ARGAN INC Q4 FY2025 earnings call

• Consolidated revenue in fiscal 2025 grew 52% to $874 million, with full year gross margin 16.1%, record diluted EPS of $6.15, and EBITDA of $113.5 million.
• Power industry services segment led growth, with 65% revenue increase in Q4 2025. Industrial construction services had solid quarter but lower revenue due to project timing.
• Exited fiscal year with $1.4 billion project backlog, an 80% increase from prior year; added 1 gigawatt of power projects in Q4.
• Project updates: Gemma working on Trumbull Energy Center (950MW natural gas plant), 405MW solar project in Illinois, 1.2GW gas project in Texas (waiting on full notice to proceed), and Tarbert biofuel plant in Ireland (full notice to proceed received).
• Strong balance sheet: $525 million in cash/investments, net liquidity $301 million, no debt; dividend increased to $1.50 per common share.

The company has two reportable business segments. The Power industry services segment saw revenues increase 65% to $197 million in the fourth quarter of fiscal 2025, representing 85% of the quarter's total revenues and reporting pre-tax book income of $38 million. The Industrial construction services segment (TRC) had revenues of $33 million in the fourth quarter of fiscal 2025, contributing 14% of consolidated revenues and pre-tax book income of $4 million. For the full fiscal year 2025, consolidated revenue grew 52% to $874 million, full year gross margin was 16.1%, record diluted EPS was $6.15, and EBITDA was $113.5 million. The company had a project backlog of approximately $1.4 billion at January 31, 2025, an 80% increase from the prior year.

• Anticipate continued growth driven by robust project pipeline and backlog growth.
• Natural gas projects expected to be the core of growth engine in the near future, though renewable business will be sustained.
• Backlog expected to have a larger portion of traditional gas-powered projects in coming years.
• Upcoming Investor Day on April 8, 2025, at the New York Stock Exchange.

• Supply chain challenges related to turbines and long lead items.
• Grid interconnect and approval processes remaining a challenge for project timelines.
• Dependence on a limited number of firms capable of handling large projects, which could impact margin consistency.

Q: Could you break down the 20.5% gross margin a bit further?

A: It comes from shifting project mix, more US-based and power revenues, avoiding certain risks, job closeouts, more fixed price contracts, and being selective in jobs.

Q: What exactly has to happen to get the 1.2 gigawatt project into backlog?

A: Getting the full notice to proceed; once received, the whole contract will be put into project backlog.

Q: Any reason to think the new administration can have a positive impact on interconnect?

A: There's been progress by grid operators, and potential deregulation could streamline project approval processes.

Q: How do you see the trend line for the industrial business over the next year?

A: TRC has added over $40 million in new contracts post-year-end, and will grow revenue mid to late year, with overall organization revenues expected to decrease slightly in upcoming quarter before increasing throughout the year.