Earnings call transcript: Argan’s Q2 2026 EPS Surpasses Expectations

Argan Inc. (AGX) reported its Q2 FY2026 earnings, showcasing a robust performance with earnings per share (EPS) of $2.50, significantly surpassing the forecast of $1.64. This 52.44% surprise in EPS was accompanied by revenues of $237.7 million, slightly below the anticipated $243.97 million. Following the earnings announcement, Argan’s stock experienced a 4.76% increase in after-hours trading, reflecting investor optimism. According to InvestingPro, the company maintains a "GREAT" financial health score of 3.48, with the stock delivering an impressive 74.72% return year-to-date.

Key Takeaways

• Argan’s EPS of $2.50 beat expectations by 52.44%.
• Revenues of $237.7 million marked a 5% year-over-year increase.
• Stock price rose by 4.76% in after-hours trading.
• Record net income and strong cash position with no debt.
• Continued expansion in power and renewable energy projects.

Company Performance

Argan Inc. demonstrated strong financial performance in Q2 FY2026, with a 5% increase in revenues year-over-year. The company’s gross margin improved to 18.6%, up from 13.7% in the same quarter last year. Argan’s strategic focus on power and renewable energy projects contributed to a record net income of $35.3 million. The company’s robust cash and investment position, totaling $572 million, underscores its financial health, particularly as it operates with no debt. InvestingPro data reveals impressive return metrics, with a 30% return on equity and 25% return on invested capital over the last twelve months. The company has achieved a remarkable 45.08% revenue growth in the same period.

Financial Highlights

• Revenue: $237.7 million, up 5% year-over-year
• Earnings per share: $2.50, significantly above the forecast
• Gross Margin: 18.6%, an improvement from 13.7% in the previous year
• EBITDA: $36.3 million, with a 15.2% margin
• Net Liquidity: $344 million

Earnings vs. Forecast

Argan’s EPS of $2.50 exceeded the forecast of $1.64 by 52.44%, marking a substantial earnings surprise. This outperformance is notable compared to previous quarters, reflecting the company’s operational efficiency and strategic project execution. However, revenues fell short of expectations, coming in 2.57% below the forecasted $243.97 million.

Market Reaction

Following the earnings release, Argan’s stock rose by 4.76% in after-hours trading, reaching $229.55. This upward movement reflects investor confidence in the company’s financial health and growth prospects, especially as it approaches its 52-week high of $253.79. InvestingPro analysis indicates the stock is currently trading at a P/E ratio of 31.94, with 13 additional ProTips available to subscribers, offering deeper insights into the company’s valuation and growth potential.

Outlook & Guidance

Argan remains optimistic about future growth, with expectations to add more projects in FY2026 and a backlog anticipated to exceed $2 billion. The company continues to focus on disciplined project selection and is well-positioned to capitalize on the growing demand for power infrastructure, including AI data centers and EV charging. Adding to investor confidence, InvestingPro data shows the company has achieved a 25% dividend growth in the last twelve months while maintaining dividend payments for 15 consecutive years. For comprehensive analysis and detailed metrics, investors can access the full AGX Pro Research Report, part of the extensive coverage of 1,400+ US equities on InvestingPro.

Executive Commentary

CEO David Watson highlighted, "The electrification of everything is driving unprecedented power consumption," emphasizing the company’s strategic positioning in the market. Watson also noted Argan’s unmatched success in project completion reliability and its focus on partnering with the right entities in optimal geographies.

Risks and Challenges

• Potential supply chain disruptions could impact project timelines.
• Market saturation in certain regions may limit growth opportunities.
• Macroeconomic pressures, such as inflation, could affect project costs.
• Regulatory changes in energy policies could alter market dynamics.
• Competition from other energy infrastructure companies remains a challenge.

Q&A

During the earnings call, analysts inquired about the completion timeline for the Trumbull project, expected in the first half of next year. Questions also focused on Argan’s conservative approach to project pricing and sustained demand in the power infrastructure market, reflecting investor interest in the company’s strategic direction.

Full transcript - Argan (AGX) Q2 2026:

Josh Baugher, Chief Financial Officer, Argan Inc.: Good evening, ladies and gentlemen, and welcome to the Argan Inc. earnings release conference call for the second quarter of fiscal 2026, ended July 31, 2025. This call is being recorded. All participants have been placed on a listen-only mode. Following management’s remarks, the call will be open for questions. There is a slide presentation that accompanies today’s remarks, which can be accessed via the webcast. At this time, it is my pleasure to turn the floor over to your host for today, Jennifer Belodeau of IMS Investor Relations. Please go ahead, ma’am.

Jennifer Belodeau, Investor Relations, IMS Investor Relations: Thank you. Good evening and welcome to our conference call to discuss Argan’s results for the second quarter, ended July 31, 2025. On the call today, we have David Watson, Chief Executive Officer, and Josh Baugher, Chief Financial Officer. I’ll take a moment to read the safe harbor statements. Statements made during this conference call and presented in the presentation that are not based on historical facts are forward-looking statements. Such statements include, but are not limited to, projections or statements of future goals and targets regarding the company’s revenues and profits. These statements are subject to known and unknown factors and risks.

The company’s actual results, performance, or achievements may differ materially from those expressed or implied by these forward-looking statements, and some of the factors and risks that could cause or contribute to such material differences have been described in this afternoon’s press release and in Argan’s filings with the U.S. Securities and Exchange Commission. These statements are based on information and understandings that are believed to be accurate as of today, and we do not undertake any duty to update such forward-looking statements. Earlier this afternoon, the company issued a press release announcing its second quarter fiscal 2026 financial results, and it filed its corresponding Form 10-Q report with the Securities and Exchange Commission. Okay, with that out of the way, I’ll turn the call over to David Watson, CEO of Argan. Please go ahead, David.

David Watson, Chief Executive Officer, Argan Inc.: Thanks, Jennifer, and thank you everyone for joining today. I’ll start by reviewing some of the highlights of our operations and activities, and Josh Baugher, our CFO, will go over our financial results for the second quarter and six months ended July 31, 2025. We’ll open up the call for a brief Q&A. We achieved significantly strong results in the second quarter of fiscal 2026, reflecting excellent execution in the quarter as we delivered solid revenue growth, enhanced gross margins, and record net income. Josh will go into the details of the quarter and first half in a moment, but highlights of our second quarter results included: consolidated revenue of $238 million, reflecting growth of 5% compared to last year’s second quarter, and a sequential increase of 23% compared to the first quarter of fiscal 2026.

Improved gross margins of 18.6% compared to 13.7% in the second quarter of fiscal 2025. Enhanced profitability with record net income of $35.3 million, or $2.50 per diluted share. EBITDA of $36.3 million, or an EBITDA margin of 15.2%. Record backlog of $2 billion, which includes the addition of the Platin Power Station, a 170 megawatt thermal facility in Ireland, as well as a significant new industrial services contract for a recycling and water treatment plant in Alabama. As I’ve mentioned on previous calls, we have been seeing increasing demand for our capabilities as the power industry mobilizes to bring new facilities online as a large portion of natural gas-fired plants reach the end of operational life in the midst of unprecedented growth in power consumption.

The electrification of everything, coupled with the anticipated expanded development of facilities to power AI data centers, is creating a strong market for our expertise and capabilities, and we’re energized about the opportunities we’re seeing, not only in the near term, but looking out for the next several years and beyond. Our balance sheet remains strong as we continue to generate significant cash flow. We have $572 million of cash and investments, net liquidity of $344 million, and no debt at July 31, 2025. Finally, we remain committed to returning capital to shareholders and paid a quarterly dividend of $0.375 in the quarter. Now on to the operational review. Slides four and five present our three reportable business segments.

In our power industry services segment, we have the capability to build multiple types of power facilities, including efficient gas-fired power plants, solar energy fields, biomass facilities, and battery energy storage systems in the U.S., the U.K., and in Ireland. Power industry services revenues increased 13% to $197 million in the second quarter, as compared to $174 million for the second quarter of fiscal 2025. The segment represented 83% of second quarter revenues and reported pre-tax book income of approximately $35 million. As we expected, due to the timing of certain projects and contract awards, revenue decreased in our industrial construction services segment to $36 million in the second quarter, compared to $50 million in the second quarter of fiscal 2025. The segment achieved sequential revenue growth of $7 million, or 23%, compared to revenue of $29 million during the first quarter of fiscal 2026.

Industrial construction services contributed 15% of consolidated revenue, with pre-tax book income of approximately $3 million in the second quarter of 2026. This segment primarily provides solutions for industrial construction projects with a concentration in agriculture, petrochemical, pulp and paper, water and power, and has seen solid demand towards capabilities, closing the quarter with a record backlog of $189 million. New projects in the segment include several scopes of work for a recycling plant in Alabama, as well as increased orders for vessel fabrication for a number of data centers. We’re excited about the record backlog, opportunities, and engagement we’re seeing for our industrial segment, and expect to see significantly increased revenues in the second half of this year. Finally, we have our telecommunications infrastructure services group, our smallest segment, which contributed 2% of second quarter revenues.

The telecommunications segment provides outside construction services for the utility and telecommunications sectors, as well as inside premises wiring services, primarily for federal government locations and military installations requiring high-level security clearance. The business achieved a record backlog in the quarter, and we expect to drive continued growth as we move through the balance of the year. The increase in energy demand, driven by the widespread electrification of virtually every sector of the economy, has been well documented. For the first time in decades, not only are we encountering rising power demand, but at the same time, a substantial portion of the nation’s natural gas infrastructure is aging out.

Reliable, high-quality 24/7 energy is a non-negotiable requirement in the support of AI data centers, complex manufacturing operations, and EV charging, and that energy is supplied by both the traditional gas-fired and renewable infrastructure that we, and a handful of others, are capable of building. With our energy-agnostic capabilities, longstanding customers and vendor relationships, and proven track record of success, we believe Argan is very well positioned to benefit in the current demand environment for large and complex power facilities. Slide seven illustrates the strength and balance of our project backlog, which is comprised of approximately 61% natural gas projects and 29% renewable. The energy industry is turning to a combination of natural gas and renewable energy resources to ensure grid reliability.

Given the aging natural gas infrastructure, we expect to see heightened demand for gas-fired and other thermal power plants for several years to come as the industry seeks to increase the number of reliable and high-quality power sources. Our backlog of approximately $2 billion at July 31 includes several power plant projects, and we expect to add more through the balance of this year. During fiscal 2025, we proactively invested in our workforce and enhanced our teams to prepare for this increased project load and to position Argan to continue to deliver excellent on-time execution for our customers as we support the electric economy. We’re excited about the market interest we’re receiving for our services, especially for our capabilities around the construction of complex combined cycle natural gas power plants.

As I mentioned a moment ago, Argan is one of only a few companies who have the capabilities to successfully execute those complex projects, and we have established a reputation for operational excellence and a proven track record of success. We’re energized by the opportunities in the pipeline and remain focused on our disciplined approach to pursuing and winning the right projects with the right partners in the right geographies. Turning to slide eight, our consolidated project backlog was approximately $2 billion at July 31, 2025, representing backlog growth of 5% from April 30, 2025, and as I mentioned, we expect to add a couple more projects before the end of the fiscal year. Our current backlog includes fully committed projects in both the power industry services and industrial construction services segments, as well as in our telecom segment.

In fact, each of our business segments has achieved a record backlog as we generate significant organic growth across the entire Argan platform. Of note, we have a growing portion of traditional gas-fired plants in the current backlog, and we believe the representation of natural gas-fired facilities in our backlog will continue to increase in the near to midterm. We will maintain our presence in the renewable business, but anticipate that our natural gas projects will be our growth driver for the foreseeable future. Slide nine highlights selected major projects currently underway or expected to begin shortly. Our Trumbull project, a 950-megawatt natural gas-fired plant in Ohio, achieved first fire at one unit during the second quarter and achieved first fire at its second unit in August. We’re really pleased with that development as we move through the later stages of the Trumbull project.

We’ve started construction on our 1.2-gigawatt ultra-efficient combined cycle natural gas-fired plant for SLEC in Texas, but we are in early days on that one. Our Tarbert Next Generation Power Station, a 300-megawatt biofuel plant in Ireland for SSE Thermal, is underway, and you’ll also see highlighted here the previously mentioned and recently awarded 170-megawatt thermal facility in Ireland that will provide power generation during periods of high demand and supply shortfall. During the second quarter, we continue to make progress on an approximately 700-megawatt combined cycle natural gas-fired power plant located in the U.S., as well as meaningfully advancing several renewable projects as we took advantage of cooperative summer weather to drive significant progress. Finally, you’ll see two separate water treatment plant projects being performed by our industrial construction services segment, as well as a new recycling and water treatment plant that we are building in Alabama.

We are busy. There’s a lot of attention given to the industry’s demand for natural gas projects, but we believe our diverse backlog demonstrates our broad range of capabilities and the wide scope of our project mix. With that, I’ll turn the call over to Josh Baugher to take us through the second quarter financials. Go ahead, Josh.

Josh Baugher, Chief Financial Officer, Argan Inc.: Thanks, David, and good evening, everyone. On slide 10, we present our consolidated statements of earnings for the second quarter and six months ended July 31, 2025. Second quarter revenues increased 5% to $237.7 million, primarily reflecting strong revenue growth in our power industry services segment as compared to the second quarter of fiscal 2025. For the quarter ended July 31, 2025, Argan Inc. reported a consolidated gross profit of approximately $44.3 million, or a gross margin of 18.6%. Consolidated gross profit for the comparative quarter last fiscal year was $31.1 million, representing a gross margin of 13.7%. The increased gross profit and improved gross margin for the recently ended quarter is primarily due to the improved gross profit margins for the power industry services segment.

Gross margins for our power industry services segment, our industrial construction services segment, and our telecommunications infrastructure services segment were 19.6%, 12.5%, and 24.7%, respectively, for the second quarter of fiscal 2026, as compared to 13.5%, 13%, and 31.4%, respectively, in the second quarter of fiscal 2025. Selling, general and administrative expenses of $14.2 million for the second quarter of fiscal 2026 increased as compared to SG&A of $12.4 million for the comparable prior year period. Other income, net for the three months ended July 31, 2025 was $5.6 million, which primarily reflected investment income earned during the period. During the quarter ended July 31, 2025, the company recorded income tax expense of $0.4 million on pre-tax book income of $35.6 million, which reflects a meaningful benefit from the favorable deductions resulting from stock option exercises during the period. For the comparable period last year, Argan Inc.

recorded income tax expense of $6.1 million on pre-tax book income of $24.3 million. Net income for the second quarter of fiscal 2026 was $35.3 million, or $2.50 per diluted share, which represents record quarterly EPS compared to $18.2 million, or $1.31 per diluted share for last year’s comparable quarter. EBITDA, earnings before interest, taxes, depreciation, and amortization for the quarter ended July 31, 2025, increased to $36.2 million compared to $24.8 million for the same period of last year. EBITDA as a percent of revenue increased to 15.2% for the second quarter of this fiscal year compared to 10.9% for the second quarter of last fiscal year. Looking at our year-to-date performance, revenues for the first six months of fiscal 2026 increased by 12.1% to $431.4 million, as compared to revenues of $384.7 million for the prior year period.

Our consolidated gross margin of 18.8% for the first six months of fiscal 2026 increased as compared to a gross margin of 12.8% for the first six months of fiscal 2025, primarily due to the same reasons described for the quarter. SG&A expense increased to $26.7 million for the first six months of fiscal 2026, as compared to $23.9 million for the first six months of fiscal 2025, but remained consistent as a percentage of revenues. Net income for the first six months of this fiscal year was $57.8 million, or $4.09 per diluted share, compared to $26.1 million, or $1.90 per diluted share for the first six months of last fiscal year. EBITDA was $66.5 million for the first half of fiscal 2026, compared with EBITDA of $36.7 million for the first half of fiscal 2025. With that, I’ll turn the call back to David.

David Watson, Chief Executive Officer, Argan Inc.: Thanks, Josh. With strong cash flow, we further strengthened our balance sheet during the second quarter. At July 31, 2025, we had approximately $572 million in cash, cash equivalents, and investments, generating meaningful investment yields. Our net liquidity was $344 million, and we had no debt. Stockholders’ equity was $393 million at July 31, 2025. This liquidity bridge demonstrates that our business model ordinarily requires a low level of capital expenditures. Our net liquidity of $344 million at July 31, 2025, has increased $43 million compared with net liquidity at January 31, 2025. During the first six months of fiscal 2026, we returned $25 million of capital to our shareholders. We have a disciplined capital allocation strategy, which focuses on our core commitments. First, we invest in our people to ensure we are appropriately prepared to staff and execute our projects.

Second, the company pays a quarterly dividend, which we increased 25% to $0.375 per common share in September of 2024, creating an annual dividend run rate of $1.50 per share. Of note, that increase came just a year after we’d raised our dividend to $0.30 per share in September of 2023. Together, these two increases represent an aggregate 50% increase in our annual dividend run rate in less than two years, reflecting the strength of our business. Third, since November 2021, when we began our share buyback program, we have returned a total of approximately $109.6 million to shareholders. Additionally, in April, our board increased the authorization of the share repurchase program to $150 million. Finally, we will continue to evaluate and consider M&A opportunities that could be additive or complementary to our current capabilities or enhance our geographic footprint.

Our company is dedicated to driving long-term value creation for shareholders. Our pipeline is stronger than it has ever been, and since 2008, we have increased our tangible book value and cumulative dividends per share to record levels. There is no doubt that the electrification of everything that is driving unprecedented power consumption is contributing to the heightened demand for Argan’s diverse construction capabilities and expertise. As one of only a few companies who have a proven success rate building both complex combined cycle natural gas facilities, as well as renewable energy resources, we are optimistic that our market position in an environment where the ongoing reliability of the power grid is dependent on the continued build-out of this infrastructure.

We believe we are well positioned with the capabilities, financial flexibility, industry relationships, and longstanding customer base to strengthen our leadership role as a partner of choice for the build-out of energy infrastructure. To close, we remain focused on our long-term growth strategy, leverage our core competencies to capitalize on existing and emerging market opportunities, maintain disciplined risk management with the goal of improving our project management effectiveness and minimizing costly project overruns, strengthen our position as a partner of choice in the construction of power generation facilities that power the electric economy and maintain grid reliability, and last but not least, drive organic growth while also being alert for acquisition opportunities that make sense for our business through thoughtful capital allocation.

As we move beyond the midway point of fiscal 2026, we are excited about the new projects we have announced so far this year and energized by the opportunities we are seeing to further increase our backlog. Our project pipeline is robust, and with the three to four-year duration of our combined cycle projects, our visibility today gives us confidence that our teams will be busy for several years to come. That said, we have always taken a disciplined approach when pursuing any project, and that approach remains in place today. We are focused on winning the right projects with the right partners in the right geographies. The most important metric in our business is our ability to complete power facilities on time and on budget so that our partners can deliver power to the grid within the timeline they guaranteed. Our success in that capability is unmatched.

This is an exciting time for our company, and we are optimistic about our near and long-term growth opportunities as our project backlog continues to strengthen in response to the significant market demand for diverse energy infrastructure to provide the reliable, high-quality supply needed to meet the unprecedented and growing demand for energy. We couldn’t do this without our employees, and I’d like to thank our entire team for their hard work and dedication to operational excellence. Likewise, I thank our shareholders for their continued support. With that, operator, let’s open it up for questions.

Conference Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star one if you have a question or a comment. The first question comes from Chris Moore with CJS Securities. Please proceed.

Chris Moore, Analyst, CJS Securities: Hey, good afternoon, guys. Congrats on another nice quarter. Maybe we will just start with what is left there and what’s a reasonable timeline?

Josh Baugher, Chief Financial Officer, Argan Inc.: Hey, Chris, could you repeat that question again?

Chris Moore, Analyst, CJS Securities: Yeah.

Josh Baugher, Chief Financial Officer, Argan Inc.: I understand you had first fire at Trumbull in Q2 and second in August. Just trying to understand what is left at Trumbull to complete and what’s a reasonable timeline when you’ll be totally finished.

David Watson, Chief Executive Officer, Argan Inc.: Yeah, absolutely. We were thrilled with achieving first fire at the end of the quarter and then on the second unit right afterwards, which, as you know, is a meaningful accomplishment in the project lifecycle of a gas-fired power plant and also a moment when some of the risk starts to come off the table. We’re still tracking towards completing that project on time and on a budget for the customer, and that should happen in the first half of next year.

Josh Baugher, Chief Financial Officer, Argan Inc.: Got it. Appreciate that. Gross margin was a strong, you know, 18.6%. I was trying to figure out if there are some meaningful one-time gains in there. I don’t know whether that be Trumbull or somebody else. I assume the 18.6% is not necessarily, even though it’s a little below Q1, it’s not necessarily sustainable. Just any thoughts on gross margin?

David Watson, Chief Executive Officer, Argan Inc.: Yeah, it’s really hard to provide any kind of particular guidance on our gross margins. I mean, this quarter, there’s clear, and frankly, the last three quarters, there’s just been significant execution excellence, especially in the power sector, right? Between reaching first fire on the units at Killroute to finishing out that LNG job early, early this past quarter, too, favorable weather allowing us to achieve a lot of progress on some more renewable projects. As you know, on our last earnings call, I indicated that we expect to exceed last year’s fiscal year’s gross profit margins % of revenues. With continued strong execution across businesses, that continues to be our expectation.

As you know, we are unapologetically conservative in all things that we do here, given the lumpy nature of this business, especially this construction business, which is one of the reasons why we don’t provide revenue and EPS guidance. We’re pleased with the margins to halfway point this year and expect to continue to achieve our main goal, which is to bring each of our customers another successful project.

Josh Baugher, Chief Financial Officer, Argan Inc.: Terrific. Maybe just the last one for me is, it sounds like there are a bunch of potential projects out there that in some you could add in fiscal 2026. The range of the scale could be anywhere from, you know, $100 million to, you know, a big traditional gas plant in the $600 million range. Just any thoughts in terms of the types of things you’re looking at?

David Watson, Chief Executive Officer, Argan Inc.: Yes. No, we’re obviously really pleased to have record backlog, frankly, at all of our business segments as of 7/31, and we remain very bullish on being able to continue to add to the backlog. As it relates to the power segment, as you know, Chris, it takes several years for developers to get to the point where they’re ready to sign an EPC contract. While our visibility for opportunities is good, the specific timing of the contracts is difficult to pinpoint. Over the last three quarters, we’ve had a 1.2-gigawatt power plant, a 700-megawatt job in the U.S., and a 300-megawatt and a 170-megawatt job in Ireland. That’s a huge testament to the hard work of the power teams that they’re putting in to get the right contracts. To your point, they’re not finished.

We expect over the rest of the current fiscal year to add a few more power jobs, which would put us significantly over $2 billion in backlog. The size of those, I just mentioned, we’ve done jobs from 170 earlier this year to 1.2 gigawatts. It’s not unfair to assume that we’ll have a variety of sizes, and because there really is no upward bound for us, given, as you know, the Guernsey job was the largest single-phase power plant built in the United States, and that’s what we did. I don’t know if that answers your question, but we have the range to do it all.

Josh Baugher, Chief Financial Officer, Argan Inc.: All right, I will leave it there. Thanks, guys.

David Watson, Chief Executive Officer, Argan Inc.: Absolutely.

Conference Operator: Next question. The next question comes from Rob Brown with Lake Street Capital Markets. Please proceed.

Rob Brown, Analyst, Lake Street Capital Markets: Hi, David. Just following up on the pipeline discussion, have you noticed any changes to the pipeline? Is it accelerating now that the demand environment is good, and are you starting to see acceleration there, or what’s the dynamic on the pipeline in the last few months?

David Watson, Chief Executive Officer, Argan Inc.: I think a lot of the, Rob, a lot of the factors that have been in play for the last six months remain. I don’t know if I would call it an acceleration. It was already a meaningful acceleration to that point. Obviously, the huge data points there are the OEMs who build the gas turbines have been sold out for many years, which clearly confirms that there’s an abundance of opportunities. The fundamentals, electricity consumption is expected to increase 4% annually through 2027 per the IEA. The recent capacity auction results in the PJM, which is the largest grid operator in the U.S., hit record levels of $329 per megawatt per day for the 2026-2027 delivery year. That is confirming that there’s the need for new power and that there’s the willingness to pay for it.

All of these data points and what we’re seeing as we evaluate opportunities suggest an elevated level of opportunities.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, thank you. On the industrial business side, you talked about a couple of big project wins there. How’s the pipeline there? I think that business is recovering off a bottom, but what’s the opportunity that that segment can get to, and what’s the trend line there in terms of backlog growth we should expect?

David Watson, Chief Executive Officer, Argan Inc.: Yeah, it was just a couple of calls ago where the backlog was meaningfully down, and I was indicating to the market that we were going to be in for a couple lower revenue quarters, and that’s exactly what happened. Though we’re super pleased that we’ve climbed to a record backlog of $189 million at the end of the quarter, and we expect to see improved performance in the second half of the year as we convert that backlog to revenues. The TRC’s markets continue to expand, including a fair amount of work in the water treatment space and the data center spaces. It’s a lot of positive momentum there, and again, as is our focus here at Argan, it comes down to execution.

Rob Brown, Analyst, Lake Street Capital Markets: Great, thank you. I’ll turn it over. Congrats on the strong results.

David Watson, Chief Executive Officer, Argan Inc.: Thanks, Rob.

Conference Operator: Once again, if you have a question or a comment, please press star one. The next question comes from Drew Chamberlain with JP Morgan. Please proceed.

Rob Brown, Analyst, Lake Street Capital Markets: Yeah, thank you. Good afternoon, team. Thanks for taking the questions. First, I just want to follow up on the backlog discussion. I think I heard you say, David, that the backlog you expect to be significantly over $2 billion at the end of the year, which is, I guess, the same as what you said last quarter, and that’s probably the formal guidance. Can you talk a little bit about maybe what’s changed in the last three months since the last call? I mean, do you think the projects are coming in faster than expected, slower than expected? I mean, just really any difference?

David Watson, Chief Executive Officer, Argan Inc.: Drew, great question. At the end of the day, they continue to progress. After another three months, we continue to see milestones getting achieved, and it gives us greater clarity and certainty that we expect those jobs to kick off later this year. We haven’t seen any pullback or any hesitation from the partners and potential customers that we’re speaking to or working with, and it has given us a lot of confidence that we’re going to get there.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, thanks. Moving to the margin discussion, I appreciate the difficulties of guiding to gross margin here, and obviously why you really choose to shy away from it. Can you talk a little bit about what you’re seeing from a pricing dynamic in the market, especially on the incremental contracts? Where do you think those are shaking out versus historic levels?

David Watson, Chief Executive Officer, Argan Inc.: Drew, another great question. We’ve been disciplined in our approach to every project, with our focus being successful completion of the project, ensuring the facility comes online on time and on budget. Our approach to kind of winning and dynamically pricing projects has been consistent for the past 20 years, and we really don’t pay attention to what others may be doing. We also really are focused on longstanding customer relationships that we value greatly, and we want those relationships to continue through this busy time and beyond. There is a meaningful demand in the market for EPCs that can build these power plants, and the supply of us is probably, you know, less than the demand, and that does create some opportunities.

Rob Brown, Analyst, Lake Street Capital Markets: Okay, makes sense. Just last one real quick for me. Thoughts on capacity? I think you’ve been pretty clear that you have double-digit capacity today. That’s going to be a mix of project types. You’re also talking about, obviously, great longer-term demand here, fundamentals are there, and really improving visibility with that. Can you talk about how you think about your need to add capacity over this cycle, and maybe, you know, is it more appealing to do it organically or through M&A? Thank you.

David Watson, Chief Executive Officer, Argan Inc.: Excellent, thank you. We’ve intentionally added headcount over the last 18 months to position ourselves for this currently very strong demand environment. In the past, I’ve said 10+ jobs, a mix of renewables and gas, and again, that all depends on size and cadence of our projects. I would say we believe we have the capacity to handle 10 to 12 jobs in our power business. We continue to nurture and grow our teams. Obviously, Argan historically focused on organic growth, and that continues today.

Rob Brown, Analyst, Lake Street Capital Markets: Perfect. Thank you very much, guys.

David Watson, Chief Executive Officer, Argan Inc.: Absolutely.

Conference Operator: Okay, we have no further questions in queue. I’d like to turn the floor back to David Watson for closing remarks.

David Watson, Chief Executive Officer, Argan Inc.: Great, thanks, John. Thank you all for participating in today’s call, and I look forward to speaking with you again when we report our third quarter fiscal 2026 results later this year. Have a great evening.

Conference Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.

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