• Revenue: Increased 57% to $257 million.
• Gross Margin: 17.2% for the quarter.
• Net Income: $28 million, or $2 per diluted share.
• EBITDA: $37.5 million for the quarter.
• Power Services Revenue: Grew 75% to $212 million.
• Project Backlog: $0.8 billion, with $478 million in renewable projects.
• Cash and Investments: $506 million with no debt.
• Dividend Increase: 25% to $0.375 per common share.
• SG&A Expenses: $14 million, 5.4% of revenues.

• Warning! GuruFocus has detected 2 Warning Sign with GTLB.

Release Date: December 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Argan Inc (NYSE:AGX) reported its second-highest quarterly results in company history, with a 57% increase in consolidated revenue to $257 million.
• The power services segment experienced a 75% revenue growth to $212 million, showcasing strong performance in both renewable and natural gas projects.
• The company has a robust project backlog of $0.8 billion, with a significant portion dedicated to renewable projects, reflecting its energy-agnostic capabilities.
• Argan Inc (NYSE:AGX) has a strong balance sheet with $506 million in cash and investments, net liquidity of $281 million, and no debt.
• The Board of Directors approved a 25% increase in the quarterly dividend, indicating confidence in the business and future growth prospects.

Negative Points

• The telecommunications segment contributed only 1% to the third quarter revenues, indicating limited growth in this area.
• Backlog decreased sequentially from $1 billion to $0.8 billion, reflecting the conversion of backlog into revenue and timing of new project contracts.
• SG&A expenses increased to $14 million for the third quarter, although they decreased as a percentage of revenues.
• The industrial construction services segment's backlog dropped to about $66 million, with expectations of reduced revenues in the coming quarters.
• The timing of new project contracts remains unpredictable, which could impact future backlog and revenue growth.

Q & A Highlights

Q: Can you break down the 18.3% gross margin in the Power Industry Services segment? A: David Watson, CEO: The strong execution across the board, positive project closeouts, project mix, and a shift towards domestic revenues contributed to the 18.3% gross margin. We focus on project success, which is key to repeat business and future margins. Historically, margins fluctuate between 13% and 20%, and we expect them to be in the 14% to 16% range over the next few quarters.

Q: What limits Argan's ability to handle multiple natural gas projects simultaneously, and how much crossover is there between labor pools for gas and renewable projects? A: David Watson, CEO: We've been increasing headcount to handle both natural gas and renewable projects. There is some crossover in labor, but we try to keep teams separate. We can handle around 10 projects at a time, depending on size, with some labor capable of working on both types of projects.

Q: With the backlog at $800 million, what are the expectations for Q4 and beyond? A: David Watson, CEO: We expect to start multiple gas-fired jobs over the next eight months, with backlog exceeding $1 billion by early next year. While we don't control project start times, we remain optimistic about converting opportunities into jobs.

Q: How has the activity level changed in terms of pipeline and bidding? A: David Watson, CEO: New opportunities continue to arise, particularly in Texas. Many projects are progressing through development hurdles, and the level of activity remains extremely elevated.

Q: What is the timing for the Texas gas plant project under a letter of intent? A: David Watson, CEO: The Texas project is meeting developmental milestones, and we hope to have an executed EPC contract and start work in the next couple of months. We will provide updates through press releases or 8-K filings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.