Good evening, ladies and gentlemen, and welcome to the Argan, Inc. Earnings Release Conference Call for the Third Fiscal Quarter ended October 31, 2024. This call is being recorded. [Operator Instructions] 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.

Thank you. Good evening, and welcome to our conference call to discuss Argan's results for the third fiscal quarter ended October 31, 2024. On the call today, we have David Watson, Chief Executive Officer; and Josh Baugher, Chief Financial Officer. I will take a moment to read the safe harbor statements. 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 that could cause or contribute to such material differences have been described in this afternoon's press release and in Argan's filings with the U.S. 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 third quarter fiscal 2025 financial results and filed its corresponding Form 10-Q report with the Securities and Exchange Commission. Okay. With that out of the way, I will turn the call over to David Watson, CEO of Argan. 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 Josh Baugher, our CFO, will go over our financial results for the third fiscal quarter ended October 31, 2024. Then we'll open up the call for a brief Q&A. Our third quarter results were the second highest in company history, and I'm very proud of our team's accomplishment. We are looking forward to continued success in the coming years. We delivered strong execution in the quarter, as evidenced by consolidated revenue growth of 57% to $257 million, with gross margin of 17.2%, substantially improved net income of $28 million, or $2 per diluted share, and EBITDA of $37.5 million. Our Power Services segment had a particularly strong quarter, as evidenced by revenue growth of 75% to $212 million, with a gross margin of 18.3%, demonstrating our ability to drive enhanced profitability on our renewable as well as on our natural gas projects. TRC has delivered a solid quarter with revenue growth of 8%, and our Telecommunications segment recorded revenue performance consistent with last year's third quarter. Project backlog of $0.8 billion at the close of the quarter represents an increase of 6% compared to backlog at the beginning of the year, and includes $478 million of renewable projects, reflecting the market appeal of our energy-agnostic capabilities and our ability to diversify our backlog mix. Additionally, our balance sheet reflected $506 million of cash and investments, net liquidity of $281 million, and no debt at October 31, 2024. During the quarter, our Board of Directors approved a 25% increase in our quarterly dividend amount to $0.375 per common share, or $1.50 annually, from the previous quarter dividend amount of $0.30 per common share. This increase comes just 1…

Thanks, David, and good afternoon, everyone. On Slide 11, we present our consolidated statements of earnings for the third quarter of fiscal 2025. Third quarter revenues increased 57% to $257 million, reflecting particularly strong performance in our Power Industry Services segment and solid growth in our Industrial Construction segment as compared to the third quarter of fiscal 2024, as David detailed earlier. Project-wise, the increase in revenues primarily related to increased quarterly construction activities for the Midwest Solar and Battery Projects, the Trumbull Energy Center, the 405-megawatt Midwest solar project, and Louisiana LNG facility. For the 3-month period ended October 31, 2024, Argan reported consolidated gross profit of approximately $44.3 million, which represented a gross margin of approximately 17.2% and reflected contributions for all 3 reportable business segments. Consolidated gross profit for the comparative quarter ended October 31, 2023, was $19.2 million, representing a gross margin of 11.7%. The increased gross profit and improved gross margin percentage for the current year quarter reflects the changing mix of projects, including increased U.S.-based revenues, strong execution, and certain positive job closeouts. During the prior year third quarter, gross profit was negatively impacted by a loss on the Kilroot project, which reduced gross profit by approximately $10.7 million. Selling, general, and administrative expenses of $14 million for the third quarter of fiscal 2025 increased as compared to SG&A of $11.4 million for the comparable prior year period. But these expenses decreased as a percentage of revenues to 5.4% for the third quarter of fiscal 2025, as compared to 6.9% of the third quarter of fiscal 2024. Net income for the third quarter of this fiscal year was $28 million, or $2 per diluted share, compared to $5.5 million, or $0.40 per diluted share, for the last year's comparable quarter. EBITDA, earnings before interest,…

Thanks, Josh. Turning to Slide 12. Our consolidated project backlog was $0.8 billion at October 31, 2024, representing growth of 6% compared to the prior fiscal year-end. As expected, backlog is down slightly sequentially from the $1 billion recorded at July 31, 2024, due to the conversion of backlog into revenue and the timing of new project contracts and starts. Nonetheless, as I've said in the past, while the project pipeline continues to strengthen, it takes some time to win and negotiate the contracts for the large and complex projects we compete for. Our backlog includes a healthy group of longer-term, fully committed projects in both the Power Industry Services and Industrial Services segments and, as I mentioned earlier, approximately $478 million of the backlog is comprised of renewable projects. On Slide 13, we show certain major projects currently included in our project backlog. Earlier, I discussed the Trumbull Energy Center in Ohio, and we continue to make progress at the 3 solar plus battery projects in Illinois, which have full notices to proceed. Additionally, we have the full notice to proceed on a utility-scale solar field in Illinois that will provide 405 megawatts of electrical power. On this slide, you'll also see our full notice to proceed on a subcontract to install 590-megawatt gas turbines to provide dedicated power to an LNG facility in Louisiana. We've included here a 1.2-gigawatt natural gas project in Texas that is currently under letter of intent, and we've listed 2 separate water treatment plant projects being performed by TRC. Over in Ireland, the 3 ESB FlexGen Peaker power plants and the Shannonbridge thermal plants are complete. There is undoubtedly growing urgency around standing up the infrastructure we need to meet the forecasted growth in energy demand, and as a result, the industry is…

[Operator Instructions] The first question today is coming from Chris Moore from CJS Securities.

That was an impressive quarter. That's for sure. All right. Maybe we can start with the gross margins. The overall gross margin was probably 300 basis points higher than I was thinking about. Power Industry Services, 18.3%. It's early for Trumbull to be getting excess margins. So can you break down a little bit further where that 18.3% in Power Industry came from?

Yes. In short, Chris, strong execution across the board, certain positive project closeouts, the project mix and the shift towards domestic revenues, and economies of scale. You've heard me say this before, but we are, first and foremost, focused on project success. And success for our customers is the number one way to get repeat business and future gross margins. So based on our -- historically, I've told you we fluctuate between 13% and 20% based on our 10/31 project backlog, which is a significantly larger portion of T&M and renewable work than we normally have, gross margins are likely to be more in line with the average of the last 2 quarters we just completed, meaning in that 14% to 16% range or slightly higher over the next couple of quarters. But this quarter was really strong, and it really came down to strong execution.

You have previously discussed being able to handle perhaps 4 to 5 good-sized natural gas projects simultaneously at different stages of construction. Just what's the limiting factor? Is it skilled labor? And how much of a crossover is the labor pool between the natural gas projects and your renewable projects?

Yes. We've been making headway by adding head count to the business in anticipation of this natural gas buildout, in addition to maintaining our renewable footprint and continuing to execute really strongly there. Is there some crossover between gas and renewable? The answer is yes, but primarily, we're trying to keep the renewable teams together and the gas teams together, but we do have certain labor that has the skillset to do both, including project managers. So the number of projects that we can do at any given time holistically is in probably that 10-plus range, if you blend the gas and renewables. And of course, it depends on the size of projects as well.

Backlog $800 million, down about $200 million. You had indicated that likely after Q2. Any expectations -- I know you're looking for some big projects in calendar '25. Expectations for Q4, probably down a little bit further before coming back in calendar '25? Or just any thoughts there?

Yes. If you recall, last quarter, I gave some guidance of 5 to 10 months as the general time line. We're now sitting here in the beginning of December and the guidance that I said earlier in my prepared remarks was we're expecting to start multiple gas-fired jobs over the course of the next 8 months and expect our backlog to be significantly in excess of $1 billion by early next year and beyond. So, as you can note, I've dropped the lower end of the floor. So we're working really hard, but you got to remember, we don't control the start of these new projects, but we really remain bullish as to our ability to convert a number of these opportunities into jobs again over the course of the next 8 months.

[Operator Instructions] The next question is coming from Rob Brown from Lake Street Capital.

Congratulations on a strong quarter. You talked a little bit about the pipeline over the next 8 months, but how has the activity level changed since you last updated things? Is it the same projects you're working on, and timing is always hard to predict? Or are there new things coming in and is activity increasing in terms of bidding and work and such?

There continues to be new opportunities that come in, and the opportunities are throughout the United States with a large nexus in Texas, as you can imagine. A lot of the jobs that we have been tracking and/or negotiating continue to progress through all their development hurdles. And so we remain really excited about what things look like for us over the coming 8 months and then looking out further. So I would say that the -- I guess, in short, the level of activity remains extremely elevated.

Okay. And then in the Texas gas plant, particularly that you have an LOI for, what's the timing of that? And is that a 2025 -- one of the 2025 opportunities?

Yes. And I guess as a reminder to all the callers, if there is a new job, we will always put out either a press release and/or an 8-K because we want to provide updates since these jobs are meaningful. So as for that Texas job that we have the letter of intent on, again, they continue to meet their developmental milestones, and we have been working closely with them to help them with that and hope to have an executed EPC contract and start at least doing some work on that job over the next couple of months.

And then maybe on the backlog burn rate on the solar projects versus the gas projects, what's your average or typical quarterly, or if you have so much backlog in solar, how long does it take to burn off versus a gas job?

Yes. That's a tough question to answer because we have different sized solar jobs, and they tend to burn at different rates. Typically, though, the more small-to medium-sized solar jobs, and small solar jobs for us are still relatively meaningful, they're going to typically be completed within a year, a little bit longer than that. But for our larger solar jobs, they can last a couple of years, if not a little bit more. So yes, I think that their consistency of revenue -- backlog converting into revenue is a little bit more even versus the more peakishness of a gas job, since gas jobs really reflect a bell curve of revenue. Solar jobs are a little bit more consistent.

And then maybe on the industrial business a little bit. I know that will jump around each quarter. But how is that looking in terms of the pipeline in the industrial side? And can that continue to grow into, call it, $200 million annual revenue business if the environment supports that direction?

Yes. They've generated $41 million of revenues this past quarter, and they've generated $175 million of revenues on a TTM basis. But to what you're pointing out, their backlog has dropped down to about $66 million or so. And based on current visibility, I do expect revenues to come down some for the next couple of quarters for this segment, and that backlog may continue to reduce some before rebounding in Q1 and Q2 of fiscal 2026. And that's really based on the expected timing of future project awards. I just had a long call with my team there this morning, and they're super excited about the number of opportunities that they're seeing and have already bid right now. And so we do expect for there to be a meaningful rebound there.

With no other questions at this time, I would now like to hand the call back to David Watson for closing remarks.

Well, thank you all for participating in today's call, and I hope everyone had a great Thanksgiving. We wish everyone a happy and healthy holiday season and look forward to speaking with you again when we report our fourth quarter fiscal 2025 results. Have a great evening.

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.