Executive Summary
Argan Inc delivered a standout QQ2 2025 with consolidated revenues of $227.0 million, up 61% YoY and 43.97% QoQ, accompanied by a material improvement in profitability. Net income reached $18.2 million ($1.31 per diluted share) and EBITDA was $19.2 million, underscoring a business that is benefiting from a rising backlog and a diversified mix across Power Industry Services, Industrial Construction Services (TRC), and Telecommunications Infrastructure Services. The quarter marked the strongest revenue and EBITDA prints since 2017, driven by a 65% revenue increase in Power Industry Services and a 52% rise in Industrial Construction Services. The company carried a backlog of over $1 billion at July 31, 2024, including approximately $570 million of renewable projects, and held a very healthy balance sheet with about $485 million in cash and investments, net liquidity of $260 million, and no outstanding debt. Management highlighted a favorable long-cycle pipeline for natural gas and renewables, while noting near-term headwinds from turbine supply constraints and interconnection delays, which could influence project timing. In sum, Argan is posting strong execution in a capital-light model that benefits from ongoing energy infrastructure buildup, but investors should monitor the evolution of backlog mix, project awards cadence, and the impact of grid interconnection processes on near-term revenue visibility.
Key Performance Indicators
QoQ: 186.50% | YoY:41.05%
QoQ: 130.88% | YoY:42.54%
QoQ: 130.51% | YoY:43.16%
Key Insights
Revenue: $227.02M (+60.6% YoY, +43.97% QoQ). Gross Profit: $31.10M (gross margin 13.70%); EBITDA: $19.24M; Operating Income: $18.68M; Net Income: $18.20M; EPS (diluted): $1.31. Backlog: >$1.0B with renewable backlog ~ $570M. Cash & investments: $485.0M; Net liquidity: $260.0M; Debt: None. Operating cash flow: $73.50M; Free cash flow: $71.15M. SG&A: $12.43M (5.5% of revenue); YoY gross margin declined from 16.8% in 2Q24 due to mix. Weighted average shares outstanding (diluted): 13.88M....
Financial Highlights
Revenue: $227.02M (+60.6% YoY, +43.97% QoQ). Gross Profit: $31.10M (gross margin 13.70%); EBITDA: $19.24M; Operating Income: $18.68M; Net Income: $18.20M; EPS (diluted): $1.31. Backlog: >$1.0B with renewable backlog ~ $570M. Cash & investments: $485.0M; Net liquidity: $260.0M; Debt: None. Operating cash flow: $73.50M; Free cash flow: $71.15M. SG&A: $12.43M (5.5% of revenue); YoY gross margin declined from 16.8% in 2Q24 due to mix. Weighted average shares outstanding (diluted): 13.88M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
227.02M |
60.61% |
43.97% |
| Gross Profit |
31.11M |
31.01% |
78.11% |
| Operating Income |
18.68M |
41.05% |
186.50% |
| Net Income |
18.20M |
42.54% |
130.88% |
| EPS |
1.36 |
43.16% |
130.51% |
Key Financial Ratios
operatingProfitMargin
8.23%
operatingCashFlowPerShare
$5.48
freeCashFlowPerShare
$5.31
dividendPayoutRatio
22.2%
Management Commentary
Key takeaways from management commentary across strategy, operations and market conditions:
- Backlog and pipeline: Backlog exceeded $1B at 7/31/2024, with renewable projects comprising about $570M of backlog, signaling a durable mix of traditional and clean-energy projects. David Watson emphasized the broad opportunity set across gas-fired and renewable facilities and highlighted a strong market trajectory for energy infrastructure.
- Growth drivers by segment: Power Industry Services revenue up 65% YoY, contributing $173.8M in the quarter; Industrial Construction Services (TRC) up 52% YoY to $49.6M; Telecommunications Infrastructure Services modest at 2% of revenue.
- Renewable and gas mix: Renewable backlog is meaningful (approx. $570M of $1B+ total backlog), with management noting renewable projects are a meaningful portion of the pipeline but gas-fired projects remain the core long-term driver.
- Margin dynamics: Consolidated gross margin declined to ~13.7% in 2Q25 from 16.8% a year ago, attributable to project mix changes. SG&A as a percent of revenue improved to 5.5% from 7.4% YoY, reflecting stronger leverage.
- Near-term execution and risks: Management cited interconnection headwinds and turbine supply constraints as near-term headwinds for natural gas project development, with a view that developers are progressing “behind the meter” assets while grid interconnection is resolved. The team expects multiple gas power plants under contract over the next 5-10 months.
- Balance sheet and shareholder capital allocation: Argan maintained a debt-free balance sheet with approx. $485M in cash/investments and net liquidity of $260M. The company has repurchased ~2.7M shares since 2021 and raised the quarterly dividend to $0.30 per share (annual run rate of $1.20), underscoring a shareholder-friendly capital allocation posture. Quotes from management reinforce a constructive view on the path to volume growth and a resilient energy demand backdrop.
"The interconnection agreements continue to be a headwind, but what folks are really doing now is you're seeing a lot of developments that are moving ahead with what they call behind the meter power generating assets..."
— David Watson
"We do expect to have multiple gas power plants under contract working on generating revenue over the next 5 to 10 months."
— David Watson
Forward Guidance
Management commentary points to continued visibility into multi-project gas-fired developments and renewable installations, with several near-term catalysts:
- Gas project cadence: Management expects multiple gas power plants under contract and revenue generation over the next 5-10 months, supported by favorable market signals such as PJM capacity auctions and ERCOT activity. Backlog remains robust at >$1B, including a renewable component (~$570M).
- Backlog and project mix: Renewable backlog represents a meaningful portion of the total backlog (about 570M of 1B+), but gas-fired and other traditional power projects are expected to remain a core driver in the foreseeable future while the renewable pipeline expands the addressable market.
- Operational milestones: Trumbull Energy Center (950 MW natural gas-fired) is progressing toward completion in calendar year 2026. Illinois solar+storage projects and a large 405 MW solar field are underway with full notices to proceed, highlighting the company’s ability to execute integrated EPC/early-stage development for renewables.
- Risks to monitor: Interconnection timelines and turbine supply constraints are the principal near-term headwinds, potentially affecting project start dates and utilization of capacity. Kilroot-related losses and ongoing claims highlight concentrated project risk but are not material to the overall operating trajectory. Investors should monitor: (1) progression of gas project awards and turbine availability, (2) grid interconnection regulatory developments, and (3) project mix evolution as renewables scale.
- Outlook: With a diversified platform spanning Power Industry Services, TRC, and telecom infrastructure, Argan remains well-positioned to capitalize on the anticipated expansion of energy infrastructure and the transition to cleaner energy sources while maintaining grid reliability. The company’s cash-rich balance sheet and lack of debt provide flexibility to pursue select opportunities or shareholder-friendly actions as market conditions evolve.