ARGAN INC Q1 FY2026 earnings call

• Consolidated revenue grew 23% to $193.7 million in the first quarter of fiscal 2026 with a gross margin of 19%.
• Net income was approximately $23 million or $1.60 per diluted share, up $1.02 year over year. EBITDA was $30.3 million or 15.6% of revenues.
• Record backlog of $1.9 billion as of April 30, 2025, including a 1.2-gigawatt ultra-efficient combined cycle natural gas-fired plant project with SLEC.
• Project pipeline is robust due to aging natural gas infrastructure and increased power demand from AI data centers, onshoring manufacturing, and electric vehicles.
• Balance sheet is strong with $546.5 million of cash and investments, net liquidity of $315 million, and no debt.
• Returned capital to shareholders through quarterly dividend, share repurchases, and board increased share repurchase program to $150 million.

The three reportable business segments are as follows:

• Power industry services: Revenues increased 45% to $160 million in the first quarter, representing 83% of first-quarter revenues and reported pretax book income of approximately $31 million.
• Industrial construction services: Revenue decreased to $29 million, contributing 15% of first-quarter consolidated revenues and pretax book income of approximately $2 million.
• Telecommunications infrastructure services: Contributed 2% of first-quarter revenues.

• Backlog could get significantly over $2 billion later in fiscal 2026.
• Expect revenues to increase meaningfully in the industrial construction services segment over the next several quarters.
• Combined cycle projects typically take three to four years to complete, and demand is expected to remain strong for the next decade and beyond.

• Project start times are not always controllable, making exact estimates of backlog and revenue difficult.
• Supply chain issues could impact project timelines, potentially affecting revenue cadence.

Q: Please describe the pipeline visibility and potential backlog growth for the rest of fiscal 2026?

A: The pipeline remains strong, and they expect to add several power industrial jobs over the next six months, potentially pushing backlog significantly over $2 billion, though start times of new projects are not always controllable.

Q: What is the outlook for the industrial business segment?

A: The industrial business saw a slight contraction in the past quarter but expects revenues to increase meaningfully over the next several quarters as there is strong interest due to increased onshoring of US manufacturing.

Q: Can you quantify the excess margin from projects like Trumbull?

A: Gross margins reflect strong execution across the business and changing mix of projects and contract types, and they expect to exceed last year's margin profile as they move through the year.

Q: Is the longer timeline for combined cycle projects a permanent change?

A: It's a bit of all factors, primarily supply chain driven, but smaller jobs could be shorter, and they aim for speed to market but currently, it's typically three to four years.