Sign in
AI

ARGAN INC (AGX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered the second-highest quarter in company history: revenue $257.0M, gross margin 17.2%, net income $28.0M, and diluted EPS $2.00; EBITDA rose to $37.5M, driven by strong execution and positive project closeouts .
  • Power Industry Services led with ~83% of revenue and an 18.3% segment gross margin, while Industrial Construction grew 8%; backlog was $0.8B at quarter-end, with $478M in renewables, and management expects backlog to be “significantly in excess of $1B” by early next year as multiple gas-fired projects start in the next ~8 months .
  • Balance sheet strength remained a differentiator: cash, cash equivalents and investments of $506.3M, net liquidity $281.0M, no debt; quarterly dividend was raised 25% to $0.375 in September 2024 (Q3) .
  • Estimate comparisons unavailable: S&P Global consensus data could not be retrieved at time of writing due to API limits; result-to-consensus analysis is not provided [GetEstimates error].

What Went Well and What Went Wrong

What Went Well

  • Strong mix and execution: consolidated gross margin expanded to 17.2% on “changing mix of projects, strong execution and certain positive job closeouts,” with segment-level outperformance in Power (18.3% GM) .
  • Strategic diversification: backlog of $0.8B included $478M of renewable projects, demonstrating energy-agnostic capabilities and diversified backlog mix; 92% of backlog supports zero/low emissions .
  • Capital returns and balance sheet: quarter’s cash/investments reached $506.3M, net liquidity $281.0M, no debt; dividend increased 25% to $0.375 per share reflecting confidence in pipeline and performance .

“Argan is uniquely positioned to facilitate the construction of any type of power facility… we’re well suited for any and all projects that bolster energy generation.” — David Watson (CEO)

What Went Wrong

  • Sequential backlog decline: backlog fell from $1.035B at 7/31 to $0.8B at 10/31 due to revenue conversion and timing of new starts; management expects multi-quarter recovery with gas projects beginning over the next ~8 months .
  • SG&A increased: Q3 SG&A rose to $14.0M from $11.4M YoY (though down as % of revenue); Industrial (TRC) backlog expected to dip near term before rebounding in FY2026 .
  • Legacy project drag easing but still noted: prior-year Q3 gross profit was negatively impacted by Kilroot ($10.7M hit), underscoring remaining dispute tail-end risks even as FY2025 comparables benefited from its absence .

Financial Results

Quarterly Trend (Q1 → Q3 FY2025)

MetricQ1 FY2025 (Apr 30, 2024)Q2 FY2025 (Jul 31, 2024)Q3 FY2025 (Oct 31, 2024)
Revenue ($USD)$157,682,000 $227,015,000 $257,008,000
Gross Profit ($USD)$17,944,000 $31,105,000 $44,327,000
Gross Margin %11.4% 13.7% 17.2%
Net Income ($USD)$7,882,000 $18,198,000 $28,010,000
Diluted EPS ($USD)$0.58 $1.31 $2.00
EBITDA ($USD)$11,890,000 $24,842,000 $37,509,000
Cash, Cash Equivalents & Investments ($USD)$416,356,000 $484,682,000 $506,282,000
Net Liquidity ($USD)$246,728,000 $259,827,000 $280,977,000
Backlog ($USD)$824,000,000 $1,035,000,000 $800,000,000

Year-over-Year (Q3 FY2025 vs Q3 FY2024)

MetricQ3 FY2024 (Oct 31, 2023)Q3 FY2025 (Oct 31, 2024)YoY Δ
Revenue ($USD)$163,755,000 $257,008,000 +57%
Gross Profit ($USD)$19,235,000 $44,327,000 +$25.092M
Gross Margin %11.7% 17.2% +550 bps
Net Income ($USD)$5,464,000 $28,010,000 +$22.546M
Diluted EPS ($USD)$0.40 $2.00 +$1.60
EBITDA ($USD)$12,180,000 $37,509,000 +$25.329M

Segment Breakdown (Q3 FY2025)

SegmentRevenue Contribution (%)Gross Margin (%)Notes
Power Industry Services~83% 18.3% 405MW Illinois solar, Trumbull CCGT, LNG turbines project activity
Industrial Construction (TRC)~16% N/ARevenue $41.3M; near-term backlog soft before rebounding FY2026
Telecommunications Infrastructure~1% N/ASmallest segment; outside/inside-premises services

KPIs and Balance Sheet

KPIQ2 FY2025 (Jul 31, 2024)Q3 FY2025 (Oct 31, 2024)
Cash, Cash Equivalents & Investments ($USD)$484,682,000 $506,282,000
Net Liquidity ($USD)$259,827,000 $280,977,000
Backlog ($USD)$1,035,000,000 $800,000,000
Other Income ($USD)$5,604,000 (Q2) $6,646,000 (Q3)
Investment Income (within Other) ($USD)~$4,800,000 (Q2) ~$4,800,000 (Q3)
Dividend per Share ($)$0.30 (Q2) $0.375 (Q3)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Project BacklogEarly CY2026Backlog $1.035B at 7/31/24; expect multiple gas projects under contract over next 5–10 months Expect backlog “significantly in excess of $1B” by early next year; start multiple gas-fired jobs over next ~8 months Raised outlook; accelerated timeline
Quarterly DividendQ3 FY2025 onward$0.30 per share $0.375 per share (25% increase) Raised
Segment Outlook (TRC)Near-termRecord TTM revenue/EBITDA; backlog converting to revenue Expect TRC revenues/backlog to dip next couple quarters, then rebound in FY2026 (Q1–Q2) Tempered near-term; medium-term constructive

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 FY2025)Trend
Energy demand drivers (AI, data centers, reshoring, EV charging)Emphasized as core demand tailwinds Reinforced as primary growth narrative; U.S. data centers and manufacturing reshoring cited Strengthening tailwinds
Gas vs Renewables mixGas core; renewables growing; 91% zero/low-carbon backlog (Q2) 92% zero/low-carbon backlog; $478M renewable backlog; expect multiple gas plant starts Balanced, diversified, gas momentum building
Supply chain constraints & interconnectionTurbine availability/queue, interconnect agreements as headwinds; behind-the-meter trend Continued awareness; pipeline active; LOI and development milestones progressing Headwinds manageable; developers adapting
TRC (Industrial) pipelineRecord quarter; Southeast footprint; potential short-term dip Near-term backlog softness, rebound expected FY2026 Temporary dip; constructive medium-term
Project execution updatesTrumbull ramping; 3 IL solar + battery NTPs; 405MW solar LNTP (Q1–Q2) Trumbull at peak construction; LNG turbines install; 405MW IL solar full NTP Execution milestones achieved

Management Commentary

  • “Our third quarter revenues and earnings… reflect strong execution across all of our businesses… and EBITDA of $37.5 million.” — David Watson, CEO .
  • “We are encouraged by the strengthening pipeline… driven by data centers, reshoring… and increased EV charger utilization.” — CEO .
  • “Backlog… includes $478 million of renewable projects, reflecting the market appeal of our energy agnostic capabilities.” — CEO .
  • “We stand ready to help our customers build [both] traditional gas-fired and renewable power facilities.” — CEO .
  • “Gross margin… reflects the changing mix of projects, strong execution and certain positive job closeouts.” — Company statement .

Q&A Highlights

  • Margin drivers and sustainability: Management attributed 18.3% Power segment margin to execution, project mix, domestic shift, and closeouts; expects consolidated GM in the 14–16% range or slightly higher over next quarters .
  • Capacity to scale gas projects: Company can handle “10+” projects blended across gas and renewables; adding skilled labor and keeping specialized teams intact .
  • Backlog path and timing: Backlog expected to exceed $1B by early next year; multiple gas-fired jobs to start over the next ~8 months; timing driven by customer development milestones .
  • TRC outlook: Revenues/backlog expected to dip near term before rebounding in FY2026 as awards cycle through; pipeline strong in Southeast U.S. .
  • Solar vs gas backlog burn: Solar jobs tend to burn more evenly and within ~1 year for smaller projects; larger solar jobs last longer; gas revenue follows a bell curve .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 (EPS and revenue) were not retrievable due to an API request limit error at time of writing; therefore, estimate comparison and beat/miss analysis is unavailable [GetEstimates error].

Key Takeaways for Investors

  • Quality of earnings improved: gross margin expanded to 17.2% and EBITDA reached $37.5M on execution and closeouts; margin trajectory guided to mid-teens range near term .
  • Backlog poised to re-accelerate: despite a sequential drop to $0.8B, management expects backlog “significantly in excess of $1B” by early next year on multiple gas project starts — a potential stock catalyst as awards convert .
  • Diversified energy exposure: $478M renewable backlog and leadership in gas-fired EPC provide optionality amid rising U.S. power demand (data centers, reshoring, EV charging) .
  • Balance sheet support and capital returns: $506.3M cash/investments, $281.0M net liquidity, no debt; dividend lifted to $0.375, signaling confidence and offering yield support .
  • Segment watch: TRC revenue/backlog likely soft near term before a FY2026 rebound; monitor award cadence and Southeast industrial demand signals .
  • Project milestones: Trumbull CCGT at peak construction; 405MW IL solar NTP; LNG turbines in Louisiana — execution narrative sustained across assets .
  • Risk considerations: turbine availability and interconnection agreements remain industry headwinds; company/industry adapting via behind-the-meter developments .

Appendix: Additional Data Points

  • Other income was $6.6M in Q3 (incl. ~$4.8M investment income), aiding net income; similar investment income trend seen in Q2 .
  • Prior-year Q3 gross profit was depressed by a ~$10.7M Kilroot loss; FY2025 comparables benefited as legacy issues abated .
Note: All quantitative data and statements are sourced from Argan, Inc. Q3 FY2025 press release, 8-K, and earnings call transcript, and prior quarters’ materials as cited above.