Argan, Inc.

Good evening, ladies and gentlemen, and welcome to the Argon Inc. Earnings Release Conference call for the second fiscal quarter ended July 31, 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 Belladeau 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 second fiscal quarter ended July 31, 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 statements. 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 Oregon'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 second quarter fiscal 2025 financial results and filed its corresponding Form 10Q report with the Securities and Exchange Commission. Okay, I'll now turn the call over to David Watson, CEO of Argan. 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. Hank Diley, our CFO, will go over our financial results for the second fiscal quarter ended July 31st. 2024. And then we'll open up the call for a brief Q&A. But before we jump into the call, as many of you already know, today will be Hank's last time taking us through the financials as he is set to retire in just a few weeks. Hank has had a distinguished 40-year career as a senior finance executive and has been with Argan for the past 17 years. So I think we can all agree that his retirement is well-earned. So on behalf of all of us here at Argan, I'd like to thank Hank for his many contributions and his counsel over the years, and we're appreciative that he will continue to help in a reduced role to ensure a successful transition. Josh Bacher, who has worked directly with Hank and myself for the last few years as VP and Corporate Controller, will take over the CFO role. Josh has nearly 20 years' experience in strategic financial positions And he joined Oregon a few years ago from Charles River Associates, a NASDAQ-traded international consulting firm. He has been a valuable member of our finance team, and we're pleased to have him take this leadership role. So now on to the operational review of our fiscal 2025 second quarter. We drove continued momentum in the second quarter, achieving consolidated revenues growth of 61% to $227 million, significantly enhanced profitability with net income of $18 million or $1.31 per diluted share and EBITDA of $25 million. Both our quarterly revenues and EBITDA performances were the strongest we've seen since 2017. Notably, we achieved revenue growth in all of our business segments this quarter, highlighted by a 65% increase in revenues from power services and and a 52% increase in revenues from industrial services. Project backlog at the close of the second quarter was over $1 billion and included approximately $570 million in renewable projects. Additionally, our balance sheet reflected $485 million of cash and investments, net liquidity of $260 million, and no debt at July 31, 2024. 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 Projects 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 65% to $173.8 million for the current quarter as compared to $105.3 million for the second quarter of fiscal 2024. The segment represented 77% of our second quarter revenues and reported pre-tax book income of $21 million. Industrial construction services, which is represented by TRC, had another significantly strong quarter with a revenues contribution of $49.6 million, or 22% of our second quarter consolidated revenues. and pre-tax book income of $4 million. These numbers represent revenues growth of 52% and a pre-tax book income increase of 38% compared to the second quarter of fiscal 2024. TRC primarily provides solutions for industrial construction projects with a concentration in agriculture, petrochemical, pulp and paper, water and power, and has seen a great deal of market interest for their capabilities as a project partner as many companies onshore or expand their U.S. manufacturing operations. TRC has a strong footprint in the southeast region of the U.S., which is a notably high-growth region for its focused industries. Finally, we have our telecommunications infrastructure services group, our smallest segment, which contributed 2% of our second 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. As we've noted, during the past several quarters, energy demand is expected to grow significantly over the coming years. The heightened demand stems from the growing number of data centers coming online, as well as greater manufacturing activity related to the onshoring of semiconductor and battery and solar panel production, among other factors. All of these enterprises require reliable and high-quality power 24-7 in order to preserve operational security and efficiency. Additionally, as more drivers shift to electric vehicles, it's anticipated that more homes and public venues will install the EV chargers necessary to keep those cars on the road. With these considerations in mind, it is widely acknowledged that energy infrastructure worldwide needs to be expanded and strengthened to meet anticipated increased capacity demands. Argan is energy agnostic, and while we are committed to assisting the transition to renewable power resources, we, along with the majority of the power industry, recognize that new traditional energy facilities are needed to support stable grids and reliable power generation. With our proven track record and capabilities related to the construction and management of complex power facility projects for both traditional natural gas and renewable energy resources, we are ideally suited to support the build out of the consistent and dependable power resources that will be necessary moving forward. We're energized by the pipeline of opportunities we're seeing and look forward to working with both new and existing partners who recognize our expertise and diverse capabilities as a valued collaborator on the anticipated impending build-out of power resources needed to meet the forecast of unprecedented demand. In addition to ensuring stable power grids, we strongly support the shift to cleaner and more reliable power source resources. Renewable projects represented approximately $570 million of our $1 billion backlog at July 31, 2024 with 91% of our current project backlog now comprised of projects that support zero or low carbon emissions. While we're pleased to have diversified our backlog with robust representation for renewable projects, we expect gas-fired and other thermal power plants to remain the core of our business for many years to come, especially as the industry seeks to provide consistent and high-quality power sources. Now I'd like to provide some project updates. GEMMA is at peak construction on the Trumbull Energy Center project in Lordstown, Ohio, where we're 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 early in calendar year 2026. As we've detailed on previous calls, we have three solar and battery projects underway in Illinois, all of which have received full notices to proceed with EPC activities. Just to recap, the three facilities will provide 160 megawatts of solar power plus 22 megawatt hours of battery storage capability. These projects are exciting opportunities for us to demonstrate our capabilities in the renewable energy space. We also recently received full notice to proceed on a utility-scale solar field in Illinois that will provide 405 megawatt of electrical power and will use pre-existing transmission and utility infrastructure from a nearby retired coal power plant. This major project represents the largest solar project to date for us and the continued expansion of our renewable business. This is an exciting time for us. In the face of unprecedented energy demands, with our experience and reputation as a full-service construction partner of choice for both traditional and renewable power projects, Argan is extremely well-positioned to address the growing number of opportunities in our business pipeline. With that, I'll turn the call over to Hank Diley to take us through the second quarter financials. Go ahead, Hank.