Argan, Inc. · NYSE:AGX
Argan — Investor Presentation (September 2017)
31 slides from Argan's investor presentation, September 2017
Slide 1: Argan, Inc.
AGAN, INC. June 2010 June 2011 September 2017
Slide 2: Disclaimer
Disclaimer 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,”
Slide 3: Investment Highlights
Investment Highlights Consistent strong operational performance Strong backlog and bidding pipeline Compelling financial results Strong balance sheet - substantial liquidity and no leverage Strong annual rate of return 5yr/3yr/1yr = 34%/21%/32%* Annual regular dividend of $0.70 per share
Slide 4: Company Overview
Company Overview Headquarters – Rockville, MD NYSE: AGX Holding company for four 100% controlled subsidiaries Market capitalization (9/5/17) – $1.0 billion (in millions) Quarter Ended Trailing Twelve July 31, 2017 Months (TTM) Revenues $ 260 $ 872 Net Income* 27 86 EBITDA* 43 134 Strong
Slide 5: Business Overview – Holding Company
Business Overview – Holding Company Gemma Power Systems (“GPS”) provides TTM Revenues by Subsidiary engineering, procurement and construction (“EPC”) services to power generation and renewable energy markets 8.6% The Roberts Company (“TRC”) is 2.4% principally an industrial steel fabricator and
Slide 6: Growing Revenues
Growing Revenues $900 $872 $800 $700 $675 $600 $500 $ Millions $400 $413 $383 $300 $279 $200 $227 $100 $142 $- 2012 2013 2014 2015 2016 2017 2018* *TTM through July 31, 2017 6 NOTE: Except where noted otherwise, the years presented throughout this presentation relate to Argan’s fiscal year-end, whic
Slide 7: Growing Net Income
Growing Net Income* $90 $86.2 $80 $70 $70.3 $60 $50 $ Millions $40 $40.1 $36.3 $30 $30.4 $20 $23.3 $10 $9.3 $- 2012 2013 2014 2015 2016 2017 2018** 7 * Attributable to the Stockholders of AGX ** TTM through July 31, 2017
Slide 8: Growing EBITDA
Growing EBITDA* $140 35% EBITDA CAGR ≅ 48% $133.5 $120 30% $110.6 $100 25% $80 20% $ Millions $60 $62.9 15% $66.3 $40 $52.2 10% $37.7 $20 5% $12.9 $- 0% 2012 2013 2014 2015 2016 2017 2018** EBITDA EBITDA Margins 8 * Attributable to the Stockholders of AGX ** TTM through July 31, 2017
Slide 9: Large Backlog
Large Backlog $1,200 $1,000 $1,163 $1,011 $800 $ Millions $600 $791 $676 $400 $423 $424 $200 $182 $0 2012 2013 2014 2015 2016 2017 7/31/2017 9
Slide 10: Growing Book Value
Growing Book Value Tangible Book Value* & Cumulative Dividends Per Share $24.00 $22.00 $4.25 $20.00 $18.00 $4.25 $16.00 $14.00 $3.25 $2.55 $12.00 $19.47 $1.85 $10.00 $16.08 $8.00 $1.10 $11.58 $11.29 $9.50 $6.00 $0.50 $7.16 $5.87 $4.00 2012 2013 2014 2015 2016 2017 7/31/2017 Tangible Book Value Cumul
Slide 11: Growing Share Price
Growing Share Price What $100 invested on 1/31/2012 would be now $600 $579 $496 $500 $400 $300 $232 $230 $210 $210 $193 $200 $162 $161 $134 $142 $100 $117 $139 $130 $100 $120 $111 $98 $91 $- 1/31/12 1/31/13 1/31/14 1/31/15 1/31/16 1/31/17 9/5/17 Argan, Inc. S&P 500 Dow Jones US Heavy Construction TS
Slide 12: Quarter Financial Highlights
Quarter Financial Highlights (in thousands, except per share data) July 31, 2017 2016 Change % Change For the Quarter Ended: Revenue $ 259,803 $ 162,495 $ 97,308 59.9% Cost of revenue 208,396 118,483 89,913 75.9 Gross profit 51,407 44,012 7,395 16.8 Gross margins 19.8% 27.1% (7.3%) (27.0) Net Income
Slide 13: Quarterly Financial Drivers
Quarterly Financial Drivers Record revenues of $260 million as GPS reached peak construction activities on four large, natural gas-fired power plants. However, revenues for each of GPS’s four major projects will generally decline over the next several quarters as they progress beyond peak construc
Slide 14: Overview of Gemma Power Systems
Overview of Gemma Power Systems History – acquired by Argan in December 2006 for $33 million and has generated cumulative EBITDA since acquisition of over $535 million, or ~16x cash on cash and an IRR in excess of 75% Business – engineering, procurement and construction of natural gas-fired and
Slide 15: Industry Growth Drivers
Industry Growth Drivers The amount of natural gas used for power generation during 2016 reached an all-time high. Over the last 10 years, the amount of electricity generated by natural gas-fired power sources increased by 69%; the amount of electric power generated by coal-fired plants declined
Slide 16: GPS Track Record
GPS Track Record More than 14,500 megawatts of generating capacity installed and under contract on an EPC basis 40 major turnkey engineering, procurement and construction projects Power experience includes combined and simple cycle, combustion turbines, coal/wood fueled projects, wind plants,
Slide 17: National Footprint
National Footprint GPS has the ability to provide EPC services to customers throughout the United States Historical Project Locations States in which GPS has completed or is working projects. 17
Slide 18: Extensive Project Portfolio
Extensive Project Portfolio Power facilities – combined cycle solution Power facilities – simple cycle solution – Panda Liberty Energy Project – Exelon West Medway II Facility – Panda Patriot Energy Project – CPV Sentinel Energy Project – Caithness Moxie Freedom Generating Plant – A.L. Pierce Re
Slide 19: Significant Current Projects
Significant Current Projects Date FNTP Scheduled Project Location Size of Facility (1) Received Completion Caithness Moxie Freedom Pennsylvania 1,040 MW Nov-15 2018 Generating Station CPV Towantic Energy Center Connecticut 785 MW Mar-16 2018 NTE Middletown Energy Center Ohio 475 MW Oct-15 2018 NTE K
Slide 20: Development Activities
Development Activities Purpose – Gemma opportunistically participates in power plant project development and related financing activities to 1) solidify a proprietary pipeline for future EPC activities, 2) secure exclusive rights to EPC contracts, and 3) generate profits through interest and succe
Slide 21: Renewable Energy
Renewable Energy Wind & Solar – Gemma Renewable Power (GRP) has installed wind and solar projects throughout North America. GRP has the unique capability to self-perform the construction work associated with our projects. This approach ensures direct control of labor, safety, quality and schedule
Slide 22: Competitive Landscape
Competitive Landscape Larger Projects / Natural Gas Fuels Smaller Projects / Alternative Fuels 22
Slide 23: Growth Strategy
Growth Strategy Capitalize on long-term relationships throughout the industry to aggressively build backlog of traditional and renewable energy projects Make strategic investments in power plant development projects as a means to create greater opportunities to build backlog of large scale EPC c
Slide 24: Investment Summary
Investment Summary Consistent strong operational performance Strong backlog and bidding pipeline Compelling financial results Strong balance sheet - substantial liquidity and no leverage Strong annual rate of return 5yr/3yr/1yr = 34%/21%/32%* Annual regular dividend of $0.70 per share, w
Slide 25: Financials Income Statements - Quarter
Financials Income Statements - Quarter (in thousands except per share amounts) Three Months Ended 31-Jul-17 30-Apr-17 31-Jan-17 31-Oct-16 31-Jul-16 Revenues $ 259,803 $ 230,489 $ 206,760 $ 175,444 $ 162,495 Cost of revenues 208,396 190,393 168,941 138,866 118,483 Gross Profit 51,407 40,096 37,819 36
Slide 26: Financials Reconciliations to EBITDA – Consolidated
Financials Reconciliations to EBITDA – Consolidated (dollars in thousands) Three Months Ended 31-Jul-17 30-Apr-17 31-Jan-17 31-Oct-16 31-Jul-16 Net income $ 27,318 $ 20,749 $ 20,781 $ 19,226 $ 23,299 Less EBITDA attributable to noncontrolling interests (179) (124) (430) (1,153) (3,625) Income tax ex
Slide 27: Financials Balance Sheets - Assets
Financials Balance Sheets - Assets (dollars in thousands) ASSETS July 31, 2017 January 31, 2017 CURRENT ASSETS Cash and cash equivalents $ 153,225 $ 167,198 Short-term investments 403,925 355,796 Accounts receivable, net 72,517 54,836 Costs and estimated earnings in excess of billings 8,194 3,192 Pr
Slide 28: Financials Balance Sheets – Liabilities and Equity
Financials Balance Sheets – Liabilities and Equity (dollars in thousands) LIABILITIES AND EQUITY July 31, 2017 January 31, 2017 CURRENT LIABILITIES Accounts payable $ 131,001 $ 101,944 Accrued expenses 33,116 39,539 Billings in excess of costs and estimated earnings 190,581 209,241 TOTAL CURRENT LIA
Slide 29: Financials Adjusted Net Liquidity
Financials Adjusted Net Liquidity (dollars in thousands) 7/31/2017 4/30/2017 1/31/2017 10/31/2016 7/31/2016 Cash and cash equivalents $ 153,225 $ 167,347 $ 167,198 $ 170,775 $ 162,855 Short-term investments 403,925 396,092 355,796 275,545 220,297 Less: Billings in excess of costs and estimated earni
Slide 30: Infrastructure Services Peer Group
Infrastructure Services Peer Group Stock 12 Month LTM LTM Return Price Total Market Debt/ LTM Gross EBITDA on Avg. Ticker Company Name 9 / 1/ 2 0 17 Return Cap Equity Revenue Margin Margin Equity AGX Argan, Inc. $64.15 % 36.0 % $995.6 0.0 X $775.2 20.4 % 16.4 % 28.5% FLR Fl uor Corpora tion $38.61 -
Slide 31: Corporate Data
Corporate Data Investor Relations Websites Investor Relations Argan, Inc. 301-315-0027 www.arganinc.com info@arganinc.com Gemma Power Systems www.gemmapower.com Corporate Headquarters The Roberts Company Argan, Inc. www.robertscompany.com One Church Street, Suite 201 Rockville, Maryland 20850 Atlant