury notes:
Due in one to three years	$	96,217	$	—	$	568	$	230	$	96,555
U.S. corporate debt security:
Due in one to three years		9,406		—		—		77		9,329
Totals	$	105,623	$	—	$	568	$	307	$	105,884


	July 31, 2024						January 31, 2024
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	Inputs		Inputs		Inputs		Inputs		Inputs		Inputs
Cash equivalents:
Money market fund	$	144,956	$	—	$	—	$	126,646	$	—	$	—
Available-for-sale securities:
U.S. Treasury notes		—		172,658		—		—		96,555		—
U.S. corporate debt security		—		10,047		—		—		9,329		—
Totals	$	144,956	$	182,705	$	—	$	126,646	$	105,884	$	—


	Amortization
Years Ending January 31,	Expense
2025 (remainder)	$	196
2026		376
2027		300
2028		300
2029		300
Thereafter		550
Total	$	2,022


				Weighted-	Weighted-
		Weighted-		Average	Average
		Average Exercise		Remaining	Grant-Date
		Price		Contractual	Fair Value
	Shares	Per Share		Term (years)	Per Share
Outstanding, February 1, 2024	1,365	$	44.95	4.67	$	10.43
Granted	6	$	61.22
Exercised	(627)	$	41.56
Forfeited	(4)	$	60.07
Outstanding, July 31, 2024	740	$	47.87	4.81	$	10.93
Exercisable, July 31, 2024	669	$	48.72	4.43	$	11.24
Vested or expected to vest, July 31, 2024	740	$	47.87	4.81	$	10.93


Three Months Ended	Power		Industrial		Telecom
July 31, 2024	Services		Services		Services		Other		Totals
Revenues	$	173,760	$	49,642	$	3,613	$	—	$	227,015
Cost of revenues		150,233		43,200		2,477		—		195,910
Gross profit		23,527		6,442		1,136		—		31,105
Selling, general and administrative expenses		7,192		1,965		669		2,602		12,428
Income (loss) from operations		16,335		4,477		467		(2,602)		18,677
Other income, net		4,707		—		3		894		5,604
Income (loss) before income taxes	$	21,042	$	4,477	$	470	$	(1,708)		24,281
Income tax expense										6,083
Net income									$	18,198

Amortization of intangibles	$	—	$	98	$	—	$	—	$	98
Depreciation		148		210		104		1		463
Property, plant and equipment additions		1,947		241		161		—		2,349

Current assets	$	476,912	$	55,175	$	4,405	$	138,462	$	674,954
Current liabilities		384,477		27,817		1,331		1,502		415,127
Goodwill		18,476		9,467		90		—		28,033
Total assets		506,365		71,787		7,041		141,381		726,574


		July 31, 2024						January 31, 2024
	Estimated	Gross		Accumulated		Net		Gross		Accumulated		Net
	Useful Life	Amounts		Amortization		Amounts		Amounts		Amortization		Amounts
Trade name	15 years	$	4,499	$	2,599	$	1,900	$	4,499	$	2,450	$	2,049
Customer relationships	10 years		916		794		122		916		748		168
Totals		$	5,415	$	3,393	$	2,022	$	5,415	$	3,198	$	2,217


	Six Months Ended July 31,
	2024		2023
Computed expected income tax expense	$	7,475	$	4,276
Difference resulting from:
State income taxes, net of federal tax effect		1,186		455
Unrecognized tax loss benefit		961		529
Excess executive compensation		404		400
Stock-based compensation windfall		(531)		(126)
Foreign tax rate differential		(240)		(643)
GILTI		—		505
Tax credits		—		(453)
Other permanent differences and adjustments, net		259		544
Income tax expense	$	9,514	$	5,487


	Three Months Ended July 31,						Six Months Ended July 31,
	2024			2023			2024			2023
Power industry services		76.5	%		74.5	%		73.8	%		71.6	%
Industrial construction services		21.9			23.2			24.3			25.7
Telecommunications infrastructure services		1.6			2.3			1.9			2.7


	Three Months Ended July 31,
	2024		2023		$ Change		% Change
REVENUES
Power industry services	$	173,760	$	105,345	$	68,415	64.9	%
Industrial construction services		49,642		32,756		16,886	51.6
Telecommunications infrastructure services		3,613		3,248		365	11.2
Revenues		227,015		141,349		85,666	60.6
COST OF REVENUES
Power industry services		150,233		87,094		63,139	72.5
Industrial construction services		43,200		28,076		15,124	53.9
Telecommunications infrastructure services		2,477		2,437		40	1.6
Cost of revenues		195,910		117,607		78,303	66.6
GROSS PROFIT		31,105		23,742		7,363	31.0
Selling, general and administrative expenses		12,428		10,501		1,927	18.4
INCOME FROM OPERATIONS		18,677		13,241		5,436	41.1
Other income, net		5,604		4,118		1,486	36.1
INCOME BEFORE INCOME TAXES		24,281		17,359		6,922	39.9
Income tax expense		6,083		4,592		1,491	32.5
NET INCOME	$	18,198	$	12,767	$	5,431	42.5	%


					Approximate Dollar
				Total Number of	Value of Shares That May Yet
				Shares Purchased as Part	Be Purchased under the
	Total Number of	Average Price per		of Publicly Announced	Plans or Programs
Period	Shares Repurchased	Share Paid		Plans or Programs	(Dollars in Thousands)
May 1 - 31, 2024	484	$	66.72	—	$	23,767
June 1 - 30, 2024	85,003	$	77.13	—	$	23,767
July 1 - 31, 2024	146,590	$	72.12	—	$	23,767
Total	232,077			—


Exhibit No.		Title
3.1		Certificate of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed on April 10, 2019.
3.2		Bylaws. Incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on April 15, 2009.
10.1		Second Amended and Restated Replacement Credit Agreement, dated May 24, 2024, among Argan, Inc. and certain subsidiaries of Argan, Inc., as borrowers, and Bank of America, N.A., as the lender. Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 31, 2024.
10.2		Master Issuance and Indemnity Agreement, dated May 31, 2024, between Atlantic Projects Company Limited and Bank of America, N.A. Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 31, 2024.
10.3		Guarantee of Payment Agreement, dated May 24, 2024, between Argan, Inc. and Bank of America, N.A. Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on May 31, 2024.
31.1		Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.
31.2		Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934.
32.1		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350. *
32.2		Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350. *
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase.
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101.DEF		Inline XBRLTaxonomy Extension Definition Document.
104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


	ARGAN, INC.

September 5, 2024	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer

September 5, 2024	By:	/s/ Richard H. Deily
		Richard H. Deily
		Senior Vice President, Chief Financial Officer,
		Treasurer and Corporate Secretary


Date: September 5, 2024	By:	/s/ David H. Watson
		David H. Watson
		President and Chief Executive Officer
		(Principal Executive Officer)