Good evening, ladies and gentlemen, and welcome to the Argan, Inc. Earnings Release Conference Call for the First Fiscal Quarter Ended April 30th, 2024. This call is being recorded. All participants have been placed on listen-only mode. Following management's remarks, the call will be open for questions. There is a slide presentation that accompanies today's remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, Jennifer Belodeau, of IMS Investor Relations. Please go ahead, Ma'am.

Thank you. Good evening, and welcome to our conference call to discuss Argan's results for the first fiscal quarter ended April 30, 2024. On the call today we have David Watson, Chief Executive Officer; and Hank Deily, Chief Financial Officer. I will take a moment to read the Safe Harbor statement. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include but are not limited to projections or statements of future goals and targets regarding the company's revenues and profits. These statements are subject to known and unknown factors and risks. The company's actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements and some of the factors and risks could cause or contribute to such material differences have been described in this afternoon's press release and in Argan's filings with the US Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today and we do not undertake any duty to update such forward-looking statements. Earlier this afternoon, the company issued a press release announcing its first quarter fiscal 2025 financial results and filed its corresponding Form 10-Q report with the Securities and Exchange Commission. All right, with that out of the way, I will turn the call over to David Watson, CEO of Argan. Please go ahead, David.

Thanks, Jennifer, and thank you, everyone for joining today. I'll start by reviewing some of the highlights of our operations and activities and Hank Deily, our CFO will go over our financial results for the first fiscal quarter ended April 30, 2024. Then we'll open up the call for a brief Q&A. Fiscal 2025 is off to a strong start, as demonstrated by a 52% increase in consolidated revenues to $157.7 million, improved profitability and EBITDA of $11.9 million. Our growth was driven by significantly strong performance from both Gemma and The Roberts Company, or TRC. We were especially pleased to deliver this profit growth despite incurring a loss of $2.6 million in the quarter associated with continued challenges at APC's Kilroot project in Northern Ireland and I'll provide an update on that project in a moment. Project backlog, at the close of the first quarter was $824 million, which includes approximately $300 million in renewable projects, first quarter 2025 backlog reflects both sequential growth compared to backlog of $757 million at the end of the fourth quarter of fiscal 2024 and year-over-year growth compared to backlog of $806 million in the first quarter of fiscal 2024. Additionally, at April 30, 2024, our balance sheet reflected $416 million of cash in investments, net liquidity of $247 million and no debt. Before we move on to the operational overview for the first quarter, I'll provide an update on some developments with APC's Kilroot project. As we've discussed on the last several earnings calls, Kilroot encountered significant operational and contractual challenges as we move towards completion, including supply chain delays, material changes to the project and work stoppages related to COVID, among others. During the first quarter, APC turned over two power units, one of which has achieved first fire. Following the…

Thanks David and good afternoon everyone. On Slide 10, we present our consolidated statements of earnings for the first quarter of fiscal 2025. First quarter revenues increased 52% to $158 million, reflecting an increase in revenues from all of our operating segments as compared to the first quarter of fiscal 2024. In the first quarter, our Power Industry Services segment achieved a 57% increase in revenues, primarily related to US based projects, including the Trumbull Energy Center and the Midwest solar and battery projects as well as projects overseas, including the Shannonbridge Power Project in Ireland. In our Industrial Construction Services segment, TRC achieved revenue growth of 44%, driven by a substantial increase in field services construction activity and supporting steel fabrication work. For the three month period ended April 30, 2024, Argan reported consolidated gross profit of approximately $17.9 million, which represented a gross profit percentage of approximately 11.4% and reflected positive contributions from all three reportable business segments. Consolidated gross profit for the comparative quarter ended April 30, 2023 was $14.2 million, representing a gross profit percentage of 13.7%. The decline in the gross profit percentage at our Power Industry Services segment during the current period was primarily due to the unfavorable gross profit adjustment on the Kilroot project in the amount of $2.6 million, but also due to the change in the mix of projects, including increased time and materials and renewable energy projects. Selling, general and administrative expenses of $11.4 million, for the first quarter of fiscal 2025, increased slightly as compared to SG&A of $10.6 million for the comparable prior year period, but these expenses decreased as a percentage of revenues for the corresponding periods from 10.2% to 7.2%. Net income for the first quarter of fiscal 2025 was $7.9 million or $0.58 per diluted share, compared to $2.1 million or $0.16 per diluted share for last year's comparable quarter. EBITDA or earnings before interest, taxes, depreciation and amortization for the quarter ended April 30, 2024 was $11.9 million, compared to $3.6 million reported for the same period of last year. Before turning the call back over to David, last but not least, I'd like to mention that other income for the three months ended April 30, 2024 included investment income and the approximate pre-tax amounts of $4.5 million compared to $2.4 million in the same period of fiscal 2024. With that, I'll turn the call back to David.

Thanks, Hank. Turning to Slide 11, our consolidated project backlog of over $0.8 billion at April 30, 2024 increased approximately 9% as compared to year end fiscal 2024. Our backlog includes a healthy group of longer term, fully committed projects in both the Power Industry Services, Industrial Services segments and as mentioned earlier, approximately $318 million of the backlog is comprised of renewable projects. On Slide 12, we show certain major projects currently included in our project backlog. I highlighted earlier our activity at the Trumbull Energy Center in Ohio and that all the three solar plus battery projects in Illinois have received full notices to proceed. Also included in our project backlog are two separate water treatment plant projects being performed by TRC over in Ireland three ESB FlexGen Peaker Power Plants and the Shannonbridge thermal plants are both in the final stages of construction and are undergoing commissioning. We are certainly seeing an increase in projects coming to market, related to the growing urgency to the power industry to ensure we have the appropriate facilities and infrastructure to meet the forecasted growth in energy demand. For example, in April 2024, Gemma executed a limited notice to proceed with a customer to construct a utility scale solar field, in Illinois, that will provide 405 megawatts of electrical power and will use pre-existing transmission and utility infrastructure from a nearby retired coal power plant. This project represents the largest solar project to date for us and the continued expansion of our renewable business. In addition, subsequent to quarter end, we have a letter of intent and expect to enter into a subcontract with a full notice to proceed eminently to install 590 megawatt gas turbines for an LNG facility in Louisiana. This project, led by Gemma, will be a collaboration…

Certainly, at this time, we'll be conducting a question-and-answer session. [Operator Instructions] Your first question today is coming from Chris Moore from CJS Securities. Chris, your line is live.

Hey, good afternoon, guys. Thanks for taking a couple of questions.

Sure. Thanks, Chris.

Congrats on another nice quarter. I know you're limited Kilroot, sounds like you're hopeful that there is $25 million in potential recovery out there. You took the $2.6 million charge in Q1. Are there likely or possible additional charges coming?

Sure. That's a good question. And before I answer that, I did want to quickly note to folks, I want to apologize if the folks are trying to get onto our website right now. It appears that we're having a surge in traffic and my team is actively trying to resolve the issues as soon as possible. But back to your question, Chris, on potential more losses on Kilroot. I mean we have recorded $12.7 million loss on the project, which is significant and disappointing. We consider all things and make it our best efforts and make our best efforts to get the accounting right based on information available. I mean, as we disclose additionally, after quarter end, the customer pulled our letter of credit in the amount of $9.2 million, which we believe was inappropriate. APC has significant unresolved contract variations and extension of time claims, among others, related to this project in amounts exceeding $25 million and this is expected to increase materially. And the project owner has asserted counterclaims that we dispute. Again, we'll continue to pursue all of our rights under the contract and we will do so through legal means if possible. So to answer your question, I guess, there is a possibility of downside, but there's also a possibility of upside.

Fair enough, I'll leave that one there. Looks like Trumbull is starting to make good progress. Can you talk a little bit about the cadence of the project. I mean, do you expect that over the balance of the current fiscal year, you'll be approaching kind of peak quarterly revenue or just kind of how you see this ramping?

We do. This project remains right on schedule. We're excited about it and executing well on it and we do expect to be in peak activity throughout the year and as it gets into startup commissioning later next year.

Got it. Looks like the project pipeline remains in good shape. The 405 megawatt solar project that you have limited notice to proceed. What has to happen to begin construction in fiscal '25 on that?

It's really just a matter of getting the full notice to proceed. I mean the limit notice to proceed has already enabled us to start doing a number of things. All limited notices to proceed are different, some we are already mobilizing, others we're just doing procurement activities. But the goal with the limit notice to proceed is to be able to start executing the project right away for the customer. So that's a project, since it's a renewable project, that we expect to start to be actively in a full notice proceed this summer.

Got it. And maybe just the last one for me. You referenced a letter of intent on a -- looks like significant gas project. At the end of Q4, you talked about a gas project, I thought that one was in Texas, this is Louisiana, is this a different project that we're talking about?

It is a different project. The Texas project is -- we're still continuing to work with the customer to get to the finish line on that job and get the EPC contract and the notice to proceed. As you know, the timing of those are always challenging, but I think it's worth noting that there were over 40 gigawatts of gas fired power units that submitted into the Texas Energy Fund to get low interest loans. So there is a significant appetite and support from Texas, for gas fire projects in the Texas area, as it relates to this other opportunity where we have the letter of intent to part of a subcontract to install 590 megawatt gas turbines within an LNG facility. And we're excited about that project and believe it's a project that has a very quick start and significant ramp somewhat like an emergency job where it's a quick one.

Got it. That's helpful. I will leave it there. I appreciate it.

Sure. Thanks, Chris.

Thank you. [Operator Instructions] The next question is coming from Rob Brown from Lake Street Capital Markets. Rob, your line is live.

Good afternoon.

Good afternoon.

Just wanted to follow-up little bit more on the pipeline of activity. And could you kind of characterize how the pipeline is at this point, how active it is and maybe the changes in the new project pipeline that you've seen over the last six months or so?

Sure. I mean we're thrilled with our pipeline. I mean since January, Rob, we've received three full notices to proceed and one limited notice to proceed on renewable jobs totaling 565 megawatts of solar power and 22 megawatts of battery storage. We do expect to receive a full notice to proceed, as I was speaking with Chris earlier on that subcontract for installing those gas turbines in Louisiana. And based on what we have signed and based on current visibility, we expect to add some additional large projects over the course of the year, which will represent a mix of both renewable and gas. And as you can see, you've already seen a meaningful increase in our renewables relative to gas with $318 million of backlog as of 4/30.

Okay, great. Thank you. And then on the Louisiana project, you talked a little bit about timing. But how would that compare to a traditional gas plant project in terms of the cycle, that revenue flows through your business once it's launched. It sounds like it's going to launch fairly really quickly. But just some color on timing compared to a regular gas line.

Yeah, I mean, it's a totally different project. With our fixed price EPC contracts, we're doing combined cycle projects that are three to three and a half years long and we do that from start to finish and control all aspects of the job that has that bell curve revenue flow similar to Trumbull being at the peak of the bell curve right now. This job is more surgical and is a subcontract. So it's one of those jobs that should be a relatively quick burn over a shorter period of time.

Okay, great. And then on the battery and solar projects that you do. Could you remind us again how those work in terms of, what you flow through your revenue? And how much of that project that you take on, is that a fully EPC project?

Yeah. So some of these projects are full EPC jobs and others are lesser, in some projects, the project owner buys the solar panels, and others, we buy the solar panels. At the end of the day, we're already piling -- putting in piles and bolting solar arrays together on a number of these jobs. And so, from a cash revenue standpoint, they are typically less than a year long. But the 405 megawatt job is going to be much longer than that, just given the sheer size and scope of it. So I don't know if that answered your question or not, Rob.

Yeah, that's what I was getting at. Thank you very much. I'll turn it over.

Thank you. And that does conclude our Q&A session for today. I would like to hand the call back to David Watson for closing remarks.

Well, thank you all for participating in today's call. We look forward to speaking with you again when we report our second fiscal quarter, ending July 31st, 2024. And have a great evening. Thanks, everybody.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.