Argan, Inc. Reports Second Quarter Results

ROCKVILLE, Md.–(BUSINESS WIRE)–Argan, Inc. (NYSE: AGX) (“Argan” or the “Company”) today
announced financial results for its second quarter ended July 31, 2017.
For additional information, please read the Company’s Quarterly Report
on Form 10-Q, which the Company intends to file today with the U.S.
Securities and Exchange Commission (the “SEC”). The Quarterly Report can
be retrieved from the SEC’s website at www.sec.gov
or from the Company's website at www.arganinc.com.

Summary Information: (dollars in thousands, except per share data
(unaudited)):

Second Quarter Results:

Revenues increased to a quarterly record of $260 million, up 60%
compared to the prior year quarter, primarily due to Gemma Power Systems
(GPS) having reached peak construction activities on four large, natural
gas-fired power plants. The power industry services segment continues to
drive our financial results and represents 92% of consolidated revenues
for the quarter ended July 31, 2017. Gross profit increased 17% to $51
million, primarily due to the increased revenues, while gross margin
percentage decreased from 27.1% to 19.8% compared to the prior year
quarter, which primarily reflected the achievement of the substantial
completion of two natural gas-fired power plant projects in the prior
year period.

Selling, general and administrative expenses increased $3.3 million to
$10.8 million, primarily due to increased incentive and stock option
compensation and human capital costs reflective of larger operations,
but decreased as a percentage of revenues to 4.2% from 4.6% in the prior
year quarter. Also in the prior year quarter, Atlantic Projects Company
(APC) recorded an impairment loss on goodwill of $2.0 million,
reflecting the suspension of a major project and other “Brexit” impacts
to its operations in the UK at that time. Net income attributable to
non-controlling interests decreased 95%, or $3.4 million, as activities
on two large power plant projects were completed last year by joint
ventures. These factors and a relatively consistent effective income tax
rate resulted in second quarter net income attributable to our
stockholders increasing 38% to $27.1 million, or $1.72 per diluted
share, compared to $19.7 million, or $1.29 per diluted share, for the
prior year quarter. EBITDA attributable to the stockholders for the
quarter ended July 31, 2017 increased 33% to $42.7 million, or $2.71 per
diluted share, from $32.1 million, or $2.10 per diluted share, for the
prior year quarter.

Six Month Results:

For the six months ended July 31, 2017, consolidated revenues increased
67% to a record $490 million over the prior year period, primarily due
to GPS having ramped up and reached peak construction activities on four
large, natural gas-fired power plants. The power industry services
segment also represented 92% of consolidated revenues for the six months
ended July 31, 2017. Gross profit increased 27% to $92 million,
primarily due to the increased revenues, while gross margin percentage
decreased from 24.7% to 18.7% compared to the prior year period, which
primarily reflected the reason discussed above, the changes in the mix
and progress of various power plant projects and the differences in
their respective gross margins.

For the same reasons discussed above, for the six months ended July 31,
2017, selling, general and administrative expenses increased $5.7
million to $20.3 million and net income attributable to non-controlling
interests decreased 95%, or $5.2 million, over the prior year period. In
addition, other income from short-term investments increased $1.9
million from the prior year period due to higher yields and investment
balances. These factors and a relatively consistent effective income tax
rate resulted in net income attributable to our stockholders for the six
months ended July 31, 2017 increasing 50% to $47.8 million, or $3.03 per
diluted share, compared to $31.9 million, or $2.09 per diluted share,
for the prior year period. EBITDA attributable to the stockholders for
the six months ended July 31, 2017 increased 44% to $75.2 million, or
$4.76 per diluted share, from $52.3 million, or $3.43 per diluted share,
for the prior year period.

The Company’s balance sheet continues to strengthen. As of July 31,
2017, cash, cash equivalents and short-term investments totaled $557
million and net liquidity was $288 million. The Company has no bank
debt. The work performed in the quarter reduced the contract backlog.
However, the decrease was partially offset with the addition of the APC
contract for the erection of a 299 MW biomass boiler in Teesside,
England. Contract backlog remained a healthy $0.7 billion as of July 31,
2017.

Commenting on Argan’s results, Rainer Bosselmann, Chairman and Chief
Executive Officer, stated, “On a trailing twelve-month basis, we have
reached $872 million in revenues, $86 million in net income and $134
million in EBITDA. This growth is a direct result of our continued
successful execution on major EPC projects due, in no small part, to the
dedication and determination of our employees. As these projects move
from peak construction to their later stages, we are committed to
maintaining the quality of performance and customer satisfaction while
creating shareholder value, and we remain hard at work in our efforts to
add new projects to the Company backlog.”

About Argan, Inc.

Argan’s primary business is providing a full range of services to the
power industry including the engineering, procurement and construction
of natural gas-fired power plants, along with related commissioning,
operations management, maintenance, project development and consulting
services, through its Gemma Power Systems and Atlantic Projects Company
operations. Argan also owns SMC Infrastructure Solutions, which provides
telecommunications infrastructure services, and The Roberts Company,
which is a fully integrated fabrication, construction and industrial
plant services company.

Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the federal securities
laws and are subject to risks and uncertainties including, but not
limited to: (1) the continued strong performance of our power industry
services business; (2) the Company’s ability to successfully and
profitably integrate acquisitions; and (3) the Company’s ability to
achieve its business strategy while effectively managing costs and
expenses. Actual results and the timing of certain events could differ
materially from those projected in or contemplated by the
forward-looking statements due to a number of factors detailed from time
to time in Argan’s filings with the SEC. In addition, reference is
hereby made to cautionary statements with respect to risk factors set
forth in the Company’s most recent reports on Form 10-K and 10-Q, and
other SEC filings.

Management uses EBITDA, a non-GAAP financial measure, for planning
purposes, including the preparation of operating budgets and the
determination of appropriate levels of operating and capital
investments. Management believes that EBITDA provides additional insight
for analysts and investors in evaluating the Company's financial and
operational performance and in assisting investors in comparing the
Company’s financial performance to those of other companies in the
Company’s industry. However, EBITDA is not intended to be an alternative
to financial measures prepared in accordance with GAAP and should not be
considered in isolation from the Company’s GAAP results of operations.
Consistent with the requirements of SEC Regulation G, reconciliations of
the Company’s non-GAAP financial results from net income are included in
the presentations above and investors are advised to carefully review
and consider this information as well as the GAAP financial results that
are presented in the Company’s SEC filings.

Contacts

Argan, Inc.
Company Contact:
Rainer Bosselmann,
301-315-0027
or
Investor Relations Contact:
David
Watson, 301-315-0027