ARGAN INC Q3 FY2025 earnings call

• Consolidated revenue grew 57% to $257 million in the third quarter, with gross margin of 17.2%, net income of $28 million ($2 per diluted share), and EBITDA of $37.5 million. - Power Industry Services had strong growth at 75% to $212 million. - TRC had 8% revenue growth to $41.3 million. - Board approved 25% increase in quarterly dividend to $0.375 per common share. - Project backlog was $0.8 billion at quarter end, up 6% from prior year, with $478 million in renewable projects. - Highlighted projects like Trumbull Energy Center, Louisiana LNG facility, and Illinois solar field.

Power Industry Services: Revenue increased 75% to $212 million, representing 83% of third quarter revenues and had pretax book income of $36 million. Industrial Construction Services (TRC): Revenue grew 8% to $41.3 million, which is 16% of consolidated revenues and had pretax book income of $2.7 million. Telecommunications Infrastructure Services: Contributed 1% of third quarter revenues.

• Project backlog was $0.8 billion at October 31, 2024, up 6% from prior year-end. - Expect to start multiple gas-fired jobs over next 8 months and backlog to be significantly over $1 billion by early next year. - Solar projects have more consistent revenue conversion vs gas jobs which are more peakish. - Industrial segment revenues expected to fluctuate but have potential for growth with supportive environment.

Q: Can you break down further where the 18.3% gross margin in Power Industry Services came from?

A: Strong execution across the board, certain positive project closeouts, project mix shift towards domestic revenues, and economies of scale. Historically, gross margins fluctuate between 13% and 20% based on backlog.

Q: What's the limiting factor for handling multiple projects and how much crossover is there between gas and renewable labor?

A: Limiting factor is managed by adding headcount. There is some crossover, but primarily keep renewable and gas teams separate though some labor has skills for both. Holistically, can handle 10+ projects when blending gas and renewables.

Q: Thoughts on backlog being down and expectations for Q4 and calendar 2025?

A: Backlog down slightly sequentially due to conversion to revenue and timing of new contracts. Expect backlog to be significantly over $1 billion by early next year as they work to convert opportunities into jobs over next 8 months.

Q: How does backlog burn rate differ between solar and gas projects?

A: Tough to answer exactly as sizes vary, but small-to-medium solar jobs typically completed within a year, larger solar jobs can last a couple years. Gas jobs have more peakish revenue, solar jobs more consistent.

Q: Outlook for industrial business pipeline and potential growth?

A: Industrial segment had $41 million in revenues last quarter, TTM $175 million. Expect revenues to come down in next couple quarters but rebound in Q1/Q2 2026, with potential to grow if environment supports