AGAN, INC. June 2010 June 2011 December 2018
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. 2
Compan any Overview NYSE: AGX ⚫ Holding company for four 100% controlled subsidiaries ⚫ Market capitalization (12/03/18) – $0.7 billion ⚫ Solid long term annual rate of return 5yr = 17%* ⚫ Quarterly dividend $0.25 per share ⚫ Quarter Ended Trailing Twelve ⚫ (in millions) October 31, 2018 Months (TTM) Revenues $ 116 $ 564 Net Income** 32 61 EBITDA** 21 64 Strong balance sheet at 10/31/18 ⚫ No leverage – Cash & short-term investments - $315 million – Net liquidity - $340 million – Project backlog (10/31/18) – $0.4 billion ⚫ * As of 12/3/2018 3 ** Attributable to the Stockholders of AGX
Business O Overview – Holding Compan any Gemma a Power Syste tems (“GPS”) provides ⚫ TTM R Revenues b by Subsidiar ary engineering, procurement and construction (“EPC”) services to power generation and renewable energy markets 14.8% The Roberts ts Compan any (“TRC”) is principally ⚫ an industrial steel fabricator and field services provider serving both light and heavy 15.3% industrial organizations Atl tlan anti tic Projects ts Compan any (“APC”) provides ⚫ turbine, boiler, large rotating equipment installation, commissioning and outage 2.1% services to the global power industry SMC Infras astr tructu ture Soluti tions (“SMC”) ⚫ provides telecommunications data infrastructure services 67.8% 4
Revenues* $900 $893 $800 $700 $675 $600 $564 $500 $ Millions $400 $413 $383 $300 $200 $227 $279 $142 $100 $- 2012 2013 2014 2015 2016 2017 2018 2019** • 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 5 NOTE: Except where noted otherwise, the years presented throughout this presentation relate to Argan’s fiscal year-end, which is January 31.
Net t In Income* $80 $70 $72.0 $70.3 $60 $61.3 $50 $ Millions $40 $40.1 $36.3 $30 $30.4 $23.3 $20 $10 $9.3 $- 2012 2013 2014 2015 2016 2017 2018 2019** 6 * Attributable to the Stockholders of AGX ** TTM through October 31, 2018
EBIT ITDA* $120 $116.1 $110.6 $100 CAGR ≅ 26 % $80 $ Millions $60 $64.3 $62.9 $66.3 $52.2 $40 $37.7 $20 $12.9 $- 2012 2013 2014 2015 2016 2017 2018 2019** 7 * Attributable to the Stockholders of AGX ** TTM through October 31, 2018
Book Val alue Tangible Book Value* & Cumulative Dividends Per Share $30.00 $6.00 $25.00 $5.25 $20.00 $4.25 $15.00 $3.25 $2.55 $23.05 $1.85 $20.34 $10.00 $16.08 $1.10 $0.50 $11.58 $11.29 $5.00 $9.50 $7.16 $5.87 $- 2012 2013 2014 2015 2016 2017 2018 Q32019 Tangible Book Value Cumulative Dividends 8 *Tangible Book Value = Total Stockholders’ Equity – Goodwill – Other Intangible Assets
Finan ancial al Results ts (in thousands, except per share data) October 31, 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 $ 32,434 $ 17,229 $ 15,205 88.3 Company Diluted per share 2.07 1.09 0.98 89.9 EBITDA attributable to stockholders of the 21,025 30,275 (9,250) (30.6) Company 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 (27.5)% $ 314,787 $ 434,015 $ (119,228) Net Liquidity (1) 339,616 301,817 37,799 12.5 Project backlog 365,000 379,000 (14,000) (3.7) 9 (1) We define Net Liquidity, or working capital, as our total current assets less our total current liabilities.
Finan ancial al Drivers 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. 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. 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 on this review, we booked a $16.5 million tax benefit in the current quarter. 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. 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. 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. 10
Overview of Gemma a Power S Syste tems 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% Business – engineering, procurement and construction of natural gas- ⚫ fired and alternative power energy facilities throughout the United States 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 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 Employees – Over 20% of staff employees are veterans ⚫ Custo tomers – Independent power producers and utilities ⚫ 11
Significan ant t GPS Current P t Projects ts Date FNTP Scheduled Project (1) Location Size of Facility Received (2) Completion Caithness Moxie Freedom 2018 (3) Pennsylvania 1,040 MW Nov-15 Generating Station 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 (4) Exelon West Medway II Facility Massachusetts 200 MW Apr-17 (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 act ivities 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. 12
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