Argan, Inc.

Good evening, ladies and gentlemen, and welcome to the Argonne Inc. earnings release conference call for the first fiscal quarter ended April 30th, 2024. This call is being recorded. All participants have been placed on a listen-only mode. Following management's remarks, the call will be open for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, Jennifer Bellido of IMS Investor Relations. Please go ahead, ma'am.

Thank you. Good evening, and welcome to our conference call to discuss Argan's results for the first fiscal quarter ended April 30, 2024. On the call today, we have David Watson, Chief Executive Officer, and Hank Diley, Chief Financial Officer. I will take a moment to read the Safe Harbor Statement. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company's revenues and profits. These statements are subject to known and unknown factors and risks. The company's actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements, and some of the factors and risks that could cause or contribute to such material differences have been described in this afternoon's press release and in Argan's filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements. Earlier this afternoon, the company issued a press release announcing its first quarter fiscal 2025 financial results and filed its corresponding Form 10Q report with the Securities and Exchange Commission. All right, with that out of the way, I will turn the call over to David Watson, CEO of Argan. Please go ahead, David.

Thanks, Jennifer, and thank you, everyone, for joining today. I'll start by reviewing some of the highlights of our operations and activities, and Hank Diley, our CFO, will go over our financial results for the first fiscal quarter in April 30, 2024. Then we'll open up the call for a brief Q&A. Fiscal 2025 is off to a strong start, as demonstrated by a 52% increase in consolidated revenues to $157.7 million, improved profitability, and EBITDA of $11.9 million. Our growth was driven by significantly strong performance from both Gemma and the Roberts Company, or TRC. We were especially pleased to deliver this profit growth despite incurring a loss of $2.6 million in the quarter associated with continued challenges at APC's Killroot project in Northern Ireland, and I'll provide an update on that project in a moment. Project backlog at the close of the first quarter was $824 million. which includes approximately $300 million in renewable projects. First quarter 2025 backlog reflects both sequential growth compared to backlog of $757 million at the end of the fourth quarter of fiscal 2024 and year-over-year growth compared to backlog of $806 million in the first quarter of fiscal 2024. Additionally, at April 30, 2024, our balance sheet reflected $416 million of cash in investments, net liquidity of $247 million, and no debt. Before we move on to the operational overview for the first quarter, I'll provide an update on some developments with APC's Killroot project. As we've discussed on the last several earnings calls, Killroot encountered significant operational and contractual challenges as we move towards completion, including supply chain delays, material changes to the project, and work stoppages related to COVID, among others. During the first quarter, APC turned over two power units, one of which has achieved first fire. Following the close of the quarter on May 3, 2024, as previously disclosed, APC's project and construction teams vacated the facility site, having served a termination notice to the customer. Given the situation, I'm limited in the details I can share at this point, but as we've previously mentioned, Argonne has identified and submitted claims in excess of $25 million related to this project, and we will vigorously pursue those claims. Now on to the operational review. Slides four and five present our three reportable business segments. Power Industry Services is comprised of our Gemma Power Systems and Atlantic Project Company operating units, which focus on the construction of multiple types of power facilities, including efficient gas-fired power plants, solar energy fields, biomass facilities, and wind farms. Power industry services revenues increased 57% to $110.3 million for the current quarter as compared to $70.2 million for the first quarter of fiscal 2024. The segment represented 70% of our first quarter revenues and reported pre-tax book income of $9.2 million. Industrial construction services, which is represented by TRC, had another significantly strong quarter, contributing $43.7 million or 28% of our first quarter consolidated revenues and reported pre-tax book income of $4 million. These numbers represented revenue growth of 44% and a pre-tax net income increase of 73% compared to the first quarter of 2024. We're seeing consistently strong demand for TRC services. TRC primarily provides solutions for industrial construction projects with a concentration in agriculture, petrochemical, pulp and paper, water and power, and TRC is ideally suited as a project partner as many companies onshore or expand their U.S. manufacturing operations. Likewise, in addition to its capabilities, TRC is well positioned geographically to service the southeast region of the U.S., which is a notably high-growth region for TRC's focused industries. We have determined to drive continued growth at TRC as demand for new or refurbished industrial sites intensifies. Finally, we have our telecommunications infrastructure services group, our smallest segment, which contributed 2% of our first quarter revenues. SMC Infrastructure Solutions is our operating brand in this segment, providing outside construction services for the utility and telecommunications sectors, as well as inside-the-premises wiring services primarily for federal government locations and military installations, requiring high-level security clearance. It would be hard to ignore the many recent reports citing the actual and expected significant increases in energy demand and power consumption. Energy infrastructure worldwide needs to be expanded and strengthened to meet anticipated increased capacity demands, particularly as more data centers come online to support AI applications, which consume very high amounts of energy. Additionally, with more electric vehicles hitting the road, more homes and public locations will install charging infrastructure, further taxing the available power supply. And finally, we are seeing a 50-year high in the onshoring of manufacturing operations for semiconductors, batteries, solar panels, and other items driven by federal grants and tax incentives. All of that production activity requires a reliable power supply. Argan is uniquely positioned to expand its leadership role as new energy facilities are needed to support stable grids and reliable power generation. With our proven and comprehensive capabilities in the construction and management of complex power facility projects for both traditional natural gas and renewable energy resources, we can support the build-out of the consistent and dependable power resources necessary for the efficient operation of new data centers manufacturing facilities, and EV charging infrastructure. Our pipeline of opportunities is robust with both new and existing partners who recognize our expertise and demonstrated success as a trusted design and construction partner for the power industry. We believe our diverse capabilities provide a competitive advantage as the industry moves to establish reliable energy resources in the face of unprecedented demand. Our industry remains focused on the shift to cleaner and more reliable power resources. And with our energy agnostic capabilities, we are a proven partner as the industry embraces alternative resources. At the end of the first quarter, approximately $318 million, or 39% of our $824 million backlog, was renewable projects, with 86% of our project backlog being comprised of projects that support zero or low carbon emissions. The significant increase in our renewables backlog reflects the effectiveness of our growth and diversity plan. However, we still believe and expect gas-fired and other thermal power plants to remain the core of our business for many years to come as we grow our overall power revenues. Now I'd like to provide some project updates. We continue to make excellent progress as we roll into peak construction on the Trumbull Energy Center project in Lordstown, Ohio, where GEMMA is providing EPC services for a 950 megawatt natural gas fired power plant. Trumbull is a combined cycle power station that will assist in fulfilling electricity needs as the region phases out several coal-fired plants. From start to finish, the project will entail design, procurement, construction, and commissioning. Trumbull is designed to be one of the cleanest and most efficient combined cycle gas turbine projects in the PJM market and we expect to complete it in 2026. As you know, we have three solar and battery projects underway in Illinois, and at our last update in April, we have received full notices to proceed on two of the three facilities. I am pleased to report that around the end of the first quarter, we received a full notice to proceed on the third facility. So just to recap, GEMMA is working on three facilities located throughout the state on an EBC basis to provide 160 megawatt, solar power plus 22 megawatt of battery storage capability. These projects are exciting opportunities for us to continue to demonstrate our capabilities in the renewable energy space. We are energized by the opportunities we're seeing in the marketplace and in our expanding potential new business pipeline. We are optimistic about the growing urgency to reinforce energy infrastructure to ensure consistent and reliable power supply in the face of anticipated unprecedented consumption levels. With our experience as a full-service construction and project management partner with extensive capabilities that support both traditional and renewable power facilities, we believe Argan is very well positioned to benefit as the industry transitions aging facilities and builds new facilities to meet surging demand. With that, I'll turn the call over to Hank Diley to take us through the first quarter financials.