Argan(AGX) - 2022 Q3 - Quarterly Report

Financial Performance - Consolidated revenues for the three months ended October 31, 2021 were $124.5 million, a decrease of $2.8 million, or 2.3%, from $127.3 million for the same period in 2020[108]. - Consolidated revenues for the nine-month period ended October 31, 2021 were $383.8 million, a 39.6% improvement from $274.2 million for the same period in 2020[112]. - Net income attributable to stockholders for the three months ended October 31, 2021 was $12.4 million, or $0.78 per diluted share, up from $9.5 million, or $0.60 per diluted share, in the prior year[111]. - For the nine months ended October 31, 2021, net income attributable to stockholders was $36.0 million, or $2.25 per diluted share, compared to $14.3 million, or $0.91 per diluted share for the same period in 2020, a 152.7% increase[168]. - Net income for the nine months ended October 31, 2021, was reported at $36,029 million, a significant increase from $14,260 million in the same period of 2020, representing a growth of approximately 153%[198]. Revenue Segmentation - Revenues from the power industry services segment decreased by $10.1 million to $99.6 million, representing 80.0% of consolidated revenues for the three months ended October 31, 2021, down from 86.2% in the prior year[109]. - The industrial services business reported revenues of $21.4 million, an increase of $5.7 million, or 36.1%, from $15.7 million in the same period last year[109]. - The power industry services segment revenues increased by $68.3 million to $295.7 million, representing 77.1% of consolidated revenues for the nine months ended October 31, 2021[112]. - Telecommunications infrastructure services revenues increased by 84.7%, or $1.6 million, to $3.5 million for the three months ended October 31, 2021, due to increased project activities[160]. - Telecommunications Infrastructure Services revenue increased to $9.9 million for the nine-month period ended October 31, 2021, up 80.9% from $5.4 million in the same period of 2020[173]. Profitability Metrics - Consolidated gross profit for the three months ended October 31, 2021 was $26.1 million, or 21.0% of revenues, compared to $20.3 million, or 16.0%, for the same period in 2020[110]. - Gross profit for the nine-month period ended October 31, 2021 was approximately $77.5 million, representing a gross profit margin of 20.2%, up from 14.5% in the same period of 2020[175][176]. - Selling, general, and administrative expenses increased by 23.3% to $11.6 million for the three months ended October 31, 2021, primarily due to increased personnel and business development costs[164]. - Selling, General and Administrative expenses increased by 10.4% to $31.8 million for the nine-month period ended October 31, 2021, compared to $28.8 million in the previous year[177]. Project Backlog and Contracts - The project backlog for the power industry services segment was approximately $0.8 billion as of October 31, 2021, unchanged from January 31, 2021[119]. - The APC subsidiary's project backlog increased from $13.8 million at January 31, 2021 to $124.2 million as of October 31, 2021[124]. - GPS entered into an EPC services contract with CPV Maple Hill Solar, LLC to construct a solar facility expected to generate approximately 100 MW of electrical power, with completion scheduled for the second half of calendar year 2022[123]. - GPS has entered into an EPC services contract for a 1,740 MW natural gas-fired power plant in Virginia, but construction commencement is uncertain due to financing and fuel supply challenges[127]. - A 625 MW power plant project in West Virginia has seen development activities discontinued, and its value may be removed from the project backlog if milestones are not achieved[128]. Market and Economic Factors - Delays in new business awards and project construction are attributed to factors such as uncertainty in capital markets and political opposition to fossil-fuel projects[129]. - Natural gas prices have risen due to increased LNG exports, leading to a 27% increase in coal-fired generation in the US during early 2021 compared to the same period in 2020[135]. - The EIA projects that coal-fired generation will decline to 11% of the electricity mix by 2050, while natural gas is expected to supply 36% of net electricity generation[134]. - Renewable energy sources are projected to provide over 42% of electricity generation by 2050, with significant growth driven by public concerns about climate change[138]. - The Irish government prioritizes the development of new conventional generation, including gas-fired plants, to ensure electricity supply security while supporting renewable growth[148]. Cash Flow and Financial Position - Cash and cash equivalents as of October 31, 2021 were $391.6 million, with working capital increasing by $30.5 million from January 31, 2021[181]. - Net cash provided by operating activities for the nine months ended October 31, 2021 was $41.7 million, with a net income adjusted for non-cash items totaling $45.6 million[182]. - The company invested approximately $4.1 million in solar energy projects during the nine months ended October 31, 2021, expected to yield a 20% return over six years[193]. - As of October 31, 2021, the value of unsatisfied bonded performance obligations was approximately $272.4 million[191]. - The company has a maximum borrowing amount of $50 million available until May 31, 2024, with interest at 30-day LIBOR plus 1.6%[205]. Risk Factors - The company is exposed to fluctuations in commodity prices, including steel, copper, concrete, and fuel, which may impact its results of operations due to the fixed-price nature of many contracts[208]. - Global supply chain disruptions have posed challenges, potentially affecting project owners' confidence and expected revenue levels until the situation stabilizes[209]. - The company has not entered into derivative financial instruments for trading or speculation, minimizing exposure to market risk[205]. - The transition from LIBOR to alternative reference rates is anticipated to have minimal effects on the company's financial arrangements[205]. - The company has made no material changes in its critical accounting policies during the nine months ended October 31, 2021[202].