Good evening, ladies and gentlemen, and welcome to the Argan, Inc. Earnings Release Conference Call for the First Quarter of Fiscal 2026 ended April 30, 2025. This call is being recorded. All participants have been placed on a listen-only mode. Following management's remarks, the call will be opened 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. Go ahead, ma'am. Thank you.

Good evening, and welcome to our conference call to discuss Argan's results for the first quarter ended April 30, 2025. On the call today, we have David Watson, Chief Executive Officer, and Joshua Baugher, Chief Financial Officer. I'll 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 first quarter fiscal 2026 financial results and filed its corresponding Form 10-Q reports with the Securities and Exchange Commission. Alright. With that out of the way, I'll 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 Joshua Baugher, our CFO, will go over our financial results for the first quarter ended April 30, 2025. Then we'll open up the call for a brief Q&A. We delivered a strong start to fiscal 2026 in the first quarter with consolidated revenue growth of 23% to $193.7 million and a gross margin of 19%, led by continued momentum in our power industry services segment. We also achieved enhanced profitability as demonstrated by net income of approximately $23 million or $1.60 per diluted share, up $1.02 year over year, and EBITDA of $30.3 million or 15.6% as a percent of revenues. Additionally, we reported a record backlog of $1.9 billion as of April 30, 2025. Our backlog reflects our receipt of full notice to proceed on our project with Sand O'Lakes Energy Company or SLEC for a 1.2-gigawatt ultra-efficient combined cycle natural gas-fired plant in Texas. Our project pipeline is robust and reflects both the need for new energy resources as a large portion of natural gas-fired plants reach the end of operational life, and the urgency around building new infrastructure to meet the unprecedented growth in power consumption. Power demand has reached its highest level in two decades and is expected to increase further with the development of AI data centers, the onshoring of complex manufacturing, and the growing adoption of electric vehicles that need charging. Today's energy demand environment has created a substantial pipeline of project opportunities, and we are seeing heightened demand for our expertise and capabilities, particularly as they relate to the construction of complex combined cycle natural gas facilities. We're energized about the demand environment, which we believe will present attractive project…

Our industrial construction services segment had a solid quarter although as we expected, due to the timing of certain projects, revenue decreased to $29 million, as compared to revenue of $44 million in the first quarter of fiscal 2025. Industrial construction services contributed 15% of first-quarter consolidated revenues and pretax book income of approximately $2 million. This segment primarily provides solutions for industrial construction projects with a concentration in agriculture, petrochemical, pulp and paper, water, and power. There is soft demand for the segment's capabilities as companies onshore or expand their US manufacturing operations in the Southeast region of the US. The industrial construction services segment has a large footprint, so they are well situated in a high-growth region for their focus industries. One last comment on the industrial segment. I want to take a moment to congratulate Sean Terrell, who has served as president of TRC since 2023, as he was recently appointed to the additional role of Chief Executive Officer. This change came as Bobby Feister Jr. stepped down to take a reduced role as part of a long-standing succession plan. We thank Bobby for his many contributions to TRC's growth and progress, as well as for building a culture of operational excellence and teamwork at TRC. Finally, we have our telecommunications infrastructure services group, our smallest segment, which contributed 2% of first-quarter revenues. The telecommunications segment provides outside construction services for the utility and telecommunications sectors, as well as inside the premises wiring services, primarily for federal government locations and military installations requiring high-level security clearance. We continue to see growing attention around the increase in energy demand driven by the widespread electrification of virtually every sector of the economy. For the first time in decades, this rising demand is coinciding with the aging and retirement of…

Thanks, David, and good evening, everyone. On slide ten, we present our consolidated first-quarter revenues, which increased 23% to $193.7 million, primarily reflecting strong revenue growth in our power industry services segment as compared to the first quarter of fiscal 2025. The growth in our project count and backlog has resulted in increased project activity and revenue compared to the same quarter last year. In the first quarter, several newly awarded gas-fired power plant projects were in the early stages, while our more advanced projects saw continued activity and contributed meaningfully to our quarterly revenues. For the three-month period ended April 30, 2025, Argan reported consolidated gross profit of approximately $36.9 million or a gross margin of 19%. Consolidated gross profit for the comparative quarter last year was $17.9 million, representing a gross margin of 11.4%. The increased gross profit and the improved gross margin for the recently ended quarter reflect the changing mix of projects and contract types. In addition, the first quarter in the prior fiscal year was negatively impacted by certain project charges, which reduced gross profit by approximately $2.6 million. Gross margins for our power industry services, industrial construction services, and telecommunications infrastructure services segments were 20.6%, 10.8%, and 18% respectively for the first quarter of fiscal 2026, as compared to 10.2%, 13.3%, and 22.9% respectively, in the first quarter of fiscal 2025. Selling, general, and administrative expense of $12.5 million for the first quarter of fiscal 2026 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 6.5% in the first quarter of fiscal 2026 as compared to 7.2% in last year's first quarter. Net income for the first quarter of fiscal 2026 was $22.6 million or $1.60 per diluted share, compared to $7.9 million or $0.58 per diluted share for last year's comparable quarter. EBITDA, earnings before interest, taxes, depreciation, and amortization, for the quarter ended April 30, 2025, increased to $30.3 million, compared to $11.9 million for the same period last year. EBITDA as a percent of revenue increased to 15.6% for the first quarter of this fiscal year compared to 7.5% for the first quarter of last fiscal year. With that, I'll turn the call back to David.

Thanks, Josh. We further strengthened our balance sheet during the first quarter. At April 30, 2025, we had approximately $546 million in cash, cash equivalents, and investments generating meaningful investment yields. Our net liquidity was $315 million, and we had no debt. Stockholder's equity was $364 million at April 30, 2025. This liquidity bridge demonstrates that our business model ordinarily requires a low level of capital expenditures. Our net liquidity of $315 million at April 30, 2025, has increased $14 million compared with net liquidity at January 31, 2025. During the first quarter, we returned $18 million of capital to our shareholders. We have a disciplined capital allocation strategy, which focuses on our core commitments. First, we invest in our people to ensure we are appropriately prepared to staff and execute our projects. Second, the company pays a quarterly dividend, which we increased to $0.375 per common share in September 2024, creating an annual dividend run rate of $1.50 per share. Of note, that increase came just a year after we raised our dividend to $0.30 per share in September of 2023. Together, these two increases represent an aggregate 50% increase in our annual dividend run rate in less than two years, reflecting the strength of our business. Third, since November of 2021, when we began our share buyback program, we have returned a total of approximately $109.4 million to shareholders. Additionally, in April, our board increased the authorization of the share repurchase program to $150 million. Finally, we will continue to evaluate and consider M&A opportunities that could be additive or complementary to our current capabilities or enhance our geographic footprint. Our company is dedicated to driving long-term value creation for shareholders. Our pipeline is stronger than it has ever been, and since 2008, we have increased our tangible…

At this time, we will be conducting a question and answer session. Our first question comes from Rob Brown with Lake Street Capital. Please proceed.

Good afternoon. Congratulations on a good quarter. Thank you. First question on the pipeline, visibility at this point. You had the Sand O'Lakes project awarded. What does the pipeline look like for the rest of the year, and could you give some color on the size and potential there?

Sure, Rob. The pipeline remains strong, and we're very bullish on being able to continue to add to the backlog. Currently, as you can see from our record backlog of $1.9 billion at April 30, we added several jobs during the quarter, including the Sand O'Lakes job you just mentioned. But in the short to medium term, we expect to add several power industrial jobs over the course of the next six months, which should put us significantly over $2 billion in backlog later this year. But as you know, it's important to reemphasize that we often don't control the start times in new projects, so it's tough for us to give an exact estimate. But in the long term, we believe demand will remain strong for the next decade and beyond, and this is underscored by the fact that the OEMs are starting to fill 2030 gas turbine spots as they are primarily sold out of earlier years.

Okay. Great. And I think you just said the backlog could get significantly over $2 billion. What sort of potential does that backlog have given your capacity and given what you see in the project pipeline? Is there a percent of how much backlog you can get through?

Well, I mean, that's the guidance, right? It's significantly over $2 billion. As you know, we have project capacity in that ten-plus range between renewable and gas jobs. And so we've just started several new jobs. Right? We just started the 700-megawatt power plant that we announced in December. We just started Tarbert in Sand O'Lakes, and we're continuing to work on the Trumbull job, and we expect to add several more to the mix. So that should absolutely result in a backlog that gets us significantly above $2 billion.

Okay. Got it. Great. Thanks. And then on the industrial business, I think this quarter was sort of bottoming. What's the outlook there? How does the pipeline look, and what's the trend on revenue in that segment?

Absolutely. You're right. As we previously discussed, we expected a slight contraction in this past quarter, which there was, but we're still seeing strong interest in TRS with increased onshoring of US manufacturing being a major contributor. TR's backlog increased to $91 million, and our confidence in this segment is really strong. Based on current visibility, Rob, we expect revenues to increase meaningfully over the next several quarters.

Great. Thank you. I'll turn it over. Once again, if you have a question or a comment, the next question comes from Chris Moore with CJS Securities. Please proceed.

Hey. Good afternoon. Thanks for taking a couple. Maybe we could start with gross margins. They've been above expectations the last two quarters. Nineteen percent in Q1. Can you quantify or even estimate the amount of, you know, kind of excess margin in there from projects like Trumbull?

You know, it's another Chris, so great to hear from you. It's another great solid gross profit quarter. And as you mentioned, the second one in a row, they basically reflect continued strong execution across the business as well as the continued changing mix of projects and contract types. I think, you know, as we're in a competitive but good market right now, and we expect to exceed last year's margin profile as we move through the year. So it's expected to be pretty strong.

Alright. Fair enough. Maybe a follow-up on one of Rob's questions. So I think from a backlog perspective, you know, given there is a finite ability in terms of, you know, how many jobs you can do. Is there, you know, an optimal backlog level if most of it is natural gas?

As you know, our backlog bounces around some given that, you know, overnight, we could add a $600 million, $700 million, $500 million contract. Right? And, of course, as we continue to execute on these jobs, revenue gets burned off and backlog gets burned off. So, you know, over the course of the year, though it could bounce around some. And we're really excited about the market we're in right now. The opportunities that we're seeing, not just for the near and midterm, but frankly for the long term and multiple years out.

Got it. In terms of just, you know, kind of what gets going first, even though Sandia was booked later, is that likely to escalate a little bit quicker in fiscal 2026?

All of our gas jobs are over a three to four-year period, and as the cadence of the job, it takes time for revenues to ramp up. I mean, we obviously want to achieve successful jobs for our customers, and we will push to get as much done as soon as we can on each and every project. But the revenue cadence of a lot of these new jobs and expected additional jobs would do take time to ramp up. And we do expect, you know, revenues to increase overall revenues to increase from Q1 over the course of the year.

Got it. And maybe my last question to follow-up on that. So, I mean, historically, the time frame was two and a half to three years. Now we talk more like three to four years. Is that a permanent change? You know, is that regulatory? Is that supply chain driven? Or is it fair to assume that, you know, it's not going back? It's gonna stay in that range.

I'd like to say it's a little bit of all the above, but I think it's primarily supply chain driven. At the end of the day, you know, if that gets straightened out, there is obviously, there will be a goal of speed to market for our customers, and so we clearly want to be able to build these things quicker and timely. And that's what we continue to do. But it is currently a three to four-year timeline typically, though smaller jobs could be shorter.

Fair enough. Appreciate it. I will leave it there.

Thanks, Chris.

We've reached the end of the question and answer session, and I will now turn the call over to David Watson for closing remarks.

Thank you all for participating in today's call. And as a reminder, please don't forget to vote your shares for our upcoming annual meeting of stockholders on June 17th, and I look forward to seeing some folks there. As always, we look forward to speaking with you again when we report our second quarter fiscal 2026 results. Have a great evening, everyone.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.