Q1 2026 Argan Inc Earnings Call

Operator: Good evening, ladies and gentlemen, and welcome to the Argan Inc earnings release conference call for the first quarter of fiscal 2026 ended April 30, 2025. This call is being recorded. All participants have been placed on a listen-only mode.

Good evening, ladies and gentlemen, and welcome to the organic earnings release conference call for the first quarter of fiscal 2026 ended April 32025.

This call is being recorded all participants have been placed on a listen only mode. Following management's remarks, the call will be opened for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast.

Operator: Following management's remarks, the call will be opened for questions.

Operator: slide presentation that accompanies today's remarks which can be accessed via the web.

Jennifer Belodeau: This time, it is my pleasure to turn the floor over to your host for today, Jennifer Belodeau of IMS Investor Relations. Please go ahead. Thank you.

Speaker Change: This time it is my pleasure to turn the floor over to your host for today, Jennifer Bilodeau with IMS Investor Relations. Please go ahead ma'am.

Speaker Change: Thank you good evening and welcome to our conference call to discuss our against results for the first quarter ended April 32025 on the call today, we have David Watson, Chief Executive Officer, and Josh Parker, Chief Financial Officer, I'll take a moment to read the safe Harbor statements statements made during.

David Watson: Good evening and welcome to our conference call to discuss Argan's results for the first quarter ended April 30, 2025.

Jennifer Belodeau: On the call today, we have David Watson, Chief Executive Officer, and Josh Baugher, Chief Financial Officer. I'll 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 Argan's filings with the U.S.

Speaker Change: 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.

Speaker Change: Really 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 afternoons press release and in our against 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.

Jennifer Belodeau: 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.

Speaker Change: To update such forward looking statements earlier. This afternoon. The company issued a press release announcing its first quarter of fiscal 2026 financial results and filed its corresponding Form 10-Q reports with the Securities and Exchange Commission right with that out of the way I'll turn the call over to David Watson CEO of Rguest. Please go ahead David.

David Watson: Earlier this afternoon, the company issued a press release announcing its first quarter fiscal 2026 financial results and filed its corresponding Form 10-Q report with the Securities and Exchange Commission.

David Watson: All right, with that out of the way, I'll turn the call over to David Watson, CEO of Argan. Please go ahead, David.

David Watson: Thanks, Jennifer, and thank you, everyone, for joining today.

Speaker Change: Thanks, Jennifer and thank you everyone for joining today.

David Watson: I'll start by reviewing some of the highlights of our operations and activities, and Josh Baugher, our CFO, will go over our financial results for the first quarter ended April 30, 2025. Then we'll open up the call for a brief Q&A. We delivered a strong start to fiscal 2026 in the first quarter with consolidated revenue growth of 23% to $193.7 million and gross margin of 19%, led by continued momentum in our power industry services segment. We also achieved enhanced profitability, as demonstrated by net income of approximately $23 million, or $1.60 per diluted share, up $1.02 year-over-year, in EBITDA of $30.3 million, or 15.6% as a percent of revenue.

Speaker Change: I'll start by reviewing some of the highlights of our operations and activities and Josh <unk>. Our CFO will go over our financial results for the first quarter ended April 30 2025.

Speaker Change: Then we'll open up the call for a brief Q&A.

Speaker Change: We delivered a strong start to fiscal 2026 in the first quarter with consolidated revenue growth up 23% to $193 7 million and gross margin of 19% led by continued momentum in our power industry services segment.

Speaker Change: We also achieved enhanced profitability as demonstrated by net income of approximately $23 million or $1 60 per diluted share.

Speaker Change: One dollar and two cents year over year, and EBITDA of $30 3 million or 15, 6%.

Speaker Change: As a percent of revenues.

David Watson: Additionally, we reported record backlog of $1.9 billion as of April 30, 2025. Our backlog reflects our receipt of full notice to proceed on our project with Sando Lakes Energy Company, or SLEC, for a 1.2 gigawatt ultra-efficient combined cycle natural gas fire plant in Texas. Our project pipeline is robust and reflects both the need for new energy resources as a large portion of natural gas fire plants reach the end of operational life, and the urgency around building new infrastructure to meet the unprecedented growth in power consumption. Power demand has reached its highest level in two decades and is expected to increase further with the development of AI data centers, the onshoring of complex manufacturing, and the growing adoption of electric vehicles that need charging.

Speaker Change: <unk> reported record backlog of $1 9 billion as of April 32025, our backlog reflects our receipt of full notice to proceed on a project with <unk> energy company or S. L. D. C World one two gigawatt ultra efficient combined cycle natural gas fired plant.

Speaker Change: In Texas.

Speaker Change: Our project pipeline is robust and reflects both the need for new energy resources.

Speaker Change: A large portion of natural gas fired plants reached the end of operational life and the urgency around building new infrastructure to meet the unprecedented growth in power consumption.

Speaker Change: Power demand has reached its highest level in two decades and is expected to increase further with the development of AI data centers, the onshoring of complex manufacturing and the growing adoption of electric vehicles that need charging today's energy demand environment has created a substantial pipeline of project opportunities and we are seeing heighten.

David Watson: Today's energy demand environment has created a substantial pipeline of project opportunities and we are seeing heightened demand for our expertise and capabilities, particularly as they relate to the construction of complex combined cycle natural gas facilities. We're energized about the demand environment, which we believe will present attractive project opportunities for the next decade and beyond. Our balance sheet remains strong with $546.5 million of cash and investments, net liquidity of $315 million, and no debt at April 30, 2025. Our financial strength and discipline has enabled us to continue to return capital to shareholders. We paid a quarterly dividend of $0.375, repurchased or net settled approximately 100,000 shares for approximately $12.9 million, and the board increased the size of the share repurchase program to $150 million.

Speaker Change: Demand for our expertise and capabilities, particularly as it relates to the construction of complex buying cycle natural gas facilities are energized about the demand environment, which we believe will present attractive project opportunities for the next decade and beyond.

Speaker Change: Our balance sheet remains strong with $546 5 million of cash and investments net liquidity of $315 million and no debt at April 32025.

Speaker Change: Our financial strength and discipline has enabled us to continue to return capital to shareholders. We paid a quarterly dividend of <unk> 37 five.

Speaker Change: Repurchased or net settled approximately 100000 shares or approximately $12 9 million and the board increased the size of the share repurchase program to $150 million.

David Watson: We're very pleased with the start to Fiscal 2026 and remain focused on executing on our ongoing projects while also intent on winning new opportunities.

Speaker Change: We're very pleased with the start to fiscal 2026 and remain focused on executing on our ongoing projects.

Speaker Change: While also intent on winning new opportunities.

David Watson: Now on to the operational review. Slides 4 and 5 present our three reportable business segments. As most of you know, our Power Industry Services segment focuses on the construction of multiple types of power facilities. including efficient gas-fired power plants, solar energy fields, biomass facilities, and battery energy storage systems in the U.S., the U.K., and in Ireland. Power Industry Services revenues increased 45% to $160 million in the first quarter as compared to $110 million for the first quarter of fiscal 2025. The segment represented 83% of first quarter revenues and reported pre-tax book income of approximately $31 million.

Speaker Change: Now on to the operational review.

Speaker Change: Slides, four and 5% our three reportable business segments as most of you know our power industry services segment focuses on the construction of multiple types of power facilities.

Speaker Change: Including an efficient gas fired power plants solar energy fields biomass facilities and battery energy storage systems in the U S. The UK and in Ireland.

Speaker Change: Power industry services revenues increased 45% to $160 million in the first quarter as compared to $110 million for the first quarter of fiscal 2025.

Speaker Change: This segment represented 83% first quarter revenues and reported pretax book income of approximate $31 million.

David Watson: Our industrial construction services segment had a solid quarter, although, as we expected, due to the timing of certain projects, revenue decreased to $29 million as compared to revenue of $44 million in the first quarter of fiscal 2025. Industrial construction services contributed 15% of first quarter consolidated revenues and pre-tax book income of approximately $2 million. This segment primarily provides solutions for industrial construction projects with a concentration in agriculture, petrochemical, pulp and paper, water, and power. There is solid demand for this segment's capabilities as companies onshore or expand their U.S. manufacturing operations. The industrial construction services segment has a large footprint in the southeast region of the U.S., so they are well situated in a high-growth region for their focus industry.

Speaker Change: Our industrial construction services segment had a solid quarter, although as we expected due to the timing of certain projects revenue decreased to $29 million as compared to revenue of $44 million in the first quarter of fiscal 2025.

Speaker Change: Industrial construction services contributed 15% of first quarter consolidated revenues and pretax book income of approximately $2 million. This segment, primarily provide solutions for industrial construction projects with a concentration of agriculture petrochemical open paper water and power there is solid demand for the <unk>.

Speaker Change: <unk> capabilities as companies onshore or expand their U S manufacturing operations the.

Speaker Change: The industrial construction services segment has a large footprint in the southeast region of the U S. So they are well situated in a high growth region, where their focus industries.

David Watson: One last comment on the industrial segment.

Speaker Change: One last comment on the industrial segment I want to take a moment to congratulate Shaun Terrell who has served as president of Trc since 2023 as he was recently appointed to the additional role of Chief Executive Officer. This change came as Bobby voiced Virginia stepped down to take a reduced role as part of.

David Watson: I want to take a moment to congratulate Sean Terrell, who has served as president of TRC since 2023, as he was recently appointed to the additional role of chief executive officer. This change came as Bobby Foister Jr. stepped down to take a reduced role as part of a long-standing succession plan.

Speaker Change: Of a longstanding succession plan, we think Bobby for his many contributions to trc's growth and progress as well as we're building a culture of operational excellence and teamwork at Trc.

David Watson: We thank Bobby for his many contributions to TRC's growth and progress, as well as for building a culture of operational excellence and teamwork at TRC.

David Watson: Finally, we have our Telecommunications Infrastructure Services Group, our smallest segment, which contributed 2% of first quarter revenue. The telecommunications segment provides 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. We continue to see growing attention around the increase in energy demand driven by the widespread electrification of virtually every sector of the economy. For the first time in decades, this rising demand is coinciding with the aging and retirement of a substantial portion of the nation's natural gas infrastructure. AI data centers, complex manufacturing operations, and EV charging all require a reliable, high-quality 24-7 power supply.

Speaker Change: Finally, we have our telecommunications infrastructure services group, our smallest segment, which contributed 2% of first quarter revenues.

Speaker Change: The telecommunications segment provides outside construction services for the utility telecommunications sectors as well as inside the premises wiring services, primarily our federal government locations and military installations, requiring high level security clearance.

Speaker Change: We continue to see growing attention around the increase in energy demand driven by the widespread electrification of virtually every sector of the economy.

Speaker Change: For the first time in decades. This rising demand is coinciding with the aging and retirement of a substantial portion of the nation's natural gas infrastructure.

Speaker Change: Data centers complex manufacturing operations and EV charging all require a reliable high quality 24, seven our supply.

David Watson: Looking at the composition of the current pipeline, the industry has adopted the approach that the most effective path to ensuring stable grids and reliable power generation is through a combination of traditional gas fire plants as well as renewables, and we build them all. with our energy agnostic capability. We have a proven track record of success with combined cycle and simple cycle natural gas facilities, as well as solar, biofuel, and other renewable energy resources.

Speaker Change: Looking at the composition of the current pipeline industry has adopted the approach that the most effective path to ensuring stable grids and reliable power generation is through a combination of traditional gas fire plants as well as renewables and we build them all.

Speaker Change: With our energy agnostic capabilities and proven track record of success with combined cycle and simple cycle natural gas facilities as well as solar biofuel and other renewable energy resources. We believe we are favorably positioned.

David Watson: We believe we are favorably positioned For more information, visit www.fema.gov as we compete to win the construction of large and complex power facilities. Slide 7 illustrates the strength and balance of our project backlog, which is comprised of approximately 67% natural gas projects As the grid faces mounting pressure, the energy industry is turning to a combination of natural gas and renewable energy resources to ensure reliability. Given the aging natural gas infrastructure, we expect to see heightened demand for gas-fired and other thermal power plants for several years to come as the industry seeks to increase the number of reliable and high-quality power sources.

Speaker Change: As we compete to win the construction of large and complex power facilities.

Speaker Change: Slide seven illustrates the strength and balance of our project backlog, which is comprised of approximately 67% natural gas projects and 28% renewable.

Speaker Change: As the grid basis mounting pressure the energy industry is turning to a combination of natural gas and renewable energy resources to ensure reliability.

Speaker Change: Given the aging natural gas infrastructure, we expect to see heightened demand for gas fired and other thermal power plants for several years to come as the industry seeks to increase the number of reliable and high quality power sources.

David Watson: Our backlog of $1.9 billion at April 30 includes several power plant projects, and we expect to add more this year. During fiscal 2025, we proactively invested in our workforce and enhanced our teams to prepare for the increased project load, and to position Argan to continue to deliver excellent on-time execution for our customers as we support the electric economy. We're excited about the demand we're seeing for our services, particularly for the construction of traditional combined cycle natural gas power plants. Argan is one of only a few companies who have the capability to successfully execute those complex projects, and we have a track record that validates our reputation as a proven industry partner.

Speaker Change: Our backlog of 1.9 billion at April 30 includes several power plant projects and we expect to add more this year during fiscal 2025, we proactively invested in our workforce and enhanced our teams to prepare for the increased project load in a position of arguing to continued to deliver excellent on time executing.

Speaker Change: <unk> for our customers as we support the electric economy.

Speaker Change: We're excited about the demand we're seeing for our services, particularly for the construction of traditional combined cycle natural gas power plants.

Speaker Change: <unk> is one of only a few companies who have the capability to successfully execute those complex projects and we have a track record that validates our reputation as a proven industry partner.

David Watson: We remain disciplined in our commitment to achieving the best outcomes for the projects we take on and believe our expertise, seasoned team, and history of on-time and on-budget project delivery positions us for continued backlog growth and financial strength. Turning to slide 8, our consolidated project backlog was $1.9 billion at April 30, 2025, representing backlog growth of 36% from January 31, 2025. Our current backlog includes fully committed projects in both the power, industry services, and industrial construction services segments. We have a growing portion of traditional gas fire plants in the current backlog, and we believe the representation of natural gas fire facilities in our backlog will continue to increase in the near to midterm.

Speaker Change: We remain disciplined in our commitment to achieving the best outcomes for the projects, we take on and believe our expertise seasoned team and history of on time and on budget project delivery positions us for continued backlog growth and financial strength.

Speaker Change: Turning to slide eight our consolidated project backlog was $1 9 billion at April 32025, representing backlog growth up 36% from January 31 2025.

Speaker Change: Our current backlog includes fully committed projects in both the power industry services and industrial construction services segments.

Speaker Change: We have a growing portion of our traditional gas fired plants and the current backlog and we believe representation of natural gas fired facilities in our backlog will continue to increase in the near to mid term.

David Watson: We plan to maintain our presence in the renewable business, but our natural gas projects will be the core of our growth engine for the foreseeable future.

Speaker Change: We plan to maintain a presence in the renewable business, but our natural gas projects will be the core of our growth engine for the foreseeable future.

David Watson: Slide 9 highlights several major projects currently underway or expected to begin shortly. Here you'll see our Trumbull project, a 950 megawatt natural gas fire plant in Ohio that is nearing completion, as well as the SLEC 1.2 gigawatt ultra-efficient combined cycle natural gas fire plant in Texas. As I mentioned a bit earlier on the call, during the first quarter we received full notice to proceed on the SLEC project, and we expect to begin construction this summer. When completed, the facility will be capable of supplying approximately 800,000 homes within the ERCOT grid.

Speaker Change: Slide nine highlights several major projects currently underway or expected to begin shortly here.

Speaker Change: Here, you'll see our trouble project, a 950 megawatt natural gas fired plant in Ohio that is nearing completion as well as the S. L. E Z one two gigawatt ultra efficient combined cycle natural gas fired plant in Texas.

Speaker Change: As I mentioned a bit earlier on the call during the first quarter. We received full notice to proceed on the S. L. A Z project and we expect to begin construction. This summer when completed the facility will be capable of supplying approximately 800000 homes within the aircraft grid.

David Watson: Also highlighted here is the Tarbert Next Generation Power Station, a 300 megawatt biofuel plant in Ireland for SSE Thermal. The project kicked off earlier in the first quarter and is at a site we are familiar with and have performed work at in the past. Construction is also underway on our approximately 700-megawatt combined-cycle natural gas fire plant located here in the U.S., and we recently finished the installation of five 90-megawatt gas turbines, which provide dedicated power to an LNG facility in Louisiana. In addition, our 405-megawatt utility-scale solar project in Illinois continues to make good progress, and we completed two of the three Solar Plus battery projects in Illinois during Fiscal 2025 and expect to finish the third during Fiscal 2022.

Speaker Change: Also highlighted here is the <unk> next generation power station 300 megawatt biofuel plant in Ireland for SSE thermal.

Speaker Change: <unk> kicked off earlier in the first quarter and is that a site. We are familiar with and have performed work at in the past.

Speaker Change: Construction is also underway on approximately 700 megawatt combined cycle natural gas fired plant located here in the U S. And we recently finished the installation of 590 megawatt gas turbines, which provide dedicated power to an LNG facility in Louisiana.

Speaker Change: In addition, our 405 megawatt utility scale solar project in Illinois continues to make good progress and we completed two of the three solar plus battery projects in Illinois. During fiscal 2025 unexpected finished the third during fiscal 2026 five.

David Watson: Finally, you'll see two separate water treatment plant projects being performed by our industrial construction services segment. While we've spoken a lot about the industry's demand for natural gas projects, you'll see that our backlog reflects a broad range of capabilities in our diverse projects.

David Watson: Finally, you will see two separate water treatment plant project is being performed by our industrial construction services segment.

Speaker Change: While we've spoken a lot about the industry's demand for natural gas projects, you will see that our backlog reflects a broad range of capabilities and our diverse project mix.

Joshua Baugher: With that, I'll turn the call over to Josh Baugher to take us through the first quarter financials. Go ahead, Josh. Thanks, David, and good evening, everyone.

Speaker Change: With that I'll turn the call over to Josh Bakr to take us through the first quarter financials go ahead Josh.

Josh Bakr: Thanks, David and good evening everyone.

Joshua Baugher: On slide 10, we present our consolidated statements of earnings for first quarter fiscal 2026. First quarter revenues increased 23% to $193.7 million, primarily reflecting strong revenue growth in our power industry services segment as compared to the first quarter of fiscal 2025. The growth in our project count and backlog has resulted in increased project activity and revenue compared to the same quarter last year. In the first quarter, several newly awarded gas-fired power plant projects were in the early stages, while our more advanced projects saw continued activity and contributed meaningfully to our quarterly revenue.

Speaker Change: On slide 10, we present, our consolidated statements of earnings for first quarter fiscal 2026.

Speaker Change: First quarter revenues increased 23% to $193 7 million, primarily reflecting strong revenue growth in our power industry services segment as compared to the first quarter of fiscal 2025.

Speaker Change: The growth in our project count and backlog has resulted in increased project activity and revenue compared to the same quarter last year.

Speaker Change: In the first quarter several newly awarded gas fired power plant projects. We're in the early stages, while our more advanced projects saw continued activity and contribute meaningfully to our quarterly revenues.

Joshua Baugher: For the three-month period ended April 30th, 2025, Argan reported consolidated gross profit of approximately 36.9 million, or gross margin of 19%. Consolidated gross profit for the comparative quarter last fiscal year was $17.9 million, representing a gross margin of $11.4%. The increased gross profit and the improved gross margin for the recently ended quarter reflect the changing mix of projects and contracts. In addition, the first quarter in the prior fiscal year was negatively impacted by a loss recorded on an overseas project, which reduced gross profit by approximately $2.6 billion. Gross margins for our power industry services, our industrial construction services, and our telecommunications infrastructure services segments were 20.6%, 10.8%, and 18% respectively for first quarter of fiscal 2026, as compared to 10.2%, 13.3%, and 22.9% respectively in the first quarter of fiscal 2025.

Speaker Change: For the three months period ended April 32025 are again reported consolidated gross profit of approximately $36 9 million or gross margin of 19%.

Speaker Change: Consolidated gross profit for the comparative quarter last fiscal year was $17 9 million, representing a gross margin of 11, 4%.

Speaker Change: The increased gross profit and the improved gross margin for the recently ended quarter reflects the changing mix of projects and contract types.

Speaker Change: In addition, the first quarter in the prior fiscal year was negatively impacted by a loss recorded on an overseas project, which reduced gross profit by approximately $2 6 million.

Speaker Change: Gross margins for our power industry services, our industrial construction services and our telecommunications infrastructure services segments were 26% 10, 8% and 18% respectively for first quarter of fiscal 2026 as compared to 10, 2% 13, 3%.

Speaker Change: 22, 9%, respectively in the first quarter of fiscal 2025.

Joshua Baugher: Selling general and administrative expenses of $12.5 million for the first quarter of fiscal 2026 increased as compared to SG&A of $11.4 million for the comparable prior year period, but these expenses decreased as a percentage of revenues to 6.5% in the first quarter of fiscal 2026 as compared to 7.2% in last year's first quarter.

Speaker Change: Selling general and administrative expenses of $12 5 million for the first quarter of fiscal 2026 increased as compared to SG&A of $11 4 million for the comparable prior year period, but these expenses decreased as a percentage of revenues to six 5% in the first quarter of fiscal 2026 as compared.

Speaker Change: Fair to seven 2% in last year's first quarter.

Joshua Baugher: Net income for the first quarter of fiscal 2026 was $22.6 million, or $1.60 per diluted share, compared to $7.9 million, or $0.58 per diluted share, for last year's comparable quarter. EBITDA, earnings before interest, taxes, depreciation, and amortization for the quarter ended April 30, 2025, increased to $30.3 million, compared to $11.9 million for the same period last year. EBITDA as a percent of revenue increased to 15.6% for the first quarter of this fiscal year compared to 7.5% for the first quarter of last fiscal year.

Speaker Change: Net income for the first quarter of fiscal 2026 was $22 6 million or $1 60 per diluted share compared to $7 9 million or 58 cents per diluted share for last years comparable quarter.

Speaker Change: EBITDA earnings before interest taxes, depreciation and amortization for the quarter ended April 30 of 2025 increased to $30 3 million compared to $11 9 million for the same period last year.

Speaker Change: EBITDA as a percent of revenue increased to 15, 6% for the first quarter of this fiscal year compared to seven 5% for the first quarter of last fiscal year.

David Watson: With that, I'll turn the call back to David. Thanks, Josh. We further strengthened our balance sheet during the first quarter. At April 30, 2025, we had approximately $546 million in cash, cash equivalents, and investments generating meaningful investment yields. Our net liquidity was $315 million and we had no debt. Stockholders' equity was $364 million at April 30, 2025. This liquidity bridge demonstrates that our business model ordinarily requires a low-level capital expenditure. Our net liquidity of $315 million at April 30, 2025 has increased to $14 million compared with net liquidity at January 31, 2025. During the first quarter, we returned $18 million of capital to our shareholders.

David Watson: With that I'll turn the call back to David.

David Watson: Thanks, Josh.

David Watson: We further strengthened our balance sheet during the first quarter at April 32025, we had approximately $546 million in cash cash.

David Watson: Cash equivalents and investments generating meaningful investment yields.

David Watson: Our net liquidity was $315 million and we had no debt.

David Watson: <unk> equity was $364 million at April 32025.

David Watson: This liquidity bridge demonstrates that our business model ordinarily requires a low level of capital expenditures, our net liquidity of $315 million at April 32025 has.

David Watson: It has increased 14 million compared with net liquidity at January 31, 2025.

David Watson: During the first quarter, we returned $18 million of capital to our shareholders.

David Watson: We have a disciplined capital allocation strategy which focuses on our core commitments.

David Watson: We have a disciplined capital allocation strategy, which focuses on our core commitments first we invest in our people to ensure we are appropriately prepared to staff and execute our projects.

David Watson: First, we invest in our people to ensure we are appropriately prepared to staff and execute our project. Second, the company pays a quarterly dividend, which we increased to $0.375 per common share in September 2024, creating an annual dividend run rate of $1.50 per share. Of note, that increase came just a year after we raised our dividend to $0.30 per share in September of 2023. Together, these two increases represent an aggregate 50% increase in our annual dividend run rate in less than two years, reflecting the strength of our business. Third, since November of 2021, when we began our share buyback program, we have returned a total of approximately $109.4 million to shareholders.

David Watson: Second the company pays a quarterly dividend, which we increased to 37 five cents per common share at September 2024, grading and annual dividend run rate of $1.50 per share of.

David Watson: Of note that increase came just a year. After we raised our dividend <unk> 30 per share in September of 2023 together. These two increases represent an aggregate 50% increase in our annual dividend run rate and less than two years, reflecting the strength of our business.

David Watson: Third since November of 2021, when we began our share buyback program. We have returned a total of approximately $109 4 million to shareholders. Additionally in April our board increased the authorization of the share repurchase program to $150 million.

David Watson: Additionally, in April, our board increased the authorization of the Share Repurchase Program to $150 million.

David Watson: Finally, we will continue to evaluate and consider M&A opportunities that could be additive or complementary to our current capabilities or enhance our geographic footprint. Our company is dedicated to driving long-term value creation for shareholders. Our pipeline is stronger than it has ever been, and since 2008, we have increased our tangible book value and cumulative dividends per share to record level. Our industry is seeing heightened urgency to meet power consumption increases that haven't been experienced in decades. With increased power demand coinciding with aging power resources and a decade-long underinvestment in energy infrastructure is driving an immediate need for facilities that can provide reliable 24-7 power.

David Watson: And finally, we will continue to evaluate and consider M&A opportunities that could be additive or complementary to our current capabilities or enhance our geographic footprint.

David Watson: Our company is dedicated to driving long term value creation for shareholders. Our pipeline is stronger than it has ever been in since 2008, we have increased our tangible book value in cumulative dividends per share to record levels.

David Watson: Our industry has seen heightened urgency to meet power consumption increases that haven't been experienced in decades. This increased power demand coinciding with Aegean power resources and a decade long underinvestment in energy infrastructure is driving an immediate need for facilities that can provide reliable 24 seven power.

David Watson: Argan is one of only a few companies with the capabilities to construct both the complex combined and simple cycle natural gas plants, as well as the renewable energy resources that are necessary to reliably and affordably power the electric economy. We believe we are well-positioned with the capabilities, financial flexibility, industry relationships, and long-standing customer base to strengthen our leadership role as a partner of choice for the build-out of energy infrastructure.

David Watson: Sure.

David Watson: Oregon is one of only a few companies with the capabilities to construct both the complex combined and simple cycle natural gas plants as well as to renewable energy resources that are necessary to reliably and affordably power the electric economy.

David Watson: We believe we are well positioned with the capabilities financial flexibility industry relationships and long standing customer base to strengthen our leadership role as a partner of choice for the build out of energy infrastructure.

David Watson: To close, we remain focused on our long-term growth strategy. leverage our core competencies to capitalize on existing and emerging market opportunities. Maintain disciplined risk management with the goal of improving our project management effectiveness and minimizing costly project overrun. strengthen our position as a partner of choice in the construction of power generation facilities that power the electric economy and maintain grid reliability. And last but not least, drive organic growth while also being alert for acquisition opportunities that make sense for a business through thoughtful capital allocation. Fiscal 2026 is off to a strong start, and we are energized to execute on our record backlog and to win more opportunities from our robust project pipeline.

David Watson: To close we.

David Watson: We remain focused on our long term growth strategy.

David Watson: Leverage our core competencies to capitalize on existing and emerging market opportunities.

David Watson: Maintained disciplined risk management, the goal of improving our project management effectiveness and minimizing costly project overruns.

David Watson: Strengthen our position as a partner of choice and the construction of power generation facilities that powered electric economy and maintain grid reliability.

David Watson: And last but not least drive organic growth, while also being alert for acquisition opportunities that makes sense for our business through thoughtful capital allocation.

David Watson: Fiscal 2026 is off to a strong start and we are energized to execute on our record backlog and to win more opportunities from our robust project pipeline.

David Watson: As you know, Combined Cycle projects typically take three to four years to complete and we are in the early days of the current power facility buildout. With our visibility of the pipeline of projects coming to market, we remain very optimistic about our continued growth through this decade and beyond as we remain fully engaged to build the energy infrastructure needed to reliably supply the electrification of everything.

David Watson: As you know.

David Watson: Combined cycle projects typically take three to four years to complete and we are in the early days of the current power facility build out with our visibility of the pipeline of projects coming to market. We remain very optimistic about our continued growth through this decade and beyond as we remain fully engaged to build the energy infrastructure needs.

David Watson: It reliably supply electrification of everything.

Operator: As always, I'd like to thank our employees for their dedication to operational excellence and to thank our shareholders for their continued support. with that operator.

David Watson: As always.

David Watson: I'd like to thank our employees for their dedication to operational excellence and to thank our shareholders for their continued support.

Operator: Let's open it up for questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or comment.

David Watson: With that operator, let's open it up for questions.

Speaker Change: At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.

David Watson: Before pressing the star keys, one moment, please while we poll for questions. Once again. Please press star one if you have a question or comment.

Rob Brown: This question comes from Rob Brown with Lake Street Capital.

Rob Brown: First question comes from Rob Brown with Lake Street Capital. Please proceed.

Rob Brown: Good afternoon. Congratulations. Have a good quarter. Thank you. His first question on the pipeline, visibility at this point. Sandow Lakes project awarded, what's sort of the pipeline look like for the rest of the year? and kind of the size. Sure Rob, the pipeline remains strong and we're very bullish on being able to continue to add to the backlog. Currently, as you can see from our record backlog of $1.9 billion at April 30, we added several jobs during the quarter, including what you just mentioned, the Sandal Lakes job. But in the short to medium term, we expect to add several power industrial jobs over the course of the next six months, which should put us significantly over $2 billion in backlog later this year.

Rob Brown: Good afternoon, and congratulations on a good quarter.

Speaker Change: Thank you.

Speaker Change: First question on the AR on the pipeline.

Speaker Change: Visibility at this point are you.

Rob Brown: In our lakes project awarded what what's sort of the pipeline look like for the rest of the year and could you give some color on kind of the size and potential there.

Rob Brown: Sure Rob the pipeline remains strong and we're very bullish on being able to continue to add to the backlog currently as you can see from our record backlog of $1 9 billion at April 30, we added several jobs during the quarter, including what you just mentioned the sandal lakes job, but in the short to medium term, we expect to add several power industrial.

Rob Brown: Real jobs over the course of the next six months, which would put us significantly over 2 billion in backlog later this year.

David Watson: But, as you know, it's important to reemphasize that we often don't control the start times in new projects, so it's tough for us to give an exact estimate. But in the long term, we believe demand will remain strong for the next decade and beyond, and this is underscored by the fact that the OEMs are starting to fill 20, 30 gas turbine slots as they are primarily filled out of earlier years.

Rob Brown: But as you know it's important to reemphasize that we often don't control the start time for new projects. So it's tough for us to give an exact estimate but in the long term we.

David Watson: We believe demand will remain strong for the next decade and beyond and this is underscored by the fact that the Oems are starting to fill 2030 gas turbines thoughts as they are primarily sold out of earlier years.

David Watson: Okay, great. All right, so they said backlog could get significantly over 2 billion. What's sort of the kind of potential that backlog can get to, given your capacity and given sort of what you see in the project pipeline? Is there a sense of how? Well, I mean, that's the guidance, right? It's significantly over $2 billion. As you know, we have, you know, project capacity in that 10 plus range between renewable and gas jobs. And so we've just started several new jobs, right? We just started the 700 megawatt power plant that we announced in December. We just started at Tarbert and Sandal Lakes, and we're to the mix.

Rob Brown: Okay great.

David Watson: Just to sit back look at.

David Watson: Significantly over 2 billion.

David Watson: What are the kind of potential that backlog can get to given your capacity and given to what you see in the project pipeline is there.

David Watson: So to help how much backlog.

David Watson: Well I mean, that's the guidance right it significantly over $2 billion as you know we have a project.

David Watson: The capacity in that 10, plus range between renewable and gas jobs and so we've just started several new jobs right. We just started Oh seven.

David Watson: 700 megawatt power plant that we announced in December we just started tarbert and Santa Lakes, and we're continuing to work on the Trimble job in and we expect to add several more to the mix. So that should absolutely result in a backlog that that gets us significantly above $2 billion.

David Watson: So that should absolutely result in a backlog that gets us significantly above $2 billion. Okay, got it.

Speaker Change: Okay got it great. Thanks, and then on the industrial business I think I think this quarter was sort of bottoming there or what's the what's the outlook there how does the pipeline look and what the trend on revenue in that segment.

Rob Brown: Great. Thanks.

David Watson: And then on the industrial business, I think this quarter was sort of bottoming. What's the outlook there? How does the pipeline look? And what's the trend on revenue? Absolutely, you're right. As we previously discussed, we expected a slight contraction in this past quarter, which there was, but we're still seeing strong interest in TRC with increased onshoring of U.S. manufacturing being a major contributor. TRC's backlog increased to $91 million, and our confidence in this segment is really strong based on current visibility. Rob, we expect revenues to increase meaningfully over the next several quarters.

David Watson: Absolutely you're right as we previously discussed we expected a slight contraction.

David Watson: And in this past quarter, which there was but we're still seeing strong interest in Trc.

David Watson: With increased onshoring of U S manufacturing and being a major contributor.

David Watson: This backlog.

David Watson: Increased 91 million and our confidence in this segment is its really strong based on current visibility.

David Watson: Rob we expect revenues to increase meaningfully over the next several quarters.

Rob Brown: Thank y'all for...

David Watson: Great. Thank you I'll turn it over.

Operator: Once again, if you have a question or a comment, please indicate so by pressing star 1 on your touchtone phone.

Speaker Change: Once again, if you have a question or comment please indicate so by pressing star one on your Touchtone phone. The next question comes from Chris Moore with C. J S Securities. Please proceed.

Chris Moore: The next question comes from Chris Moore with CJS Securities. Hey, good afternoon. Thanks for taking a couple.

Chris Moore: Hey, good afternoon. Thanks for taking a couple maybe we could start with with gross margins they've been above expectations last two quarters, 19% in Q1 can you quantify or even estimate the.

Chris Moore: Maybe we could start with with gross margins. They've been above expectations last two quarters, 19% in Q1. Can you quantify or even estimate the amount of, you know, kind of excess margin in there from and other projects like Trumbull.

Speaker Change: You know kind of excess margin in there from.

Speaker Change: Projects like Trumbull.

Joshua Baugher: You know, it's another Chris, so great to great to hear from you. It's another great, solid gross profit quarter. And as you mentioned, the second one in a row, they basically reflect continued strong execution across the business, as well as the continued changing mix of projects and contract types. I think we're in a competitive but good market right now, and we expect to exceed last year's margin profile as we move through the year. So it's expected to be pretty strong. All right, fair enough.

Chris Moore: You know, it's it's another Chris a great great to hear from you. It's another great solid gross profit quarter and as you mentioned the second one in a row.

Chris Moore: They they basically reflect continued strong execution across the business as well as the continued changing mix of projects and contract types. I think you know as as you know we're in a competitive but good market right now and we expect to exceed last year's margin profile as we move through the year. So it's it's expected to be pretty strong.

Speaker Change: Alright fair enough, maybe a follow up on one of Rob's questions. So I think from a backlog perspective.

David Watson: Maybe a follow-up on one of Rob's questions. So I think from a backlog perspective. You know, given there's finite ability in terms of, you know, how many jobs you can do. Is there, you know, an optimal backlog level if most of it is natural gas? As you know, our backlog bounces around some, given that overnight we could add a $600 million, $700 million, $500 million contract, right? And of course, as we continue to execute on these jobs, revenue gets burned off and backlog gets burned off. So we expect, again, the trajectory of backlog to increase over the course of the year, though it could bounce around some.

Speaker Change: You know given their theirs.

Speaker Change: A finite ability in terms of you know how many jobs you can do is there an optimal backlog level. If most of it is is natural gas.

Speaker Change: As you know our backlog bounces around some given that an overnight we could add 600 million 700 million $500 million contract right and of course as we as we continue to execute on these jobs revenue gets burned off in backlog backlog gets burned off.

Speaker Change: We expect again the trajectory of backlog to increase over the course of the year, though it could bounce around some.

David Watson: And we're really excited about the market we're in right now, the opportunities that we're seeing, not just for the near and midterm, but frankly, for the long term and multiple years out. Got it.

Speaker Change: And we're really excited about the market. We're in right now the opportunities that we're seeing not just for the near and mid term, but frankly for for the long term and in multiple years out.

Speaker Change: Got it in terms of just you know kind of what gets going first is even though send out was.

David Watson: In terms of just, you know, kind of what gets going first, is even though Sandow was booked later, is that likely to escalate a little bit quicker in fiscal 26? all all of our uh... go ahead chris not not that go ahead I mean all of our gas jobs are over a three to four year period in it and as the cadence of the job it takes time for revenues to ramp up. We obviously want to achieve successful jobs for our customers and we will push to get as much done as soon as we can on each and every project but the revenue cadence of a new job and expected additional jobs do take time to ramp up and we do expect revenues to increase, overall revenues to increase from Q1 over the course of the year.

Speaker Change: <unk> was booked later is that likely to escalate a little bit quicker in in fiscal 'twenty six.

Speaker Change: Oh all of our.

David Watson: Go ahead, Chris No no go ahead.

Speaker Change: I mean, all of our gas jobs are over a three to four year period and it in as the cadence of the of the of the job. It takes time for revenues to ramp up I mean, we obviously want to achieve successful jobs for our customers and we will push to get as much done.

Speaker Change: As soon as we can on each and every project, but the the revenue cadence up a lot of these new jobs in unexpected additional jobs do take time to ramp up and we do expect revenues to increase overall revenues to increase from Q1 over the course of the year.

Chris Moore: Got it.

David Watson: And maybe my last question to follow up on that. So, I mean, historically, the timeframe was two and a half to three years. Now we talk more like three to four years. Is that a permanent change? Is that regulatory? Is that supply chain driven? Or is it fair to assume that it's not going back, it's going to stay in that range? I'd like to say it's a little bit of all of the above, but I think it's primarily supply chain driven. At the end of the day, if that gets straightened out, obviously there will be a goal of speed the market for our customers.

Speaker Change: Got it and maybe my last question to follow up on that so I mean, historically the time frame was two and a half to three years now we talk more like three to four years.

Speaker Change: Is that a permanent change as you know is that regulatory is it supply chain driven or is it is it fair to assume that that you know.

Speaker Change: It's it's it's not going back it's going to stay in that range.

Speaker Change: I'd like to say, it's a little bit of all the above but I think it's primarily supply shrink supply chain driven at the end of the day if that gets straightened out. There is obviously, obviously there there will be a goal of speed to market for our customers and so we'd be we clearly wanted to be able to build.

David Watson: And so we clearly want to be able to build these things quicker and timely, and that's what we continue to do. But it is currently a three to four year timeline typically, though smaller jobs could be shorter. Appreciate it.

Speaker Change: These things quicker and and and and timely and that's what we've continued to do but it is currently a three to four year timeline, typically though smaller jobs could be shorter.

Speaker Change: Fair enough.

Chris Moore: I will leave it there.

Speaker Change: I appreciate it I'll leave it there.

Chris Moore: Great. Thanks, Chris.

Speaker Change: Great. Thanks, Chris.

David Watson: We've reached the end of the question and answer session, and I will now turn the call over to David Watson for closing remarks. Thank you all for participating in today's call, and as a reminder, please don't forget to vote your shares for our upcoming annual meeting of stockholders on June 17th, and I look forward to seeing some folks there.

Speaker Change: We've reached the end of the question and answer session and I will now turn the call over to David Watson for closing remarks.

David Watson: Thank you all for participating in today's call and as a reminder, please don't forget to vote your shares for upcoming annual meeting of stockholders on June 17th.

Speaker Change: And I look forward to seeing some folks there and as always we look forward to speaking with you again, when we report our second quarter fiscal 2026 results have a great evening everyone.

David Watson: As always, we look forward to speaking with you again when we report our second quarter fiscal 2026 results.

Operator: Have a great evening, everyone. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.