AGAN, INC. June 2010 June 2011 June 2018 Safe Harbor Statement - - PowerPoint PPT Presentation

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AGAN, INC.

June 2010

June 2011 June 2018

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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 (5/31/18) – $0.6 billion

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Solid long term annual rate of return 5yr = 22%*

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Quarterly dividend $0.25 per share

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Strong balance sheet at 4/30/18

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No leverage

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Cash & short-term investments - $366 million

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Net liquidity - $300 million

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Project backlog (4/30/18) – $0.5 billion

* As of 5/31/2018 ** Attributable to the Stockholders of AGX (in millions)

Quarter Ended April 30, 2018 Trailing Twelve Months (TTM) Revenues $ 141 $ 804 Net Income** 5 56 EBITDA** 8 92

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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

84.7% 1.5% 5.7% 8.1%

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Revenues*

$142 $279 $227 $383 $413 $675 $893 $804 $- $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 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 April 30, 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 Income*

$9.3 $23.3 $40.1 $30.4 $36.3 $70.3 $72.0 $56.4 $- $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 April 30, 2018

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EBITDA*

$12.9 $37.7 $66.3 $52.2 $62.9 $110.6 $116.1 $91.8 0% 5% 10% 15% 20% 25% 30% 35% $- $20 $40 $60 $80 $100 $120 $140 2012 2013 2014 2015 2016 2017 2018 2019**

$ Millions

EBITDA EBITDA Margins

EBITDA CAGR ≅ 32%

* Attributable to the Stockholders of AGX ** TTM through April 30, 2018

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Book Value

$5.87 $7.16 $9.50 $11.29 $11.58 $16.08 $20.34 $20.42 $0.50 $1.10 $1.85 $2.55 $3.25 $4.25 $5.25 $5.50 $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 2012 2013 2014 2015 2016 2017 2018 Q12019

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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Financial Results

(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 141,366 $ 230,489 $ (89,123) $ (38.7)% Cost of revenues 125,914 190,393 (64,479) (33.9) Gross profit 15,452 40,096 (24,644) (61.5) Gross margins 10.9% 17.4% (6.5%) (37.4) Net Income attributable to stockholders of the Company 4,837 $ 20,625 $ (15,788) $ (76.5) Diluted per share 0.31 1.31 (1.00) (76.3) EBITDA attributable to stockholders of the Company 8,147 32,456 (24,309) (74.9) Diluted per share 0.52 2.06 (1.54) (74.8) April 30, January 31, As of: 2018 2018 Change % Change Cash, cash equivalents and short-term investments 365,581 $ 434,015 $ (68,434) $ (15.8)% Net Liquidity (1) 300,319 301,817 (1,498) (0.5) Project backlog 524,000 379,000 145,000 38.3 April 30,

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Financial Drivers

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Revenues declined quarter over quarter primarily due to the construction activities moving from peak levels to the commissioning and start up phases on four large power plant projects. We recently reached substantial completion for two power plant projects.

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Gross profits decreased reflecting primarily the reduction in consolidated revenues between periods. Our gross margin percentage decreased quarter over quarter, reflecting the effects of increased labor and subcontractor cost estimates for certain projects over the past three quarters, one-time costs recorded related to the resolution of a dispute with a former subcontractor and the changes in the mix, progress and gross margin levels of multiple power plant projects.

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The recent Tax Cuts and Jobs Act had a favorable impact on our tax rate, resulting in an estimated annual effective income tax rate of 26.4% for the current quarter, compared to 34.8% for the first quarter last year.

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Our balance sheet remains strong. As of April 30, 2018, our cash, cash equivalents and short-term investments totaled $366 million and adjusted net liquidity was $300 million; plus, we had no bank debt.

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Our project backlog was $524 million as of April 30, 2018, up from $379 million at the end of the prior year, mostly due to an EPC contract entered into by GPS during the quarter. We remain encouraged about

• ur project pipeline as GPS has been selected by the owners of several other projects to negotiate EPC

service contracts with a collective potential project value in excess of $1.5 billion and projected start dates ranging from later in 2018 through 2019. However, this transition will result in a decrease to our revenues in the coming quarters until work on new projects is secured and ramps up in accordance with the normal construction cycle of large EPC projects.

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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 $590 million, or ~18x 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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Safety 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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Customers – Independent power producers and utilities

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Significant GPS Current Projects

(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. (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.

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

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Extensive Project Portfolio

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Power facilities – combined cycle solution

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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 (5/29/2018)

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

• n Avg.

Ticker

5/25/2018

Return Cap Equity Revenue Margin Margin Equity AGX $39.15 %

• 34.5 %

$609.5 0.0 X $892.8 16.7 % 12.5 % 22.1% FLR $48.53 9.1 $6,822.7 0.5 $19,508.8 2.7 2.9 3.5 GVA $56.68 21.7 $2,269.9 0.2 $3,084.7 11.2 6.2 8.8 JEC $63.33 21.6 $8,979.7 0.4 $11,854.0 18.6 6.8 4.5 KBR KBR, Inc. $17.49 25.5 $2,459.5 0.4 $4,103.0 8.3 5.8 43.9 MDR $21.57 15.2 $3,878.4 0.3 $3,073.2 18.8 14.9 11.1 ORN $7.55 4.6 $213.7 0.3 $576.6 12.1 5.6 2.7 TPC $20.55

• 21.4

$1,025.7 0.5 $4,668.0 9.0 3.9 7.5 PRIM $26.30 15.2 $1,355.3 0.4 $2,322.6 11.5 7.1 12.2 TSX-SNC $42.44 8.2 $7,450.2 0.7 $7,690.2 19.7 8.9 8.4 STRL $12.55 21.6 $339.1 0.6 $1,027.0 9.8 4.2 12.7 Mean 7.9% 0.4x 12.6% 7.2% 11.5% 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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Investment Summary

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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 = 22%*

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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 5/31/2018

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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 $ 141,366 $ 169,578 $ 232,945 $ 259,803 $ 230,489 Cost of revenues 125,914 149,474 195,227 208,396 190,393 Gross Profit 15,452 20,104 37,718 51,407 40,096 Gross Profit % 10.9% 11.9% 16.2% 19.8% 17.4% Impairment loss — 584 — — — Selling, general and administrative expenses 9,637 11,356 10,119 10,799 9,489 Income from operations 5,815 8,164 27,599 40,608 30,607 Other income, net 764 1,427 1,692 1,311 1,218 Income before income taxes 6,579 9,591 29,291 41,919 31,825 Income tax expense 1,737 2,541 12,062 14,601 11,076 Net income 4,842 7,050 17,229 27,318 20,749 Net income attributable to noncontrolling interests 5 32

• 179

124 Net income attributable to the stockholders of AGX $ 4,837 $ 7,018 $ 17,229 $ 27,139 $ 20,625 EPS attributable to the stockholders of Argan, Inc. Basic $ 0.31 $ 0.45 $ 1.11 $ 1.75 $ 1.33 Diluted $ 0.31 $ 0.45 $ 1.09 $ 1.72 $ 1.31 Weighted average number of shares outstanding Basic 15,568 15,559 15,545 15,514 15,467 Diluted 15,656 15,743 15,793 15,787 15,771 Cash dividends per share $ 0.25 $

• $

1.00 $

• $
• 31-Oct-17

31-Jul-17 30-Apr-17 31-Jan-18 30-Apr-18 Three Months Ended

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Appendix Reconciliations to EBITDA – Consolidated

30-Apr-18 31-Jan-18 31-Oct-17 31-Jul-17 30-Apr-17 Net income 4,842 $ 7,050 $ 17,229 $ 27,318 $ 20,749 $ Less EBITDA attributable to noncontrolling interests (5) (32) — (179) (124) Interest expense 549 — — — — Income tax expense 1,737 2,541 12,062 14,601 11,076 Depreciation 771 843 726 638 572 Amortization of purchased intangible assets 253 256 258 334 183 EBITDA attributable to the stockholders of Argan, Inc. 8,147 $ 10,658 $ 30,275 $ 42,712 $ 32,456 $ EBITDA per diluted share 0.52 $ 0.68 $ 1.92 $ 2.71 $ 2.06 $ Three Months Ended

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Appendix

Consolidated Balance Sheets - Assets

(dollars in thousands)

ASSETS April 30, 2018 January 31, 2018 CURRENT ASSETS Cash and cash equivalents $ 151,523 $ 122,107 Short-term investments 214,058 311,908 Accounts receivable, net 35,623 24,756 Contract assets 50,579 13,847 Prepaid expenses and other current assets 13,849 12,410 TOTAL CURRENT ASSETS 465,632 485,028 Property, plant and equipment, net 18,175 15,299 Goodwill 34,329 34,329 Other intangible assets, net 6,896 7,149 Deferred taxes 435 439 Other assets 411 426 TOTAL ASSETS $ 525,878 $ 542,670

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Appendix

Consolidated Balance Sheets – Liabilities and Equity

(dollars in thousands)

LIABILITIES AND EQUITY April 30, 2018 January 31, 2018 CURRENT LIABILITIES Accounts payable $ 97,453 $ 100,238 Accrued expenses 37,397 35,360 Contract liabilities 30,463 47,613 TOTAL CURRENT LIABILITIES 165,313 183,211 Deferred taxes 1,460 1,293 TOTAL LIABILITIES 166,773 184,504 STOCKHOLDERS’ EQUITY Common stock 2,336 2,336 Additional paid-in capital 143,783 143,215 Retained earnings 212,095 211,150 Accumulated other comprehensive income 843 1,422 TOTAL STOCKHOLDERS’ EQUITY 359,057 358,123 Noncontrolling interests 48 43 TOTAL EQUITY 359,105 358,166 TOTAL LIABILITIES AND EQUITY $ 525,878 $ 542,670