September 2019 Safe Harbor Statement All statements in this - - PowerPoint PPT Presentation

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September 2019

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Safe Harbor Statement

All statements in this presentation that are not historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may be identified by words such as “believe,” “intend,” “expect,” “may,” “could,” “would,” “will,” “should,” “plan,” “project,” “contemplate,” “anticipate,” or similar statements. Because these statements reflect the current views of Argan, Inc. (“Argan” or the “Company”) concerning future events, these forward-looking statements are subject to risks and

• uncertainties. Argan’s actual results could differ materially from those anticipated

in these forward-looking statements as a result of many factors, which are described under the caption “Risk Factors” in Argan’s most recent Form 10-K filed with the Securities and Exchange Commission. Argan undertakes no obligation to update publicly any forward-looking statements contained in this presentation.

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Company Overview

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NYSE: AGX

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Holding company for four 100% controlled subsidiaries

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Market capitalization (9/11/19) – $0.7 billion

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Quarterly dividend $0.25 per share

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Strong balance sheet at 7/31/19

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No leverage

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Cash & short-term investments - $234 million

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Net liquidity - $294 million

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Project backlog (7/31/19) – $1.4 billion

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Received Full Notice to Proceed on the Guernsey Power Station project in August 2019.

* Attributable to the Stockholders of AGX

(in millions)

Quarter Ended July 31, 2019 Trailing Twelve Months (TTM) Revenues $ 63 $317 Net Income* 1 2 EBITDA* (4) (13)

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Business Overview – Holding Company

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Gemma Power Systems (“GPS”) provides engineering, procurement and construction (“EPC”) services to power generation and renewable energy markets

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The Roberts Company (“TRC”) is principally an industrial steel fabricator and field services provider serving both light and heavy industrial organizations

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Atlantic Projects Company (“APC”) provides turbine, boiler, large rotating equipment installation, commissioning and

• utage services to the global power industry

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SMC Infrastructure Solutions (“SMC”) provides telecommunications data infrastructure services TTM Revenues by Subsidiary

27.2%* 3.4% 32.3% 37.1%

* Historically, GPS has generated the majority of the Company’s revenues.

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Revenues*

$142 $279 $227 $383 $413 $675 $893 $482 $317 $- $100 $200 $300 $400 $500 $600 $700 $800 $900 2012 2013 2014 2015 2016 2017 2018 2019 2020**

$ Millions

* As expected, with several major projects completed in the year ended January 31, 2019, our revenues and several other financial metrics were lower in the first two quarters of Fiscal 2020 compared to prior years. ** TTM through July 31, 2019. NOTE: Except where noted otherwise, the years presented throughout this presentation relate to Argan’s fiscal year-end, which is January 31.

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Net Income*

$9.3 $23.3 $40.1 $30.4 $36.3 $70.3 $72.0 $52.0 $2.0 $- $10 $20 $30 $40 $50 $60 $70 $80 2012 2013 2014 2015 2016 2017 2018 2019 2020**

$ Millions

* Attributable to the Stockholders of AGX. ** TTM through July 31, 2019. The dotted line reflects net income excluding the effect of the TeesREP job and related impairment loss. $39.1

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Project Backlog

$1.0 $0.4 $1.1 $1.1 $1.4 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4

2017 2018 2019 4/30/2019 7/31/2019

$ Billions

As of January 31,

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Book Value

$5.87 $7.16 $9.50 $11.29 $11.58 $16.08 $20.34 $22.83 $20.68 $0.50 $1.10 $1.85 $2.55 $3.25 $4.25 $5.25 $6.25 $6.75 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 2012 2013 2014 2015 2016 2017 2018 2019 2020

Tangible Book Value* & Cumulative Dividends Per Share

Tangible Book Value Cumulative Dividends

*Tangible Book Value = Total Stockholders’ Equity – Goodwill – Other Intangible Assets

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Overview of Gemma Power Systems

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History – acquired by Argan in December 2006 for $33 million and has generated cumulative EBITDA since acquisition of over $630 million, or ~19x cash on cash and an IRR of ~75%

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Business – engineering, procurement and construction of natural gas- fired and alternative power energy facilities throughout the United States

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Track Record – Installed and under-contract capacity for 15 gigawatts

• f mostly domestic power-generating capacity including 65 gas

turbines comprising 40 projects

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Safety Record – 10 million safe hours achieved over the past seven

• years. Gemma’s OSHA recordable injury rate is significantly below

the national average

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Employees – Over 20% of staff employees are veterans

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Customers – Independent power producers and utilities

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Extensive Project Portfolio

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Power facilities – combined cycle solution

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Guernsey Power Station

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Caithness Moxie Freedom Generating Plant

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CPV Towantic Energy Center

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NTE Kings Mountain Energy Center

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NTE Middletown Energy Center

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Panda Liberty Energy Project

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Panda Patriot Energy Project

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Colusa Generating Station

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Roseville Energy Park

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Hines PB-2 Power Project

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Rowan County Power Project

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Effingham County Power Project

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Richmond County Phase II Power Project

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Dighton Power Project

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Pollution solutions

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Brayton Point Power Station

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La Rosita SCR Project

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Biomass power facilities

• Woodville, Texas

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Solar facilities

• Canton, MA
• Carver, MA
• Beaumont Solar

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Power facilities – simple cycle solution

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Exelon West Medway II Facility

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CPV Sentinel Energy Project

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A.L. Pierce Re-powering Project

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Vandolah Power Project

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DeSoto County Power Project

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Indigo Energy Facility

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Larkspur Energy Facility

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Richmond County Phase I Power

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Monroe Power Project

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Richland Peaking Project

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Rocky Road Unit 4 Project

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Broad River Energy Center

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Middletown, CT Project

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Process facilities – biodiesel

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Renewable BioFuels Port Neches

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Galena Park

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Green Earth Fuels Houston LLC

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Process facilities – ethanol

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Carleton Ethanol Facility

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Wind Facilities

• LaSalle County, Illinois
• Vantage, Washington
• Henry County, Illinois
• Ebensburg, Pennsylvania

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Construction Services Peer Group

Source: Stifel - Engineering, Construction and Infrastructure Newsletter (9/3/2019)

Stock 12 Month LTM LTM Return Price Total Market Debt/ LTM Gross EBITDA

• n Avg.

Ticker

8/30/2019

Return Cap Equity Revenue Margin Margin Equity AGX $41.31 % 5.4 % $645.8 0.0 X $390.3 11.0 % 2.5 % 4.8% FLR 17.67 (68.7) 2,472.5 0.8 17,746.2 NEG NEG NEG GVA 28.44 (36.9) 1,332.1 0.4 3,357.3 7.2 2.1 NEG JEC 88.86 22.8 12,040.4 0.2 16,741.7 18.4 6.4 5.9 KBR KBR, Inc. 25.52 22.6 3,612.5 0.8 5,370.0 9.1 7.1 11.0 MDR 4.72 (75.7) 857.8 5.4 8,710.0 7.2 3.2 NEG ORN 4.14 (51.1) 122.3 0.8 533.4 2.2 NEG NEG TPC 9.99 (50.2) 502.3 0.7 4,390.2 10.4 5.8 NEG PRIM 19.54 (21.1) 996.2 1.0 3,238.1 10.6 7.3 14.2 TSX: SNC 16.41 (68.7) 2,880.8 4.6 9,772.9 1.0 1.2 NEG STRL 11.19 (22.9) 296.2 0.5 1,034.5 10.1 4.4 14.4 Mean (31.3)% 1.4x 8.7% 4.5% 10.1% NEG: Negative Sterling Construction Co. Inc. Company Name Argan, Inc. Fluor Corporation Granite Construction Incorporated Jacobs Engineering Group Inc. McDermott International Inc. Orion Group Holdings, Inc. Tutor Perini Corporation Primoris Services Corporation SNC-Lavalin Group Inc.

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Corporate Data

Websites NYSE Listing Common: AGX Investor Relations Investor Relations 301-315-0027 info@arganinc.com Argan, Inc. www.arganinc.com Gemma Power Systems www.gemmapower.com The Roberts Company www.robertscompany.com Atlantic Projects Company www.atlanticprojects.com SMC Infrastructure Solutions www.smcinc.biz Corporate Headquarters Argan, Inc. One Church Street, Suite 201 Rockville, Maryland 20850 301-315-0027

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Appendix Consolidated Income Statements - Quarter

(in thousands except per share amounts)

Revenues $ 63,059 $ 49,544 $ 87,658 $ 116,459 $ 136,670 Cost of revenues 60,094 70,570 80,912 86,927 105,962 Gross Profit 2,965 (21,026) 6,746 29,532 30,708 Gross Profit % 4.7%

• 42.4%

7.7% 25.4% 22.5% Selling, general and administrative expenses 10,038 9,588 9,548 11,147 10,378 (Loss) Income from operations (7,073) (32,686) (4,293) 18,385 20,330 Other income, net 1,642 2,252 1,860 1,429 2,928 (Loss) Income before income taxes (5,431) (30,434) (2,433) 19,814 23,258 Income tax (benefit) expense (6,411) (521) (142) (12,560) 6,314 Net Income (Loss) 980 (29,913) (2,291) 32,374 16,944 Net loss attributable to noncontrolling interests (174) (113) (84) (60) (28) Net Income (Loss) attributable to the stockholders of AGX $ 1,154 $ (29,800) $ (2,207) $ 32,434 $ 16,972 EPS attributable to the stockholders of Argan, Inc. Basic $ 0.07 $ (1.91) $ (0.14) $ 2.08 $ 1.09 Diluted $ 0.07 $ (1.91) $ (0.14) $ 2.07 $ 1.08 Weighted average number of shares outstanding Basic 15,633 15,583 15,573 15,569 15,568 Diluted 15,757 15,583 15,573 15,702 15,673 Cash dividends per share $ 0.25 $ 0.25 $ 0.25 $ 0.25 $ 0.25 31-Oct-18 31-Jul-18 31-Jul-19 Three Months Ended 30-Apr-19 31-Jan-19

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Appendix Reconciliations to EBITDA – Consolidated

31-Jul-19 30-Apr-19 31-Jan-19 31-Oct-18 31-Jul-18 Net income (loss) $ 980 $ (29,913) $ (2,291) $ 32,374 $ 16,944 Less EBITDA attributable to noncontrolling interests 172 115 84 60 28 Interest expense — — — — 110 Income tax (benefit) expense (6,411) (521) (142) (12,560) 6,314 Depreciation 882 829 957 898 796 Amortization of purchased intangible assets 293 299 253 253 253 EBITDA attributable to the stockholders of Argan, Inc. (4,084) $ (29,191) $ (1,139) $ 21,025 $ 24,445 $ EBITDA per diluted share (0.26) $ (1.87) $ (0.07) $ 1.34 $ 1.56 $ Three Months Ended

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Appendix

Consolidated Balance Sheets – Assets

(dollars in thousands)

July 31, 2019 January 31, 2019 ASSETS CURRENT ASSETS Cash and cash equivalents $ 170,710 $ 164,318 Short-term investments 62,914 132,213 Accounts receivable, net 45,989 36,174 Contract assets 51,742 58,357 Other current assets 21,782 25,286 TOTAL CURRENT ASSETS 353,137 416,348 Property, plant and equipment, net 20,903 19,778 Goodwill 30,766 32,838 Other purchased intangible assets, net 5,545 6,137 Rights-of-use assets 1,043 — Deferred taxes 7,979 1,257 Other assets 351 290 TOTAL ASSETS $ 419,724 $ 476,648

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Appendix

Consolidated Balance Sheets – Liabilities and Equity

(dollars in thousands)

July 31, 2019 January 31, 2019 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable $ 26,028 $ 39,870 Accrued expenses 30,928 33,097 Contract liabilities 1,758 8,349 TOTAL CURRENT LIABILITIES 58,714 81,316 Lease liabilities 616 — Deferred taxes 1,325 960 TOTAL LIABILITIES 60,655 82,276 STOCKHOLDERS’ EQUITY Common stock 2,346 2,337 Additional paid-in capital 147,445 144,961 Retained earnings 211,167 247,616 Accumulated other comprehensive (loss) income (1,406) (346) TOTAL STOCKHOLDERS’ EQUITY 359,552 394,568 Non-controlling interests (483) (196) TOTAL EQUITY 359,069 394,372 TOTAL LIABILITIES AND EQUITY $ 419,724 $ 476,648