Argan(AGX) - 2026 Q2 - Quarterly Report

Financial Statements Condensed Consolidated Statements of Earnings For the three and six months ended July 31, 2025, the company achieved significant growth in both revenue and net income, with three-month net income increasing by 93.8% and six-month net income by 121.7%, alongside a substantial rise in diluted earnings per share Condensed Consolidated Statements of Earnings (Three Months Ended July 31, in thousands USD) | Metric (in thousands USD) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change (%) | | :------------------------ | :------------------------------- | :------------------------------- | :--------- | | Revenue | 237,743 | 227,015 | 4.7 | | Gross Profit | 44,267 | 31,105 | 42.3 | | Operating Income | 30,055 | 18,677 | 60.9 | | Net Income | 35,275 | 18,198 | 93.8 | | Diluted EPS | 2.50 | 1.31 | 90.8 | Condensed Consolidated Statements of Earnings (Six Months Ended July 31, in thousands USD) | Metric (in thousands USD) | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Change (%) | | :------------------------ | :----------------------------- | :----------------------------- | :--------- | | Revenue | 431,403 | 384,697 | 12.1 | | Gross Profit | 81,130 | 49,049 | 65.4 | | Operating Income | 54,397 | 25,196 | 115.9 | | Net Income | 57,825 | 26,080 | 121.7 | | Diluted EPS | 4.09 | 1.90 | 115.3 | Condensed Consolidated Balance Sheets As of July 31, 2025, the company's total assets and stockholders' equity increased, with higher cash and cash equivalents and investment balances, reflecting a robust financial position Condensed Consolidated Balance Sheets (As of July 31, in thousands USD) | Metric (in thousands USD) | July 31, 2025 | January 31, 2025 | Change (%) | | :------------------------ | :------------ | :--------------- | :--------- | | Cash and Cash Equivalents | 177,850 | 145,263 | 22.4 | | Investments | 394,340 | 379,874 | 3.8 | | Total Current Assets | 828,784 | 781,300 | 6.1 | | Total Assets | 882,704 | 836,227 | 5.6 | | Total Current Liabilities | 484,322 | 479,857 | 0.9 | | Total Liabilities | 489,528 | 484,370 | 1.1 | | Total Stockholders' Equity | 393,176 | 351,857 | 11.7 | Condensed Consolidated Statements of Stockholders' Equity For the six months ended July 31, 2025, stockholders' equity increased from $351,857 thousand USD on February 1, 2025, to $393,176 thousand USD, primarily driven by net income, partially offset by cash dividends and stock repurchases Condensed Consolidated Statements of Stockholders' Equity (in thousands USD) | Stockholders' Equity Changes | Balance as of February 1, 2025 | Balance as of July 31, 2025 | | :--------------------------- | :----------------------------- | :-------------------------- | | Net Income | - | 57,825 | | Foreign Currency Translation Gain/Loss | - | 3,370 | | Unrealized Gain/Loss on Available-for-Sale Securities | - | 1,598 | | Stock-Based Compensation Expense | - | 3,453 | | Stock Option Exercises and Restricted Stock Settlements | - | (7,632) | | Common Stock Repurchases | - | (7,048) | | Cash Dividends | - | (10,247) | | Total Stockholders' Equity | 351,857 | 393,176 | Condensed Consolidated Statements of Cash Flows For the six months ended July 31, 2025, operating cash flow was $69.9 million USD, with net cash outflows of $14.3 million USD from investing activities and $24.9 million USD from financing activities, increasing cash and cash equivalents to $177.9 million USD at period-end Condensed Consolidated Statements of Cash Flows (in thousands USD) | Cash Flow Activities | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | 69,895 | 91,181 | | Net Cash Used in Investing Activities | (14,253) | (44,562) | | Net Cash Used in Financing Activities | (24,927) | (10,680) | | Effect of Exchange Rate Changes | 1,872 | (286) | | Net Increase in Cash and Cash Equivalents | 32,587 | 35,653 | | Cash and Cash Equivalents at End of Period | 177,850 | 232,685 | Notes to Condensed Consolidated Financial Statements NOTE 1 – DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION The company operates through three reporting segments: Power Industry Services, Industrial Construction Services, and Telecommunications Infrastructure Services, primarily in the US, Ireland, and the UK, with these unaudited financial statements prepared under US GAAP and SEC rules, to be read in conjunction with the annual 10-K report - The company operates through three reporting segments: Power Industry Services, Industrial Construction Services, and Telecommunications Infrastructure Services[12] - The Power Industry Services segment provides engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services for client projects in the US, Ireland, and the UK[12] - The Industrial Construction Services segment offers new plant construction, maintenance, outage, and emergency mobilization field services, primarily in the southeastern US, potentially including the fabrication, delivery, and erection of structural steel components[12] - The Telecommunications Infrastructure Services segment provides project management, construction, installation, maintenance, repair, and response services, primarily to commercial, local, and federal government clients in the Mid-Atlantic US[12] - These condensed consolidated financial statements are unaudited, prepared in accordance with SEC rules and regulations, and should be read in conjunction with the company's annual report on Form 10-K for the fiscal year ended January 31, 2025[14] - FASB issued ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Expense Disclosures on the Income Statement), and the company is evaluating their impact on financial position, results of operations, cash flows, or disclosures[16][17] NOTE 2 – REVENUES FROM CONTRACTS WITH CUSTOMERS Company revenue primarily originates from US projects, with US revenue increasing by 23.7% for the six months ended July 31, 2025, and a significant increase in revenue recognized from contract liabilities, with $2.0 billion USD in remaining performance obligations, mostly expected to be recognized in future fiscal years Revenue by Geographic Region (in thousands USD) | Region | Three Months Ended July 31, 2025 (in thousands USD) | Three Months Ended July 31, 2024 (in thousands USD) | Six Months Ended July 31, 2025 (in thousands USD) | Six Months Ended July 31, 2024 (in thousands USD) | | :--------------------- | :-------------------------------------------------- | :-------------------------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | United States | 214,195 | 195,249 | 395,301 | 319,580 | | Republic of Ireland | 17,244 | 28,167 | 27,132 | 57,058 | | United Kingdom | 6,304 | 3,599 | 8,970 | 8,059 | | Consolidated Total Revenue | 237,743 | 227,015 | 431,403 | 384,697 | Revenue Recognized from Contract Liabilities (in thousands USD) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue Recognized from Contract Liabilities | 143,116 | 90,874 | 244,884 | 131,229 | - As of July 31, 2025, the company's total remaining performance obligations (RUPO) amounted to $2.0 billion USD, with approximately 26% expected to be recognized as revenue during the remainder of fiscal year 2026, and the majority thereafter in fiscal years 2027, 2028, and 2029[22] - As of July 31, 2025, contract retentions (billed amounts not yet paid by customers) totaled $26.6 million USD, an increase from $15.8 million USD as of January 31, 2025[20] - As of July 31, 2025, contract modifications included in the transaction price awaiting customer approval (primarily related to an overseas project) totaled $10.2 million USD, an increase from $8.0 million USD as of January 31, 2025[21] NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS The company's cash and cash equivalents are primarily invested in money market funds, with an investment portfolio including short-term investments (mainly certificates of deposit) and available-for-sale securities (primarily US Treasury notes), totaling $394.3 million USD as of July 31, 2025, with a weighted average annualized yield of 4.0% Investment Portfolio (in thousands USD) | Investment Type | July 31, 2025 | January 31, 2025 | | :------------------- | :------------ | :--------------- | | Short-Term Investments | 97,676 | 153,129 | | Available-for-Sale Securities | 296,664 | 226,745 | | Total Investments | 394,340 | 379,874 | Investment and Cash Income (in thousands USD) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investment and Cash Income | 5,500 | 5,300 | 11,000 | 10,100 | - As of July 31, 2025, the company's unrealized losses do not represent credit losses, as the company does not intend to sell these investments before recovering their amortized cost[28] - As of July 31, 2025, and January 31, 2025, the weighted average annualized yield on the company's outstanding investment funds and interest-bearing cash accounts was 4.0% and 4.1%, respectively[30] - As of July 31, 2025, approximately 8% of cash, cash equivalents, and investments were held by foreign subsidiaries in Ireland and the UK, and management believes concentration risk does not pose a significant threat[31] NOTE 4 – FAIR VALUE MEASUREMENTS The company's fair value measurements for financial instruments primarily utilize Level 1 and Level 2 inputs, with money market funds (Level 1) at $89.8 million USD and available-for-sale securities (US Treasury notes, Level 2) at $296.7 million USD as of July 31, 2025 Fair Value Measurements (in thousands USD) | Financial Instrument | July 31, 2025 Level 1 | July 31, 2025 Level 2 | January 31, 2025 Level 1 | January 31, 2025 Level 2 | | :------------------------------- | :-------------------- | :-------------------- | :----------------------- | :----------------------- | | Cash Equivalents: Money Market Funds | 89,807 | — | 93,067 | — | | Available-for-Sale Securities: US Treasury Notes | — | 296,664 | — | 226,745 | | Total | 89,807 | 296,664 | 93,067 | 226,745 | NOTE 5 – ACCOUNTS RECEIVABLE As of July 31, 2025, accounts receivable included $24.7 million USD in billable amounts related to an overseas project, including anticipated letter of credit drawdowns to be returned, with credit loss allowance being immaterial for the current period compared to $0.5 million USD in the prior year - As of July 31, 2025, accounts receivable included $24.7 million USD in billable amounts related to an overseas project, including anticipated letter of credit drawdowns to be returned[33] - As of July 31, 2025, the allowance for credit losses was $1.8 million USD, compared to $1.9 million USD as of January 31, 2025[34] - For the three and six months ended July 31, 2025, the amount of credit loss allowance was immaterial; for the same period in 2024, it was $0.5 million USD[34] NOTE 6 – INTANGIBLE ASSETS The company's intangible assets, primarily trade names and customer relationships, totaled $1.63 million USD net as of July 31, 2025, with goodwill balances of $18.5 million USD for Power Industry Services and $9.5 million USD for Industrial Construction Services remaining unchanged since January 31, 2025 Intangible Assets (in thousands USD) | Intangible Asset Type | Estimated Useful Life | Net Amount as of July 31, 2025 (in thousands USD) | Net Amount as of January 31, 2025 (in thousands USD) | | :-------------------- | :-------------------- | :------------------------------------------------ | :------------------------------------------------- | | Trade Names | 15 years | 1,600 | 1,750 | | Customer Relationships | 10 years | 30 | 76 | | Total | | 1,630 | 1,826 | - As of July 31, 2025, and January 31, 2025, goodwill balances remained unchanged at $18.5 million USD for the Power Industry Services segment and $9.5 million USD for the Industrial Construction Services segment[35] - For the three and six months ended July 31, 2025, intangible asset amortization expense was $0.1 million USD and $0.2 million USD, respectively[36] Estimated Future Amortization Expense (in thousands USD) | Fiscal Year Ending January 31 | Amortization Expense (in thousands USD) | | :---------------------------- | :-------------------------------------- | | 2026 (remaining) | 180 | | 2027 | 300 | | 2028 | 300 | | 2029 | 300 | | 2030 | 300 | | Thereafter | 250 | | Total | 1,630 | NOTE 7 – FINANCING ARRANGEMENTS The company has a revised credit agreement with banks providing a $35.0 million USD base loan commitment and an additional $30.0 million USD commitment at SOFR plus 1.85%, with no outstanding borrowings but $0.3 million USD in outstanding letters of credit as of July 31, 2025, having pledged most assets as collateral and complied with all financial covenants - The company's credit agreement with banks is effective until May 31, 2027, with a base loan commitment of $35.0 million USD and an additional $30.0 million USD commitment[39] - The revolving loan interest rate under the credit agreement is SOFR plus 1.85%[39] - As of July 31, 2025, the company had no outstanding borrowings under the credit agreement but had outstanding letters of credit totaling $0.3 million USD[40] - The company has pledged most of its assets to secure its financing arrangements and has complied with all covenants and other requirements of the credit agreement as of July 31, 2025[41] NOTE 8 – COMMITMENTS As of July 31, 2025, the company's outstanding performance bond obligations are estimated at approximately $60 million USD across all subsidiaries, with an additional $61.2 million USD in outstanding bonds covering other risks, including warranty obligations and contract payment retentions for completed activities - As of July 31, 2025, the company's outstanding performance bond obligations are estimated at approximately $60 million USD[42] - As of July 31, 2025, outstanding bonds covering other risks (including warranty obligations and contract payment retentions) totaled $61.2 million USD[42] NOTE 9 – LEGAL CONTINGENCIES The company's UK subsidiary is currently involved in a lawsuit against EP NI Energy Limited and EP UK Investment Limited for breach of contract and unpaid amounts, with the project owner improperly drawing $9.7 million USD from a letter of credit, which the company has recorded as accounts receivable, and management believes existing claims will not materially adversely affect the consolidated financial statements - The company's UK subsidiary has sued EP NI Energy Limited and EP UK Investment Limited, alleging breach of contract and unpaid amounts, which negatively impacted project progress and costs[44] - The project owner improperly drew $9.7 million USD from an irrevocable letter of credit, which the company has recorded as accounts receivable as of July 31, 2025[45] - The company's UK subsidiary holds substantial billable accounts receivable, unresolved contract modifications, and delay claims[45] - Management believes, based on available information, that no current claims or lawsuits will have a material adverse effect on the consolidated financial statements[43] NOTE 10 – STOCK-BASED COMPENSATION For the six months ended July 31, 2025, stock-based compensation expense was $3.5 million USD, a significant increase from the prior year, with the company granting various restricted stock units and non-qualified stock options, and settling some stock option exercises and share-based payment awards using treasury stock Stock-Based Compensation Expense (in thousands USD) | Stock-Based Compensation Expense | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-Based Compensation Expense | 2,300 | 1,000 | 3,500 | 2,200 | - As of July 31, 2025, unrecognized compensation cost related to unexercised stock awards was $10.2 million USD, expected to be recognized over the next three years[46] - For the six months ended July 31, 2025, the company granted a total of 56,450 target restricted stock units (including performance and renewable energy performance-linked) and 32,350 time-vested restricted stock units[47] - For the six months ended July 31, 2025, the company granted 4,000 non-qualified stock options with a weighted average exercise price of $148.72 per share; 230,433 non-qualified stock options were exercised with a weighted average exercise price of $47.67 per share[47] - For the six months ended July 31, 2025, the company used 233,478 shares of treasury stock to settle stock option exercises and other share-based payment awards[48] NOTE 11 – INCOME TAXES For the six months ended July 31, 2025, the company's income tax expense was $7.6 million USD, with an effective tax rate of 11.6%, primarily influenced by tax benefits from stock option exercises, while the company is evaluating the impact of the newly enacted OBBBA and is contesting IRS denials of NOL carryback refund requests and R&D tax credits Income Tax Expense (in thousands USD) | Income Tax Item | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | US Statutory Federal Income Tax Expense | 13,739 | 7,475 | | State Income Tax (net of federal benefit) | 1,253 | 1,186 | | Unrecognized Tax Benefits | — | 961 | | Executive Compensation Limitations | 792 | 404 | | Stock-Based Compensation Windfall Benefit | (7,994) | (531) | | Other Permanent Differences and Adjustments | (193) | 19 | | Income Tax Expense | 7,597 | 9,514 | - For the six months ended July 31, 2025, the effective income tax rate was 11.6%, primarily due to favorable tax benefits from stock option exercises[122] - The newly enacted One Big Beautiful Bill Act (OBBBA) allows for more favorable deductions for certain business expenses, including the restoration of immediate expensing for domestic R&D expenditures and 100% bonus depreciation, with the company evaluating its impact on future periods, which is not expected to be material[49][86] - The company has filed an NOL carryback refund claim with the IRS for approximately $12.7 million USD, which is currently under IRS review[50] - The IRS has denied $5.8 million USD in R&D tax credits claimed by the company for fiscal years 2021 and 2022, and the company is formally contesting this and has filed a claim with its insurance carrier[51][52] - As of July 31, 2025, other current assets included approximately $33.6 million USD in income tax refunds receivable, related accrued interest, and prepaid income taxes[53] - The company holds investments in solar tax credit (STC) limited liability companies, with an outstanding cash investment commitment of $11.5 million USD as of July 31, 2025, which was paid in August 2025; for the six months ended July 31, 2025, the company recognized $1.5 million USD in income tax credits and other income tax benefits[55][56] NOTE 12 – EARNINGS PER SHARE For the three and six months ended July 31, 2025, both basic and diluted earnings per share significantly increased, reflecting strong net income performance and the impact of dilutive securities Earnings Per Share (in thousands of shares, except per share data) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | 35,275 | 18,198 | 57,825 | 26,080 | | Basic Weighted Average Shares Outstanding | 13,731 | 13,403 | 13,680 | 13,331 | | Diluted Weighted Average Shares Outstanding | 14,131 | 13,880 | 14,122 | 13,727 | | Basic Earnings Per Share | 2.57 | 1.36 | 4.23 | 1.96 | | Diluted Earnings Per Share | 2.50 | 1.31 | 4.09 | 1.90 | NOTE 13 – STOCKHOLDERS' EQUITY The Board of Directors increased the total stock repurchase authorization by $25 million USD to $150 million USD on April 10, 2025, with the company repurchasing 56,117 shares of common stock for approximately $7.0 million USD and paying $0.375 per share in cash dividends for the six months ended July 31, 2025 - The Board of Directors increased the total stock repurchase authorization by $25 million USD to $150 million USD on April 10, 2025[59] - For the six months ended July 31, 2025, the company repurchased 56,117 shares of common stock for approximately $7.0 million USD, at an average price of $125.60 per share[59] Cash Dividends Declared and Paid (in USD) | Record Date | Payment Date | Amount Per Share (USD) | | :------------ | :------------ | :--------------------- | | July 23, 2025 | July 31, 2025 | 0.375 | | April 22, 2025 | April 30, 2025 | 0.375 | | January 23, 2025 | January 31, 2025 | 0.375 | | October 23, 2024 | October 31, 2024 | 0.375 | | July 23, 2024 | July 31, 2024 | 0.300 | | April 22, 2024 | April 30, 2024 | 0.300 | NOTE 14 – CUSTOMER CONCENTRATIONS The majority of the company's consolidated revenue is derived from the Power Industry Services segment, with high revenue and accounts receivable concentration among a few key customers; for the three months ended July 31, 2025, the top three Power Industry Services customers contributed 30%, 17%, and 13% of consolidated revenue Revenue by Reporting Segment (Percentage of Consolidated Revenue) | Reporting Segment | Three Months Ended July 31, 2025 (%) | Three Months Ended July 31, 2024 (%) | Six Months Ended July 31, 2025 (%) | Six Months Ended July 31, 2024 (%) | | :------------------------------- | :----------------------------------- | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Power Industry Services | 82.8 | 76.5 | 82.8 | 73.8 | | Industrial Construction Services | 15.2 | 21.9 | 15.1 | 24.3 | | Telecommunications Infrastructure Services | 2.0 | 1.6 | 2.1 | 1.9 | - For the three months ended July 31, 2025, the top three Power Industry Services customers accounted for 30%, 17%, and 13% of consolidated revenue, respectively[60] - For the six months ended July 31, 2025, the top two Power Industry Services customers accounted for 27% and 23% of consolidated revenue, respectively[61] - As of July 31, 2025, the accounts receivable balances for the top three major customers accounted for 29%, 23%, and 14% of the consolidated balance, respectively[62] - As of July 31, 2025, the contract asset balances for the top four major customers accounted for 33%, 15%, 11%, and 10% of the consolidated balance, respectively[63] NOTE 15 – SEGMENT REPORTING The company's operations are segmented into Power Industry Services, Industrial Construction Services, and Telecommunications Infrastructure Services, based on how the chief operating decision maker assesses performance and allocates resources, with detailed financial data for each segment showing Power Industry Services contributing the majority of revenue and profit for the three and six months ended July 31, 2025 - The company's Chief Executive Officer, as the chief operating decision maker, uses income before taxes to assess the performance of business segments and determine resource allocation[64] Segment Operating Results (Three Months Ended July 31, in thousands USD) | Metric | Power Industry Services | Industrial Construction Services | Telecommunications Infrastructure Services | Other | Total | | :---------------- | :---------------------- | :------------------------------- | :----------------------------------------- | :------ | :------ | | 2025年7月31日止三个月 | | | | | | | Revenue | 196,948 | 36,065 | 4,730 | — | 237,743 | | Gross Profit | 38,578 | 4,523 | 1,166 | — | 44,267 | | Operating Income | 30,834 | 2,685 | 253 | (3,717) | 30,055 | | Income Before Taxes | 35,256 | 2,686 | 264 | (2,570) | 35,636 | | 2024年7月31日止三个月 | | | | | | | Revenue | 173,760 | 49,642 | 3,613 | — | 227,015 | | Gross Profit | 23,527 | 6,442 | 1,136 | — | 31,105 | | Operating Income | 16,335 | 4,477 | 467 | (2,602) | 18,677 | | Income Before Taxes | 21,042 | 4,477 | 470 | (1,708) | 24,281 | Segment Operating Results (Six Months Ended July 31, in thousands USD) | Metric | Power Industry Services | Industrial Construction Services | Telecommunications Infrastructure Services | Other | Total | | :---------------- | :---------------------- | :------------------------------- | :----------------------------------------- | :------ | :------ | | 2025年7月31日止六个月 | | | | | | | Revenue | 357,304 | 65,249 | 8,850 | — | 431,403 | | Gross Profit | 71,548 | 7,674 | 1,908 | — | 81,130 | | Operating Income | 57,018 | 4,224 | 77 | (6,922) | 54,397 | | Income Before Taxes | 65,812 | 4,225 | 120 | (4,735) | 65,422 | | 2024年7月31日止六个月 | | | | | | | Revenue | 284,026 | 93,341 | 7,330 | — | 384,697 | | Gross Profit | 34,801 | 12,262 | 1,986 | — | 49,049 | | Operating Income | 21,481 | 8,424 | 707 | (5,416) | 25,196 | | Income Before Taxes | 30,249 | 8,425 | 710 | (3,790) | 35,594 | NOTE 16 – SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION As of July 31, 2025, other current assets primarily included $33.6 million USD in income tax refunds receivable and prepaid income taxes, while accrued expenses mainly comprised $29.8 million USD in accrued project costs and $20.9 million USD in accrued compensation Other Current Assets (in thousands USD) | Other Current Assets | July 31, 2025 | January 31, 2025 | | :---------------------------------------- | :------------ | :--------------- | | Income Tax Refunds Receivable and Prepaid Income Taxes | 33,614 | 30,881 | | Notes Receivable | 4,608 | 5,023 | | Prepaid Expenses | 7,302 | 5,751 | | Raw Materials Inventory | 1,256 | 320 | | Other | 6,918 | 9,950 | | Total | 53,698 | 51,925 | Accrued Expenses (in thousands USD) | Accrued Expenses | July 31, 2025 | January 31, 2025 | | :------------------- | :------------ | :--------------- | | Accrued Project Costs | 29,798 | 31,620 | | Accrued Compensation | 20,854 | 29,772 | | Lease Liabilities | 2,378 | 2,710 | | Other | 18,423 | 19,217 | | Total | 71,453 | 83,319 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview and Forward-Looking Statements This section discusses the company's financial condition and results of operations as of July 31, 2025, containing forward-looking statements based on current expectations and beliefs that involve significant risks and uncertainties, where actual results may differ materially from projections, and the company undertakes no obligation to publicly update or revise any forward-looking statements - This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes in this quarterly report, as well as the consolidated financial statements and notes in the company's annual report on Form 10-K for the fiscal year ended January 31, 2025[72] - Forward-looking statements are based on the company's current expectations and beliefs regarding future developments and their potential effects, but involve significant risks and uncertainties, and actual results may differ materially from projections[75][76] - The company undertakes no obligation to publicly update or revise any forward-looking statements[76] Business Description The company is primarily an engineering and construction firm operating through three reporting segments: Power Industry Services, Industrial Construction Services, and Telecommunications Infrastructure Services, actively seeking opportunistic acquisitions and/or investments in companies with profitable growth potential and synergies - The company is primarily an engineering and construction company operating through three reporting segments: Power Industry Services, Industrial Construction Services, and Telecommunications Infrastructure Services[77] - The Power Industry Services segment provides a full range of engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services for power generation markets, with projects located in the US, Ireland, and the UK[78] - The Industrial Construction Services segment primarily provides field services for industrial plants in the southeastern US, including new plant construction, maintenance, outages, and emergency mobilization[79] - The Telecommunications Infrastructure Services segment provides telecommunications project management, construction, installation, maintenance, repair, and response services to commercial, local, and federal government clients in the Mid-Atlantic US[80] - The company may pursue additional opportunistic acquisitions and/or investments by identifying companies with profitable growth potential and synergies[81] Market Outlook US electricity demand has reached a two-decade high, driven by AI data centers, electric vehicles, and reshoring manufacturing, while aging traditional generation and expanding renewables necessitate natural gas power plants as a critical component, with trade policy changes introducing cost and supply chain uncertainties, and the newly enacted OBBBA expected to have no material impact on the company - US electricity demand has reached a two-decade high, primarily driven by the expansion of data centers supporting artificial intelligence technology, the proliferation of electric vehicles, and the reshoring of manufacturing[82] - Aging traditional power generation facilities are retiring faster than new ones are being built, increasing the risk of electricity shortages[82] - Natural gas power plants are expected to remain a critical component of future capacity additions due to their cost-effectiveness, reliability, and ability to support intermittent energy sources[82] - Utility-scale solar, wind, and battery storage projects continue to expand, benefiting from declining capital costs, improved storage systems, and tax incentives[83] - Changes in US trade policy, including the implementation of new tariffs, introduce uncertainty regarding the cost and supply chain of certain construction materials and equipment, potentially leading to increased project costs and delays[84][85] - The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, modifies US federal income tax law to allow for more favorable deductions for certain business expenses, and the company is evaluating its impact on future periods, which is not expected to be material[86] Project Backlog As of July 31, 2025, the company's consolidated project backlog reached $2.0 billion USD, a significant increase from $1.4 billion USD as of January 31, 2025, primarily concentrated in the Power Industry Services segment and including several large natural gas, biofuel, and solar power plant projects, as well as industrial construction service projects Project Backlog (in billions USD) | Project Backlog | July 31, 2025 | January 31, 2025 | Change (%) | | :----------------------- | :------------ | :--------------- | :--------- | | Consolidated Project Backlog | 2.0 | 1.4 | 42.9 | - The project backlog primarily includes projects in the Power Industry Services segment, such as a 170 MW combined heat and power project in Ireland, a 1.2 GW combined cycle natural gas power plant in Texas, a 300 MW biofuel power plant in Ireland, a 700 MW combined cycle natural gas power plant in the US, an LNG facility in Louisiana, a 405 MW solar project in Illinois, Midwest solar and battery projects, and a 950 MW combined cycle natural gas power plant in Ohio[90][91][92][93][94][95][96][97] - As of July 31, 2025, the Industrial Construction Services segment's project backlog was approximately $189.0 million USD, a substantial increase from $53.2 million USD as of January 31, 2025, with new contracts involving automotive plants, data centers, aluminum rolling and recycling facilities, and water treatment plants[98] Comparison of Results of Operations (Three Months Ended July 31, 2025 and 2024) For the three months ended July 31, 2025, consolidated revenue increased by 4.7% and net income by 93.8%, with Power Industry Services revenue growing 13.3% while Industrial Construction Services revenue declined 27.3%, and gross margin improved from 13.7% to 18.6% due to changes in project mix, alongside a significant decrease in income tax expense to an effective tax rate of 1.0% Comparison of Results of Operations (Three Months Ended July 31, in thousands USD) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Change ($) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Revenue | 237,743 | 227,015 | 10,728 | 4.7 | | Selling, General and Administrative Expenses | 14,212 | 12,428 | 1,784 | 14.4 | | Operating Income | 30,055 | 18,677 | 11,378 | 60.9 | | Other Income, Net | 5,581 | 5,604 | (23) | (0.4) | | Income Before Taxes | 35,636 | 24,281 | 11,355 | 46.8 | | Income Tax Expense | 361 | 6,083 | (5,722) | (94.1) | | Net Income | 35,275 | 18,198 | 17,077 | 93.8 | | Diluted Earnings Per Share | 2.50 | 1.31 | 1.19 | 90.4 | - Power Industry Services revenue increased by 13.3% to $196.9 million USD, primarily driven by increased construction activity on a 405 MW Midwest solar project and a 700 MW combined cycle project[101] - Industrial Construction Services revenue decreased by 27.3% to $36.1 million USD, mainly due to reduced field service construction activity and vessel fabrication work[103] - Telecommunications Infrastructure Services revenue increased to $4.7 million USD[104] - Consolidated gross margin improved from 13.7% in the prior year period to 18.6% in the current period, primarily due to changes in project mix and contract types[106] - Income tax expense for the current period was $0.4 million USD, with an effective tax rate of 1.0%, primarily due to favorable tax benefits from stock option exercises[109] Comparison of Results of Operations (Six Months Ended July 31, 2025 and 2024) For the six months ended July 31, 2025, consolidated revenue increased by 12.1% and net income by 121.7%, with Power Industry Services revenue growing 25.8% while Industrial Construction Services revenue declined 30.1%, and consolidated gross margin significantly improved from 12.8% to 18.8% due to project mix changes, alongside a decrease in income tax expense to an effective tax rate of 11.6% Comparison of Results of Operations (Six Months Ended July 31, in thousands USD) | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | Change ($) | Change (%) | | :--------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Revenue | 431,403 | 384,697 | 46,706 | 12.1 | | Selling, General and Administrative Expenses | 26,733 | 23,853 | 2,880 | 12.1 | | Operating Income | 54,397 | 25,196 | 29,201 | 115.9 | | Other Income, Net | 11,025 | 10,398 | 627 | 6.0 | | Income Before Taxes | 65,422 | 35,594 | 29,828 | 83.8 | | Income Tax Expense | 7,597 | 9,514 | (1,917) | (20.1) | | Net Income | 57,825 | 26,080 | 31,745 | 121.7 | | Diluted Earnings Per Share | 4.09 | 1.90 | 2.19 | 115.5 | - Power Industry Services revenue increased by 25.8% to $357.3 million USD, primarily driven by increased construction activity on a 405 MW Midwest solar project and a 700 MW combined cycle project[113] - Industrial Construction Services revenue decreased by 30.1% to $65.2 million USD, mainly due to a significant reduction in field service and vessel fabrication work[115] - Telecommunications Infrastructure Services revenue increased by 20.7% to $8.9 million USD[116] - Consolidated gross margin improved from 12.8% in the prior year period to 18.8% in the current period, primarily due to changes in project mix and contract types, partially offset by unfavorable profit adjustments on an overseas project last year[119] - Income tax expense for the current period was $7.6 million USD, with an effective tax rate of 11.6%, primarily due to favorable tax benefits from stock option exercises[122] Liquidity and Capital Resources As of July 31, 2025, cash and cash equivalents increased to $177.9 million USD, with $69.9 million USD provided by operating activities, net cash outflows of $14.3 million USD from investing activities, and $24.9 million USD from financing activities, resulting in a $43.0 million USD increase in net liquidity to $344.5 million USD, which the company believes is sufficient to meet business needs and maintain adequate liquidity for bonding capacity and project guarantees - As of July 31, 2025, the cash and cash equivalents balance was $177.9 million USD, an increase of $32.6 million USD from January 31, 2025[124] - For the six months ended July 31, 2025, net cash provided by operating activities was $69.9 million USD[125] - Investing activities primarily generated cash from net maturities of certificates of deposit totaling $55.0 million USD, mainly used for investments in available-for-sale securities (US Treasury notes) of $67.2 million USD and purchases of property, plant, and equipment of $2.1 million USD[126] - Financing activities used $24.9 million USD in cash, including $7.0 million USD for common stock repurchases and $10.3 million USD for cash dividend payments[127] - As of July 31, 2025, the company's net liquidity increased by $43.0 million USD to $344.5 million USD, primarily driven by net income, partially offset by cash dividend payments, common stock repurchases, and tax withholdings for share-based payment settlements[131] - The company believes that existing cash, cash equivalents, maturities of short-term investments, and future operating cash flows are sufficient to meet general business needs for the foreseeable future and maintain adequate working capital to ensure bonding capacity[132] Performance Bonds and Guarantees In the normal course of business, the company provides performance bonds, parent company guarantees, or letters of credit for significant projects, with outstanding performance bond obligations estimated at approximately $60 million USD across all subsidiaries and an additional $61.2 million USD in outstanding bonds covering other risks as of July 31, 2025 - The company may be required to obtain performance bonds, provide parent company guarantees, or issue letters of credit to provide performance assurance to customers[137] - As of July 31, 2025, the company's outstanding performance bond obligations are estimated at approximately $60 million USD[141] - As of July 31, 2025, outstanding bonds covering other risks (including warranty obligations and contract payment retentions) totaled $61.2 million USD[141] Solar Energy Project Investments The company invests in solar energy project limited liability companies eligible for energy tax credits, with an outstanding cash investment commitment of $11.5 million USD to a solar fund as of July 31, 2025, paid in August 2025, and may evaluate other alternative energy project investment opportunities in the future - The company invests in solar energy project limited liability companies eligible for energy tax credits[143] - As of July 31, 2025, the company had an outstanding cash investment commitment of $11.5 million USD to a solar fund, which was paid in August 2025[143] - The company may evaluate other alternative energy project investment opportunities in the future[143] Development Financing The company selectively participates in power plant project development and related financing activities to maintain proprietary access to EPC service contracts, secure exclusive EPC contract rights, and generate profits through interest income and project development success fees, having provided a $5.0 million USD loan to a special purpose entity in fiscal year 2025 to support the development phase of a natural gas power plant - The company participates in power plant project development and financing activities to maintain proprietary access to EPC service contracts, secure exclusive EPC contract rights, and generate profits through interest income and project development success fees[144] - In fiscal year 2025, the company provided a $5.0 million USD loan to a special purpose entity to support the development phase of a natural gas power plant, which remained outstanding as of July 31, 2025[145] Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") EBITDA, a non-GAAP measure, is used to assess and compare the company's operating performance by excluding the effects of capital structure, depreciation and amortization accounting methods, and varying income tax jurisdictions, showing significant growth for both the three and six months ended July 31, 2025 - EBITDA is an effective metric for assessing and comparing the company's operating performance by excluding the effects of capital structure, depreciation and amortization accounting methods, and varying income tax jurisdictions[146] - EBITDA is not a performance measure calculated in accordance with US GAAP and should not be considered in isolation or as a substitute for results of operations in the consolidated financial statements[147] Reconciliation of Net Income to EBITDA (in thousands USD) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | 35,275 | 18,198 | 57,825 | 26,080 | | Income Tax Expense | 361 | 6,083 | 7,597 | 9,514 | | Depreciation | 491 | 463 | 906 | 943 | | Amortization of Intangible Assets | 98 | 98 | 196 | 195 | | EBITDA | 36,225 | 24,842 | 66,524 | 36,732 | Critical Accounting Policies and Recently Issued Accounting Pronouncements There have been no significant changes to the company's critical accounting policies since the annual report disclosure, and recently issued accounting pronouncements are discussed in Note 1 to the condensed consolidated financial statements - There have been no significant changes to the company's critical accounting policies and estimates since the annual report filed on March 27, 2025[150] - Discussions of recently issued accounting pronouncements are included in Note 1 to the condensed consolidated financial statements[151] Other Information Quantitative and Qualitative Disclosures About Market Risk For the six months ended July 31, 2025, there were no material changes to the market risks faced by the company, with a broader discussion of market risks available in the annual report - For the six months ended July 31, 2025, there were no material changes to the market risks faced by the company[152] - For a broader discussion of the company's market risks, refer to the 'Quantitative and Qualitative Disclosures About Market Risk' section in the company's annual report[152] Controls and Procedures As of July 31, 2025, management assessed the disclosure controls and procedures as effective, providing reasonable assurance that information is timely recorded, processed, summarized, and reported, with no material changes to internal control over financial reporting during the quarter - As of July 31, 2025, the company's Chief Executive Officer and Chief Financial Officer assessed the disclosure controls and procedures as effective, providing reasonable assurance that information is timely recorded, processed, summarized, and reported[153] - There were no material changes to internal control over financial reporting during the fiscal quarter ended July 31, 2025[154] Legal Proceedings As of July 31, 2025, the company is involved in ongoing legal proceedings as detailed in Note 9 to the condensed consolidated financial statements, and management believes that, based on available information, no current claims or lawsuits will have a material impact on the consolidated financial statements - As of July 31, 2025, the company is involved in ongoing legal proceedings, as detailed in Note 9 to the condensed consolidated financial statements[155] - Management believes that, based on available information, no current claims or lawsuits will have a material impact on the consolidated financial statements[155] Risk Factors There were no material changes to the risk factors disclosed in the company's annual report - There were no material changes to the risk factors disclosed in the company's annual report[156] Unregistered Sales of Equity Securities and Use of Proceeds The Board of Directors has authorized management to repurchase common stock under a stock repurchase program, with the total authorized amount increased to $150 million USD, and for the three months ended July 31, 2025, the company repurchased 52,308 shares of common stock and accepted 95,977 shares for exercise price and/or tax withholding related to stock option exercises and share-based payment settlements - The Board of Directors has increased the total authorized amount for the stock repurchase program by $25 million USD to $150 million USD[157] Common Stock Repurchases (Three Months Ended July 31, 2025) | Period | Total Number of Shares Repurchased | Average Price Paid Per Share (USD) | Total Number of Shares Repurchased as Part of Publicly Announced Plans | Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Plans or Programs (in thousands USD) | | :-------------- | :--------------------------------- | :--------------------------------- | :--------------------------------------------------------------------- | :---------------------------------------------------------------------------- | | May 1-31, 2025 | 94 | 144.00 | — | 40,647 | | June 1-30, 2025 | 49,318 | 235.43 | — | 40,647 | | July 1-31, 2025 | 2,896 | 226.19 | 1,000 | 40,447 | | Total | 52,308 | | 1,000 | | - For the three months ended July 31, 2025, the company accepted 95,977 shares of common stock for exercise price and/or tax withholding related to stock option exercises and share-based payment settlements[158] Exhibits This report includes exhibits such as the company's articles of incorporation, bylaws, certifications from the Chief Executive Officer and Chief Financial Officer, and XBRL data files - Exhibits include the company's articles of incorporation, bylaws, certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act Rule 13a-14(c) and 18 U.S.C. Section 1350, and XBRL data files[160]