Argan(US:AGX)2021-06-07 16:00Part I - Financial Information Financial Statements The company presents its unaudited condensed consolidated financial statements for the quarter ended April 30, 2021, showing significant revenue growth, a shift to net income, and strong liquidity Condensed Consolidated Statements of Earnings (Unaudited) | Financial Metric | Three Months Ended April 30, 2021 | Three Months Ended April 30, 2020 | | :--- | :--- | :--- | | Revenues | $126,341 thousand | $60,148 thousand | | Gross Profit | $23,714 thousand | $4,009 thousand | | Income (Loss) from Operations | $13,822 thousand | $(6,335) thousand | | Net Income (Loss) Attributable to Stockholders | $10,766 thousand | $(763) thousand | | Diluted EPS | $0.67 | $(0.05) | Condensed Consolidated Balance Sheet Highlights | Account | April 30, 2021 (Unaudited) | January 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $559,031 thousand | $546,220 thousand | | Total Assets | $617,972 thousand | $602,630 thousand | | Total Current Liabilities | $283,065 thousand | $276,087 thousand | | Total Liabilities | $287,156 thousand | $280,222 thousand | | Total Equity | $330,816 thousand | $322,408 thousand | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended April 30, 2021 | Three Months Ended April 30, 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $17,346 thousand | $40,187 thousand | | Net Cash from Investing Activities | $15,636 thousand | $59,316 thousand | | Net Cash from Financing Activities | $(2,919) thousand | $(3,733) thousand | | Cash and Cash Equivalents, End of Period | $396,675 thousand | $262,927 thousand | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, business segments, revenue recognition, customer concentrations, segment performance, and significant legal and tax matters - The company operates through four main subsidiaries (GPS, TRC, APC, SMC), grouped into three reportable segments21209 - As of April 30, 2021, Remaining Unsatisfied Performance Obligations (RUPO) totaled $478.7 million, with approximately 58% expected to be recognized as revenue by January 31, 202244232 - An ongoing lawsuit with Exelon involves $24.5 million in accounts receivable and contract assets related to a terminated EPC contract, with mediation scheduled for September 20215269240 - The company is under IRS examination for R&D tax credits claimed for FY2016, FY2017, and FY2018, with protests filed for the first two years and a favorable resolution expected90278 Segment Performance for Three Months Ended April 30, 2021 (in thousands) | Segment | Revenues | Gross Profit | Income (Loss) from Operations | | :--- | :--- | :--- | :--- | | Power Services | $97,172 | $18,503 | $13,048 | | Industrial Services | $26,658 | $4,689 | $2,807 | | Telecom Services | $2,511 | $522 | $36 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 110.1% revenue growth driven by Power Industry Services, a $0.7 billion project backlog, market outlook for energy transition, and strong liquidity with $396.7 million cash and a $50 million credit facility Operating Results Consolidated revenues surged 110.1% to $126.3 million, primarily driven by the Guernsey Power Station project, leading to a significant improvement in gross profit margin to 18.8% and a net income of $10.8 million Segment Revenue Comparison (in thousands) | Segment | Q1 2021 Revenue | Q1 2020 Revenue | % Change | | :--- | :--- | :--- | :--- | | Power industry services | $97,172 | $48,612 | 99.9% | | Industrial fabrication and field services | $26,658 | $9,744 | 173.6% | | Telecommunications infrastructure services | $2,511 | $1,792 | 40.1% | | Total Revenues | $126,341 | $60,148 | 110.1% | - The Guernsey Power Station project, reaching peak construction, was the primary driver for improved performance, accounting for 67.8% of consolidated revenues142330 - Gross profit margin significantly improved to 18.8% from 6.7% in the prior-year quarter, which was adversely affected by a $2.7 million loss on the TeesREP project109148297 - The company received a $0.7 million R&D credit payment from the UK government for the TeesREP project, recorded as other income150338 Liquidity and Capital Resources The company's liquidity strengthened with cash and equivalents reaching $396.7 million, supported by $17.3 million in operating cash flow and an extended $50.0 million credit facility - Cash and cash equivalents increased by $30.0 million during the quarter, reaching $396.7 million as of April 30, 2021154342 - The Credit Agreement was extended to May 31, 2024, maintaining a $50.0 million lending commitment at a reduced interest rate of 30-day LIBOR plus 1.6%160348 - As of April 30, 2021, the company had approximately $372 million in unsatisfied bonded performance obligations and $6.6 million in other outstanding bonds163351 EBITDA Reconciliation (in thousands) | Metric | Three Months Ended April 30, 2021 | Three Months Ended April 30, 2020 | | :--- | :--- | :--- | | Net income (loss), as reported | $10,766 | $(793) | | Income tax expense (benefit) | 3,768 | (4,454) | | Depreciation | 882 | 937 | | Amortization of purchased intangible assets | 228 | 225 | | EBITDA | $15,644 | $(4,085) | Market Outlook Management sees a favorable long-term outlook for natural gas-fired power plants for grid reliability, despite headwinds from political and regulatory pressures, and is diversifying into renewable and hydrogen-ready projects - The company is diversifying into renewable energy, evidenced by a new EPC services contract for the Maple Hill Solar facility in Pennsylvania119307 - Headwinds for the gas-fired power plant market include increased environmental activism, regulatory initiatives like RGGI, and the Biden administration's goal for carbon-free electricity by 2035122124125 - The company is positioning for a flexible energy future by contracting for natural gas-fired plants with integrated green hydrogen solution packages, enabling them to eventually burn a mix of natural gas and hydrogen135323 - Recent power crises in California and Texas demonstrate that fossil-fuel generation remains critical for grid reliability132133320 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations, foreign currency translation for its Irish subsidiary, and commodity price volatility, mitigated by early procurement and short-term quotes - The company faces interest rate risk on its cash and investments; a hypothetical 100 basis point increase in rates would increase pre-tax income by approximately $3.0 million annually178180366 - Foreign currency risk stems from translating the financial statements of its subsidiary APC from Euros into US dollars178366 - The company faces commodity price risk for materials like copper, concrete, and steel on its fixed-price contracts, mitigated by including anticipated price changes in bids and early material procurement179367 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of April 30, 2021, with no significant changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of April 30, 2021181369 - No significant changes were made to the company's internal control over financial reporting during the fiscal quarter182370 Part II - Other Information Legal Proceedings The company's primary legal proceeding, a lawsuit between its subsidiary GPS and Exelon, is detailed in Note 8, with other pending claims not expected to materially affect financial statements - The company's main legal proceeding is the lawsuit between its subsidiary GPS and Exelon, detailed in Note 8 of the financial statements183371 Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K have been reported - There have been no material changes to the risk factors disclosed in the company's Annual Report184372 Unregistered Sales of Equity Securities and Use of Proceeds A stock repurchase plan for up to $25.0 million is authorized through June 2022, with no shares repurchased under the program to date - A stock repurchase plan for up to $25.0 million is authorized through June 2022, but no purchases have been made under it to date184372