AGAN, INC. June 2010 June 2011 December 2018 Saf afe Har arbor - - PowerPoint PPT Presentation

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AGAN, INC.

June 2010

June 2011 December 2018

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Saf afe Har arbor S State tatement

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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Compan any Overview

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NYSE: AGX

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Holding company for four 100% controlled subsidiaries

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Market capitalization (12/03/18) – $0.7 billion

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Solid long term annual rate of return 5yr = 17%*

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Quarterly dividend $0.25 per share

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Strong balance sheet at 10/31/18

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No leverage

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Cash & short-term investments - $315 million

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Net liquidity - $340 million

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Project backlog (10/31/18) – $0.4 billion

* As of 12/3/2018 ** Attributable to the Stockholders of AGX (in millions)

Quarter Ended October 31, 2018 Trailing Twelve Months (TTM) Revenues $ 116 $ 564 Net Income** 32 61 EBITDA** 21 64

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Business O Overview – Holding Compan any

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

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

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Atl tlan anti tic Projects ts Compan any (“APC”) provides turbine, boiler, large rotating equipment installation, commissioning and outage services to the global power industry

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SMC Infras astr tructu ture Soluti tions (“SMC”) provides telecommunications data infrastructure services TTM R Revenues b by Subsidiar ary

67.8% 2.1% 15.3% 14.8%

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Revenues*

$142 $279 $227 $383 $413 $675 $893 $564 $- $100 $200 $300 $400 $500 $600 $700 $800 $900 2012 2013 2014 2015 2016 2017 2018 2019**

$ Millions

• With several major projects projected to be completed in the year ending January 31, 2019, we expect our revenues and several other

financial metrics to decrease in Fiscal 2019 compared to Fiscal 2018. ** TTM through October 31, 2018 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 t In Income*

$9.3 $23.3 $40.1 $30.4 $36.3 $70.3 $72.0 $61.3 $- $10 $20 $30 $40 $50 $60 $70 $80 2012 2013 2014 2015 2016 2017 2018 2019**

$ Millions * Attributable to the Stockholders of AGX ** TTM through October 31, 2018

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EBIT ITDA*

$12.9 $37.7 $66.3 $52.2 $62.9 $110.6 $116.1 $64.3 $- $20 $40 $60 $80 $100 $120 2012 2013 2014 2015 2016 2017 2018 2019**

$ Millions

CAGR ≅ 26%

* Attributable to the Stockholders of AGX ** TTM through October 31, 2018

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Book Val alue

$5.87 $7.16 $9.50 $11.29 $11.58 $16.08 $20.34 $23.05 $0.50 $1.10 $1.85 $2.55 $3.25 $4.25 $5.25 $6.00 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 2012 2013 2014 2015 2016 2017 2018 Q32019

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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Finan ancial al Results ts

(in thousands, except per share data)

(1) We define Net Liquidity, or working capital, as our total current assets less our total current liabilities.

For the Quarter Ended: 2018 2017 Change % Change Revenues 116,459 $ 232,945 $ (116,486) $ (50.0)% Cost of revenues 86,927 195,227 (108,300) (55.5) Gross profit 29,532 37,718 (8,186) (21.7) Gross margins 25.4% 16.2% 9.2% 56.8 Net Income attributable to stockholders of the Company 32,434 $ 17,229 $ 15,205 $ 88.3 Diluted per share 2.07 1.09 0.98 89.9 EBITDA attributable to stockholders of the Company 21,025 30,275 (9,250) (30.6) Diluted per share 1.34 1.92 (0.58) (30.2) October 31, January 31, As of: 2018 2018 Change % Change Cash, cash equivalents and short-term investments 314,787 $ 434,015 $ (119,228) $ (27.5)% Net Liquidity (1) 339,616 301,817 37,799 12.5 Project backlog 365,000 379,000 (14,000) (3.7) October 31,

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Finan ancial al Drivers

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As successful execution by GPS on four large gas-fired power plant projects have reached the final stages, revenues saw a decline during the current quarter. Construction activities for these projects have matured from peak levels to the commissioning, start up and final activities. The decline in revenues at GPS was partially offset by strong revenues at APC and TRC during the third quarter.

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Gross profits decreased reflecting primarily the reduction in consolidated revenues between periods. Our gross margin percentage increased quarter over quarter, reflecting favorable project close-out adjustments to the gross profits of certain projects that have reached substantial completion.

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We completed a yearlong detailed review of the activities performed by its engineering staff on major EPC services projects in order to identify and quantify the amounts of research and development credits. Based

• n this review, we booked a $16.5 million tax benefit in the current quarter.

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The Tax Cuts and Jobs Act had a favorable impact on our tax rate, resulting in an estimated annual effective income tax rate of 28% for the current quarter, compared to 37% for the second quarter last year.

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Our balance sheet remains strong. As of October 31, 2018, our cash, cash equivalents and short-term investments totaled $315 million and adjusted net liquidity was $340 million; plus, we had no bank debt.

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Our project backlog was $365 million as of October 31, 2018, slightly down from $379 million at the end of the prior year, mostly due to year-to-date work on existing backlog partially offset by an EPC contract entered into by GPS during the first quarter. As previously reported, we remain encouraged about our project pipeline as GPS has been selected to perform the EPC work for several new power generation facilities with a collective potential project value over $1.5 billion with projected start dates extending through 2019.

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Overview of Gemma a Power S Syste tems

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Histo tory – acquired by Argan in December 2006 for $33 million and has generated cumulative EBITDA since acquisition of over $628 million, or ~19x cash on cash and an IRR in excess 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 nearly 15,000 MW of mostly domestic power-generating capacity including 65 gas turbines comprising 44 projects

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Saf afety ty Record – In seven of the past ten years, Gemma has incurred no lost time injuries and 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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Custo tomers – Independent power producers and utilities

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Significan ant t GPS Current P t Projects ts

(1) Although not GPS projects, our APC subsidiary has two significant projects in the United Kingdom: TeesREP Biomass Power Station is a 299 MW facility and InterGen Spalding OCGT Expansion Project is a 298 MW facility, both scheduled to be completed in 2019. In addition, GPS has signed two EPC contracts for projects which have not yet started. (2) Full Notice to Proceed (“FNTP”) represents the formal notice provided by the project owner instructing us to commence the activities covered by the corresponding EPC contract. (3) Substantial completion achieved. (4) Based on the current schedule for this challenging project, the completion date, which was initially targeted for the end of 2018, may move to early 2019.

Project(1) Location Size of Facility Date FNTP Received(2) Scheduled Completion Caithness Moxie Freedom Generating Station Pennsylvania 1,040 MW Nov-15 2018(3) CPV Towantic Energy Center Connecticut 785 MW Mar-16 2018(3) NTE Middletown Energy Center Ohio 475 MW Oct-15 2018(3) NTE Kings Mountain Energy Center North Carolina 475 MW Mar-16 2018(3) Exelon West Medway II Facility Massachusetts 200 MW Apr-17

(4)

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Exte tensive Project t Portf tfolio

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Power fac aciliti ties – combined cycle soluti tion

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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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Polluti tion soluti tions

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Brayton Point Power Station

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La Rosita SCR Project

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Biomas ass power fac aciliti ties

• Woodville, Texas

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Solar ar fac aciliti ties

• Canton, MA
• Carver, MA
• Beaumont Solar

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Power fac aciliti ties – simple cycle soluti tion

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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 fac aciliti ties – 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 fac aciliti ties – eth than anol

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Carleton Ethanol Facility

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Wind Fac aciliti ties

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

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Constr tructi tion Services Peer Group

Source: Stifel - Engineering, Construction and Infrastructure Newsletter (11/27/2018)

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

• n Avg.

Ticker

11/23/2018

Return Cap Equity Revenue Margin Margin Equity AGX $43.40 %

• 26.0 %

$675.7 0.0 X $680.6 15.3 % 9.8 % 12.8% FLR $40.21

• 13.6

$5,656.3 0.5 $19,392.9 3.7 3.9 7.1 GVA $51.38

• 20.3

$2,409.6 0.3 $3,227.4 11.8 6.9 5.8 JEC $64.69 0.8 $9,203.1 0.4 $14,984.6 18.9 5.8 3.1 KBR KBR, Inc. $17.92

• 1.6

$2,524.5 0.7 $4,520.0 8.8 6.7 40.5 MDR $7.82

• 64.8

$1,412.2 1.0 $5,349.8 15.1 12.7 4.1 ORN $4.28

• 44.9

$124.0 0.4 $583.9 12.0 6.0 4.2 TPC $18.28

• 25.1

$914.5 0.5 $4,464.4 9.6 4.6 6.8 PRIM $23.31

• 12.4

$1,193.6 0.6 $2,640.8 11.0 7.0 11.9 TSX-SNC $36.95

• 10.9

$6,487.4 0.7 $8,075.9 19.3 9.7 6.5 STRL $12.83

• 26.8

$347.3 0.5 $1,036.4 10.4 4.4 14.5 Mean

• 22.3%

0.5x 12.3% 7.1% 10.5% 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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In Investm tment t Summar ary

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Consistent strong operational performance

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Excellent safety record

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Large bidding pipeline

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Strong balance sheet - substantial liquidity and no leverage

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Solid long term annual rate of return 5yr = 17%*

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Quarterly dividend of $0.25 per share in 2018, for an annual total of $1.00 per share

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Experienced management team

*As of 12/3/2018

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Corporate ate Data ata

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 Consolidate ated In Income Stat tatements ts - Quar arte ter

(in thousands except per share amounts)

Revenues $ 116,459 $ 136,670 $ 141,366 $ 169,578 $ 232,945 Cost of revenues 86,927 105,962 125,914 149,474 195,227 Gross Profit 29,532 30,708 15,452 20,104 37,718 Gross Profit % 25.4% 22.5% 10.9% 11.9% 16.2% Impairment loss — — — 584 — Selling, general and administrative expenses 11,147 10,378 9,637 11,356 10,119 Income from operations 18,385 20,330 5,815 8,164 27,599 Other income, net 1,429 2,928 764 1,427 1,692 Income before income taxes 19,814 23,258 6,579 9,591 29,291 Income tax (benefit) expense (12,560) 6,314 1,737 2,541 12,062 Net income 32,374 16,944 4,842 7,050 17,229 Net income attributable to noncontrolling interests (60) (28) 5 32 — Net income attributable to the stockholders of AGX $ 32,434 $ 16,972 $ 4,837 $ 7,018 $ 17,229 EPS attributable to the stockholders of Argan, Inc. Basic $ 2.08 $ 1.09 $ 0.31 $ 0.45 $ 1.11 Diluted $ 2.07 $ 1.08 $ 0.31 $ 0.45 $ 1.09 Weighted average number of shares outstanding Basic 15,569 15,568 15,568 15,559 15,545 Diluted 15,702 15,673 15,656 15,743 15,793 Cash dividends per share $ 0.25 $ 0.25 $ 0.25 $ — $ 1.00 31-Oct-18 Three Months Ended 31-Oct-17 31-Jan-18 31-Jul-18 30-Apr-18

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Appendix Reconciliati ations to to EBIT ITDA – Consolidate ated

31-Oct-18 31-Jul-18 30-Apr-18 31-Jan-18 31-Oct-17 Net income 32,374 $ 16,944 $ 4,842 $ 7,050 $ 17,229 $ Less EBITDA attributable to noncontrolling interests 60 28 (5) (32) — Interest expense — 110 549 — — Income tax (benefit) expense (12,560) 6,314 1,737 2,541 12,062 Depreciation 898 796 771 843 726 Amortization of purchased intangible assets 253 253 253 256 258 EBITDA attributable to the stockholders of Argan, Inc. 21,025 $ 24,445 $ 8,147 $ 10,658 $ 30,275 $ EBITDA per diluted share 1.34 $ 1.56 $ 0.52 $ 0.68 $ 1.92 $ Three Months Ended

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Appendix

Consolidate ated Bal alan ance Sheets ts - Assets ts

(dollars in thousands)

ASSETS October 31, 2018 January 31, 2018 CURRENT ASSETS Cash and cash equivalents $ 155,791 $ 122,107 Short-term investments 158,996 311,908 Accounts receivable, net 43,612 24,756 Contract assets 55,628 13,847 Other current assets 25,465 12,410 TOTAL CURRENT ASSETS 439,492 485,028 Property, plant and equipment, net 19,866 15,299 Goodwill 34,329 34,329 Other purchased intangible assets, net 6,390 7,149 Deferred taxes 315 439 Other assets 377 426 TOTAL ASSETS $ 500,769 $ 542,670

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Appendix

Consolidate ated Bal alan ance Sheets ts – Liab abiliti ties an and Equity ty

(dollars in thousands)

LIABILITIES AND EQUITY October 31, 2018 January 31, 2018 CURRENT LIABILITIES Accounts payable $ 64,987 $ 100,238 Accrued expenses 25,111 35,360 Contract liabilities 9,778 47,613 TOTAL CURRENT LIABILITIES 99,876 183,211 Deferred taxes 1,388 1,293 TOTAL LIABILITIES 101,264 184,504 STOCKHOLDERS’ EQUITY Common stock 2,336 2,336 Additional paid-in capital 144,507 143,215 Retained earnings 253,716 211,150 Accumulated other comprehensive (loss) income (942) 1,422 TOTAL STOCKHOLDERS’ EQUITY 399,617 358,123 Noncontrolling interests (112) 43 TOTAL EQUITY 399,505 358,166 TOTAL LIABILITIES AND EQUITY $ 500,769 $ 542,670