David Watson
About David H. Watson
David H. Watson, age 49, is President and Chief Executive Officer of Argan, Inc. (AGX) and has served on the Board since August 2022. He previously served as Senior Vice President, Chief Financial Officer, Treasurer, and Corporate Secretary from October 2015 to August 2022, and held CFO/Treasurer roles at Gladstone Investment (NASDAQ: GAIN) and Gladstone Capital (NASDAQ: GLAD) before joining Argan . Under Watson’s leadership in FY2025, Argan delivered revenues of $874M, EBITDA of $114M, diluted EPS of $6.15, cash and investments of $525M, net liquidity of $301M, and backlog of $1.36B, with no debt . Total shareholder return was strong: five-year cumulative TSR reached 380.49 vs. S&P 500 at 202.59, and one-year TSR of ~120% ranked in the 92nd percentile versus peers .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Argan, Inc. | Senior Vice President, CFO, Treasurer, Corporate Secretary | Oct 2015 – Aug 2022 | Built finance, treasury, and controls; established relationships with subsidiary leaders; led risk management and capital allocation . |
| Gladstone Investment (GAIN) | Chief Financial Officer | 2010 – 2015 | Led finance for publicly traded BDC; also served as Treasurer (2012–2015), enhancing capital markets access . |
| Gladstone Capital (GLAD) | Chief Financial Officer | 2011 – 2013 | CFO/Treasurer roles supported portfolio financing and reporting rigor . |
Board Governance, Committees, and Dual-Role Implications
- Board service: Director since 2022; serves on the Executive Committee and Responsible Business Committee .
- Independence: Watson is management (non-independent); Chairman is independent (William F. Leimkuhler). Seven of nine directors are independent .
- Leadership structure: CEO presides at Board meetings per bylaws; lead independent director role eliminated after Chairman appointment. CEO reports to the Chairman multiple times monthly, mitigating combined CEO/Director influence .
- Committee oversight: Audit, Compensation, and Nominating/Corporate Governance committees are fully independent .
- Attendance: All current Board members attended Board and committee meetings in FY2025 (except one director; Watson not cited as absent) .
Implications: CEO sits on the Board and Executive Committee, but independent Chair and fully independent key committees provide counterweights to potential independence concerns .
Fixed Compensation
| Metric | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Base Salary ($) | $305,444 | $400,000 | $437,500 |
| Target Bonus (% of Base) | 100% (per employment agreement) | 100% | 100% |
| Actual Bonus Paid ($) | $330,000 | $575,000 | $675,000 |
Notes:
- New employment agreement (effective Sept 16, 2024): base salary set at $500,000 and auto-renews annually .
Performance Compensation
| Metric | Award Type | Target | Threshold | Maximum | Payout Formula | Measurement Period / Vesting |
|---|---|---|---|---|---|---|
| Total Shareholder Return vs. Peer Group | PRSU (2025 grants: 3,000 target shares) | Rank 6–7 among 13 peers = 100% payout | Rank below top 7 = 0% | Top 4 ranks = 200% payout | Sliding scale by peer rank with dividend adjustments | 3-year measurement; vests at year 3 |
| Diluted EPS Compound Growth | EPRSU (2025 grants: 7,500 target shares) | 20–25% compound growth over 3 years = 100% | < 7.5% = 0% | > 40% = 200% | Sliding scale; includes dividend adjustments | 3-year measurement; issuable at year 3 |
| Time-Based Service | TRSU (2025 grants: 4,000 shares) | n/a | n/a | n/a | Ratable vesting; dividend adjustments | 3-year ratable vesting |
| Stock Options | NQSO (2025 grants: 2,000 options; $148.72 strike) | n/a | n/a | n/a | Value realized only if stock price > strike | 3-year ratable vesting; 10-year term |
FY2025 grant fair values: PRSU ~$394,680; EPRSU ~$557,700; TRSU ~$594,880; NQSO ~$86,501 .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership (Jan 31, 2025) | 52,958 shares; includes 1,667 vested options; <1% of shares outstanding (13,634,214) . |
| Stock Ownership Guideline (CEO) | 3x base salary ($1.5M); policy counts RSUs at 25% of target but excludes options . |
| Guideline Compliance | 82,178 “shares held” for guideline purposes; valued at $11,012,640 as of Apr 22, 2025; Compliant . |
| Anti-Pledging / Anti-Hedging | No pledging; no hedging, short selling, or derivative trading allowed . |
| Clawback Policy | Adopted Oct 2023; recovers incentive comp upon material restatement due to noncompliance . |
Outstanding unvested awards (Jan 31, 2025):
- TRSUs: 21,334 shares .
- PRSUs: up to 38,000 shares (maximum, pre-dividends) .
- EPRSUs: up to 36,000 shares (maximum, pre-dividends) .
Stock options (as of Jan 31, 2025):
| Grant | Exercisable | Unexercisable | Strike | Expiration |
|---|---|---|---|---|
| Apr 18, 2022 | – | 3,334 | $36.78 | Apr 18, 2032 |
| Apr 17, 2023 | 1,667 | 3,333 | $39.47 | Apr 17, 2033 |
| Apr 16, 2024 | – | 3,000 | $61.22 | Apr 16, 2034 |
Insider selling pressure assessment:
- FY2025 option exercises: 150,666 shares; value realized $6,877,336; 11,219 shares vested from RSUs with $679,345 value realized; a portion withheld for taxes/exercise price. Large exercises suggest monetization but not necessarily open-market sales .
Employment Terms
| Provision | Details |
|---|---|
| Current Agreement | Effective Sept 16, 2024; term through Sept 15, 2027; auto-renew for successive one-year periods . |
| Base Salary / Target Bonus | $500,000 base; target bonus 100% of base; bonus cap 200% of base per policy . |
| Severance (No Cause / Good Reason) | 12 months salary continuation and health/benefits; excludes 401(k)/qualified plans . |
| Change-in-Control | If terminated within 24 months post-CIC: lump sum equal to 12x monthly salary . |
| Non-Compete / Non-Solicit | Two years post-employment; confidentiality provisions apply . |
| Potential Payments upon Termination (as of Jan 31, 2025) | Salary: $500,000; cash incentive: $675,000; health benefits: $31,489; total: $1,206,489 . |
Compensation Structure Analysis
- Mix shift to RSUs and performance-based equity (PRSUs, EPRSUs) with longer 3-year vesting; reduced reliance on options since 2018 .
- Annual bonus caps implemented (200% of base) after shareholder feedback; no single-trigger CIC provisions in new agreements .
- Policies upgraded: stock ownership guidelines, anti-pledging, anti-hedging, clawback; no option repricing allowed under the 2020 Stock Plan .
Performance & Track Record
- FY2025 highlights: Revenues +52.5% YoY, EBITDA +121% YoY, backlog +~80% YoY to ~$1.4B; SG&A fell to 6.0% of revenue; net income $85M; EPS $6.15 .
- Balance sheet: $525M cash/investments; net liquidity $301M; no debt; shareholder returns via dividends and buybacks ($19.8M in FY2025) .
- TSR: 1-year ~120% (peer 29% avg; 92nd percentile), 3-year 57% (75th percentile), 5-year 34% (58th percentile) .
- Notable operational wins: EPC awards including 1.2GW Texas power plant, Illinois solar + storage projects; diversified backlog across gas, biofuel, solar .
Say-on-Pay & Shareholder Feedback
- Say-on-pay approval: 94% in prior year; annual say-on-pay maintained .
- Outreach: Ongoing engagement with top 25 shareholders (~62% outstanding); actions taken include leadership transitions, contract renewals (Watson, Collins), dividend increases, Investor Day at NYSE .
Compensation Peer Group (FY2025)
Expro Group Holdings N.V.; Granite Construction; Gulf Island Fabrication; Integrated Electrical Services; Limbach Holdings; Matrix Service; MYR Group; NPK International; Orion Marine Group; Primoris Services; Sterling Construction; Team, Inc. .
Director Compensation (Context)
Non-employee directors received base $40,000 (raised to $50,000 effective Feb 1, 2025), committee fees, and equity awards; Chairman received additional $65,000 . Watson, as CEO, is not a non-employee director.
Risk Indicators & Red Flags
- Pledging/hedging prohibited; clawback adopted; no option repricing; anti-single-trigger CIC policy for new agreements .
- Prior low say-on-pay (2017) addressed via program changes; recent approvals remain strong .
- No debt and strong liquidity reduce financial stress risk; however, large FY2025 option exercises may indicate personal liquidity events; not necessarily open-market selling .
Equity Ownership & Awards Detail Tables
Beneficial Ownership and Guideline Compliance
| Metric | Value |
|---|---|
| Beneficial Shares | 52,958; includes 1,667 vested options; <1% ownership . |
| Guideline Requirement | CEO: 3x salary ($1.5M) . |
| Shares Counted for Guideline | 82,178 “held” (includes 25% of target RSUs) . |
| Guideline Value | $11,012,640 as of Apr 22, 2025; compliant . |
Outstanding Unvested Awards (Jan 31, 2025)
| Award Type | Shares / Max Shares | Citation |
|---|---|---|
| TRSUs | 21,334 | |
| PRSUs | 38,000 (max) | |
| EPRSUs | 36,000 (max) |
Option Grants (Jan 31, 2025)
| Grant Date | Exercisable | Unexercisable | Strike | Expiration | Citation |
|---|---|---|---|---|---|
| Apr 18, 2022 | – | 3,334 | $36.78 | Apr 18, 2032 | |
| Apr 17, 2023 | 1,667 | 3,333 | $39.47 | Apr 17, 2033 | |
| Apr 16, 2024 | – | 3,000 | $61.22 | Apr 16, 2034 |
Exercises and Vests (FY2025)
| Event | Shares | Value Realized |
|---|---|---|
| Options Exercised | 150,666 | $6,877,336 |
| RSUs Vested | 11,219 | $679,345 |
Investment Implications
- Alignment: Strong compliance with stock ownership guidelines and increased use of performance-based RSUs (TSR/EPS) align Watson’s incentives with shareholder returns and EPS growth .
- Retention risk: Three-year employment agreement (auto-renew), 12-month severance, two-year non-compete, and robust equity/long-term incentives reduce near-term departure risk .
- Trading signals: Significant FY2025 option exercises created realized value; while not definitive of selling, large monetizations can introduce episodic supply; monitor Form 4 filings for ongoing activity .
- Governance: CEO’s Board role is balanced by an independent Chair and independent oversight committees; mitigates dual-role concerns, though CEO presides at Board meetings per bylaws .
- Performance momentum: Backlog growth, diversified projects, and strong TSR suggest continued operational and financial execution under Watson’s leadership; equity awards keyed to EPS and TSR should reinforce this trajectory .