AGAN, INC. June 2010 June 2011 June 2018
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. 2
Company Overview NYSE: AGX ⚫ Holding company for four 100% controlled subsidiaries ⚫ Market capitalization (5/31/18) – $0.6 billion ⚫ Solid long term annual rate of return 5yr = 22%* ⚫ Quarterly dividend $0.25 per share ⚫ Quarter Ended Trailing Twelve ⚫ (in millions) April 30, 2018 Months (TTM) Revenues $ 141 $ 804 Net Income** 5 56 EBITDA** 8 92 Strong balance sheet at 4/30/18 ⚫ No leverage – Cash & short-term investments - $366 million – Net liquidity - $300 million – Project backlog (4/30/18) – $0.5 billion ⚫ * As of 5/31/2018 3 ** Attributable to the Stockholders of AGX
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 8.1% 5.7% The Roberts Company (“TRC”) is ⚫ principally an industrial steel fabricator and field services provider serving both light and 1.5% heavy industrial organizations Atlantic Projects Company (“APC”) ⚫ provides turbine, boiler, large rotating equipment installation, commissioning and outage services to the global power industry SMC Infrastructure Solutions (“SMC”) ⚫ provides telecommunications data 84.7% infrastructure services 4
Revenues* $1,000 $900 $893 $800 $804 $700 $675 $600 $ Millions $500 $400 $413 $383 $300 $279 $200 $227 $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 April 30, 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 Income* $80 $70 $72.0 $70.3 $60 $56.4 $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 April 30, 2018
EBITDA* $140 35% EBITDA CAGR ≅ 32 % $120 30% $116.1 $110.6 $100 25% $91.8 $80 20% $ Millions $60 15% $62.9 $66.3 $40 10% $52.2 $37.7 $20 5% $12.9 $- 0% 2012 2013 2014 2015 2016 2017 2018 2019** EBITDA EBITDA Margins 7 * Attributable to the Stockholders of AGX ** TTM through April 30, 2018
Book Value Tangible Book Value* & Cumulative Dividends Per Share $30.00 $25.00 $5.50 $5.25 $20.00 $4.25 $15.00 $3.25 $2.55 $1.85 $20.42 $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 Q12019 Tangible Book Value Cumulative Dividends 8 *Tangible Book Value = Total Stockholders’ Equity – Goodwill – Other Intangible Assets
Financial Results (in thousands, except per share data) April 30, 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 $ 4,837 $ 20,625 $ (15,788) (76.5) Company Diluted per share 0.31 1.31 (1.00) (76.3) EBITDA attributable to stockholders of the 8,147 32,456 (24,309) (74.9) Company 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 (15.8)% $ 365,581 $ 434,015 $ (68,434) Net Liquidity (1) 300,319 301,817 (1,498) (0.5) Project backlog 524,000 379,000 145,000 38.3 9 (1) We define Net Liquidity, or working capital, as our total current assets less our total current liabilities.
Financial Drivers 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. 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. 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. 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. 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 our 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. 10
Overview of Gemma Power Systems 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% 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 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 Employees – Over 20% of staff employees are veterans ⚫ Customers – Independent power producers and utilities ⚫ 11
Significant GPS Current Projects Date FNTP Scheduled Project (1) Location Size of Facility Received (2) 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 Kings Mountain Energy Center North Carolina 475 MW Mar-16 2018 Exelon West Medway II Facility Massachusetts 200 MW Apr-17 2018 (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. 12
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