Argan(US:AGX)2023-06-08 23:02Financial Data and Key Metrics Changes - First quarter 2024 revenues increased by 4% to $104 million compared to the same period in fiscal 2023 [13] - Gross margins declined to 13.7% from 19.7% in the first quarter of fiscal 2023, primarily due to changes in revenue mix [14] - Net income for the first quarter of 2024 was $2.1 million or $0.16 per diluted share, down from $7 million or $0.50 per diluted share in the first quarter of fiscal 2023 [16] - EBITDA decreased to $4 million from $11 million in the first quarter of fiscal 2023, attributed to revenue mix changes and a fraud-related loss [16] Business Segment Data and Key Metrics Changes - Power industry services accounted for 68% of first quarter revenues, focusing on various power facility constructions [9] - Industrial Field and Fabrication Services contributed 29% of revenues, with a strong performance noted [10] - Telecommunications Infrastructure services, the smallest segment, contributed 3% of revenues [11] Market Data and Key Metrics Changes - The backlog stood at over $0.8 billion as of April 30, 2023, consistent with year-end fiscal 2023 [16] - 81% of the current backlog supports lower carbon emissions projects, indicating a shift towards cleaner energy [12] Company Strategy and Development Direction - The company aims to leverage its core competencies to capitalize on emerging market opportunities and maintain disciplined risk management [22] - Focus on strengthening its position as a partner in constructing new low and net-zero emission power generation facilities [22] - The company is positioned to benefit from the transition from coal-fired power generation to renewable energy sources [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth driven by the demand for diverse energy sources and supportive federal legislation [7] - The company anticipates adding new large projects in the current year, despite potential short-term fluctuations in backlog [25] - Management highlighted the importance of project success for future business and margin improvement [29] Other Important Information - The company repurchased approximately 93,000 shares for about $3.7 million during the first quarter [9] - A one-time pre-tax charge of approximately $3.2 million related to fraudulent wire transfers was recorded [15] - The balance sheet remains strong with $317 million in cash and liquid investments and no debt [19] Q&A Session Summary Question: Development of the pipeline of new projects - Management is excited about the pipeline and expects to add new large projects, though backlog may temporarily decrease as current projects convert to revenue [25] Question: Performance of The Roberts industrial fab business - The Roberts Company has seen a 180% growth in backlog to over $150 million, with expectations for continued growth despite potential recession impacts [27] Question: Margin activity in the quarter - Margins fluctuate due to project mix and risk profiles, with expectations for full-year margins to improve beyond the reported 13.7% [29] Question: Status of the Guernsey project - Completion involves several closing tasks, and additional revenue is expected as the project wraps up [33] Question: Timeline for peak activity at Trumbull - Trumbull is expected to ramp up throughout the year, with peak activity likely occurring in fiscal year 2025 [38] Question: Impact of the Mountain Valley Pipeline on Argan - Permitting reforms related to the Mountain Valley Pipeline are expected to indirectly benefit Argan by expediting project development [42] Question: Cash flow generation expectations for fiscal 2024 - Cash flow generation is difficult to model due to project timing, but positive cash flow is anticipated as new projects start [45]