Argan Inc: Form 10-Q for the period ended Jul 31, 2026

The following discussion summarizes the financial position of Argan, Inc. and its subsidiaries as of July 31, 2026, and the results of their operations for the three and six months ended July 31, 2026 and 2025, and should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for Fiscal 2026 that was filed with the SEC on March 26, 2026 (the “Annual Report”).

Cautionary Statement Regarding Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. We have made statements in this Item 2 and elsewhere in this Quarterly Report on Form 10-Q that may constitute “forward-looking statements.” The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements.

These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance, or achievements.

All comments concerning our expectations for future revenues and operating results are based on our forecasts for existing operations that do not include the potential impacts of any future acquisitions.

There are a number of important factors that could cause our actual results to differ materially from the results anticipated by our forward-looking statements, which include, but are not limited to:

• decreased demand for our services during economic downturns or unpredictable economic cycles;
• the concentration of our consolidated revenues in a limited number of customers and projects;
• unexpected adjustments, delays, suspensions or cancellations that reduce project backlog or the rate at which backlog is converted into revenues;
• disruptions or unfavorable changes in power market economics;
• reduced demand for our services resulting from increases in, or increased volatility of, natural gas prices;
• soft demand for electrical power;
• project disruptions due to unexpected changes in the foreign countries in which we operate;
• changes in U.S. trade policy, including the imposition of tariffs;
• delays or failures in obtaining required regulatory approvals, including permits, interconnection agreements and natural gas pipeline approvals;
• inflation and increases in the cost, or reductions in the availability, of labor, materials, components and equipment, including extended lead times for gas turbines and other long-lead equipment;
• work stoppages, union negotiations and other labor problems;
• risks relating to acquisitions, investments and divestitures, including the inability to complete such transactions or to integrate acquired businesses successfully;
• security threats, including cybersecurity threats, and related disruptions; and
• natural disasters, adverse weather, public health crises, geopolitical conflicts and other catastrophic events, including related disruptions to global energy markets and supply chains.

Additional factors include those described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, including under the captions Risk Factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Business, in our quarterly reports on Form 10-Q, including under the captions Risk Factors and Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in our subsequent filings with the SEC.

There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business, and we undertake no obligation to update or revise any forward-looking statements except as required by law. You should not place undue reliance on any forward-looking statements that we may make.

Business Description

The Company is primarily an engineering and construction firm that conducts operations through its wholly-owned subsidiaries across three distinct reportable business segments: Power, Industrial, and Teledata.

Power: Our Power segment provides a full range of engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting services to the power generation market. The customers include primarily independent power producers, public utilities, power plant equipment suppliers, and other commercial firms with significant power requirements. Customer projects are located in the U.S., Ireland, and the U.K.

Industrial: Our Industrial segment provides on-site services that support new plant construction and additions, maintenance turnarounds, shutdowns, and emergency mobilizations for industrial operations primarily located in the Southeast region of the U.S. The segment also fabricates, delivers, and installs metal components such as piping systems and pressure vessels. Its customers include datacenter developers and companies in the power, petrochemical, biopharmaceutical, pulp and paper, and specialty chemical industries, among other industrial end markets.

Teledata: Our Teledata segment provides project management, construction, installation, maintenance, repair, and emergency response services across power distribution and information, communications, and data networks. The segment’s customers include commercial and industrial organizations, as well as state and federal government agencies, primarily throughout the Mid-Atlantic and New England regions of the U.S.

Together, these segments enable us to serve a wide range of client needs across power generation, industrial construction, and teledata infrastructure, establishing our presence as a diversified provider in the construction and engineering sectors.

We may make opportunistic acquisitions and/or investments by identifying companies with significant potential for profitable growth and realizable synergies with one or more of our existing businesses. As a result, we may have more than one industrial focus depending on the opportunities and/or needs of our customers. Acquired companies will be operated in a manner that we believe will best provide long-term and enduring value for our stockholders.

Acquisition

On July 31, 2026, we acquired all of the membership interests of ValCor for total consideration of approximately $9.4 million, consisting of $8.0 million in cash, $0.5 million of our common stock issued from treasury, and $0.9 million for the acquisition-date fair value of contingent consideration. ValCor is reported within our Teledata segment. See Note 14 to the accompanying condensed consolidated financial statements.

The acquisition extends the geographic reach of our Teledata segment into New England and adds a customer base of defense and aerospace organizations that complements the segment’s existing commercial, industrial, and government customers. Because the acquisition closed on the last day of the quarter, ValCor did not contribute revenues or earnings to our results of operations for the three and six months ended July 31, 2026. The acquisition was not material to our condensed consolidated financial statements, and we do not expect it to have a material effect on our consolidated results of operations or financial condition.

Market Outlook

Most of our consolidated revenues relate to performance in the U.S. by the Power segment, which provides EPC services to design, build, and commission large-scale energy projects. In the U.S., electricity demand has reached its highest level in two decades, driven by the build-out of data centers supporting artificial intelligence technologies, the adoption of electric vehicles, and the reshoring of manufacturing activities. Keeping up with growing energy demand is further challenged by the aging fleet of traditional power facilities that are at or nearing the end of their operational lives. Throughout the U.S., the risk of electricity shortages is rising as the retirement of traditional power plants outpaces their replacements. Grid operators have emphasized the need for additional dispatchable, reliable power sources to support system stability, particularly during periods of peak demand or reduced renewable output. Natural gas-fired power plants are expected to remain a key component of future capacity additions due to their cost-effectiveness, reliability, and ability to support intermittent energy sources.

While utility-scale solar, wind, and battery storage projects continue to expand their prevalence – supported by declining capital costs, improved energy storage systems, and policy incentives – they often cannot provide the same level of consistent, around-the-clock power generation as thermal plants. Despite their increasing cost competitiveness and their rapid deployment over the past several years, the long-term trajectory of renewables may be influenced by shifts in energy policy, evolving regulatory frameworks, and grid integration challenges.

The pace of new power generation development continues to be constrained by a limited number of experienced EPC contractors, equipment supply limitations, interconnection delays, and specialized labor availability. Lead times for large gas turbines, transformers, and other grid equipment have extended meaningfully beyond historical norms as manufacturer order books have expanded, and equipment costs have risen accordingly. Competition for skilled craft labor has also intensified, as data center, semiconductor, liquefied natural gas, and industrial construction activity often draw from the same regional labor pools. These dynamics have contributed to a supply-constrained environment for large-scale power generation construction, which we believe supports a strong pipeline of project opportunities for contractors with demonstrated execution experience. Our backlog growth over the past year reflects these conditions and the continued demand for experienced contractors capable of executing complex power generation projects. However, the timing and extent of future project awards remain subject to a variety of factors, including regulatory developments, financing conditions, permitting timelines, equipment availability, and broader economic conditions, any of which could affect the pace at which new power generation projects move forward. For example, community opposition to new large-scale data center development has contributed to moratoria and other restrictions recently adopted or proposed in several states and localities, which could moderate the pace of load growth in affected markets, although these measures are directed at data center development rather than power generation.

Recent changes in U.S. trade policy, including the implementation of new or increased tariffs, have introduced cost and supply chain uncertainties affecting certain construction materials and equipment. Tariffs on imported materials, including steel and aluminum, could significantly impact the cost of building power plants and may cause import delays, increasing lead times necessary for materials to arrive at our construction sites. The resulting rise in material costs and delivery delays could lead to higher overall project costs and changes to project timelines. As the current U.S. administration’s approach to tariffs remains fluid, the full extent of these effects remains uncertain. We continue to monitor developments closely, as prolonged or expanded trade restrictions could negatively affect project costs, timing, and customer demand.

Project Backlog

As of July 31, 2026 and January 31, 2026, our consolidated project backlog amounts of $2.5 billion and $2.9 billion, respectively, consisted substantially of projects within our Power segment.

The amount of our project backlog reported at a point in time represents the expected revenue from the remaining work on projects where the scope is sufficiently defined and the contract value can be reasonably estimated. While the inclusion of contract values in project backlog involves management judgment based on the facts and circumstances, we typically include the value of the contract in project backlog upon receiving a notice to proceed from the project owner. In making the determination of project backlog, management may consider several factors, including terms of the contract, the degree of project financing and permitting, and historical experience with similar contracts. The start of new projects is primarily controlled by project owners and delays may occur that are beyond our control.

860 MW Thermal Project

In October 2025, we entered into an EPC services contract and received the corresponding full notice to proceed (“FNTP”) for the construction of an approximately 860 MW natural gas-fired power plant located in the Electric Reliability Council of Texas (“ERCOT”) market. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2028.

1.4 GW Thermal Project

In October 2025, we received FNTP on an EPC services contract for a 1.4 GW combined-cycle natural gas-fired power plant in Ward County, Texas. Construction began during the fourth quarter of Fiscal 2026, and the project has an expected completion date in calendar year 2029.

170 MW Thermal Project

In July 2025, we entered into an EPC services contract for the construction of a power plant with a planned electricity generation capacity of approximately 170 MW in County Meath, Ireland. Project activity commenced in the third quarter of Fiscal 2026. The project has an expected project completion date in calendar year 2028.

Sandow Lakes Power Station (“1.2 GW Power Station”)

In April 2025, we received a notice to proceed on an EPC services contract to build a 1.2 GW combined-cycle natural gas-fired power plant in Lee County, Texas. Project activity commenced in the second quarter of Fiscal 2026. The project has an expected completion date in calendar year 2028.

Tarbert Next Generation Power Station

In January 2025, we entered into an EPC services contract to build an approximately 300 MW biofuel power plant located in County Kerry, Ireland. The Tarbert Next Generation Power Station will run on 100% sustainable biofuels, specifically hydrotreated vegetable oil. Project activity commenced in the first quarter of Fiscal 2026. The project has an expected completion date towards the end of calendar year 2027.

700 MW Combined-Cycle Project

In December 2024, we entered into an EPC services contract and received the corresponding FNTP to build an approximately 700 MW combined-cycle natural gas-fired power plant located in the U.S. Project activity commenced in the fourth quarter of Fiscal 2025. Project completion is scheduled for calendar year 2028.

405 MW Midwest Solar Project

In August 2024, we received FNTP on an EPC services contract to construct a utility-scale solar field in Illinois with the capacity to provide 405 MW of electrical power. The project is expected to reach substantial completion during the fiscal quarter ending October 31, 2026.

Midwest Solar and Battery Projects

Between January and early May 2024, we received FNTPs for three state-of-the-art solar energy and battery energy storage facilities in Illinois. The three projects will cumulatively represent 160 MW of electrical power and 22 MW of energy storage. Two of these projects were completed in Fiscal 2025. Substantial completion for the remaining project was achieved during the first quarter of the fiscal year ending January 31, 2027 (“Fiscal 2027”), and final completion was achieved subsequent to July 31, 2026.

Trumbull Energy Center

In November 2022, we received FNTP related to an EPC services contract for the construction of a 950 MW combined-cycle natural gas-fired power plant in Lordstown, Ohio. Substantial completion of the project was reached during the fourth quarter of Fiscal 2026, and final completion was achieved during the first quarter of Fiscal 2027.

Industrial Segment Project Backlog

As of July 31, 2026, the Industrial segment’s project backlog was approximately $209.6 million as compared to $253.0 million on January 31, 2026. In November 2025, we were awarded a contract for the fabrication of approximately 2,000 horizontal pressure vessels intended for use in thermal energy storage and chilled water buffer cooling systems at the customer's data center facilities. To support execution of this contract and future orders, we purchased land in Farmville, North Carolina for construction of an additional fabrication facility, which is expected to be completed during the third quarter of Fiscal 2027.

Comparison of the Results of Operations for the Three Months Ended July 31, 2026 and 2025

The following schedule compares our operating results for the three months ended July 31, 2026 and 2025 (dollars in thousands):

Revenues

Power Segment

The revenues of the Power segment increased by 52.9%, or $104.3 million, to $301.2 million for the three months ended July 31, 2026 compared with revenues of $196.9 million for the three months ended July 31, 2025 as the quarterly construction activities increased for the 1.4 GW Thermal Project, the 700 MW Combined-Cycle Project, the 1.2 GW Power Station, and the 860 MW Thermal Project. The primary drivers for this segment’s revenues for the three months ended July 31, 2025, were the construction of the 405 MW Midwest Solar Project, the Midwest Solar and Battery Projects, and the Trumbull Energy Center. The revenues of this business segment represented approximately 78.4% of consolidated revenues for the quarter ended July 31, 2026 and 82.8% of consolidated revenues for the corresponding prior year quarter.

Industrial Segment

The revenues of the Industrial segment increased by $40.1 million, or 111.2%, to $76.2 million for the three months ended July 31, 2026 compared to revenues of $36.1 million for the three months ended July 31, 2025, as the amounts of field services construction activities and vessel fabrication work increased between periods. For the three months ended July 31, 2026 and 2025, the revenues of this segment represented 19.8% and 15.2% of consolidated revenues for the corresponding periods, respectively.

Teledata Segment

The revenues of the Teledata segment were $6.6 million for the three months ended July 31, 2026, compared with revenues of $4.7 million for the three months ended July 31, 2025.

Cost of Revenues

Due primarily to the increase in consolidated revenues for the three months ended July 31, 2026 compared with revenues for the three months ended July 31, 2025, consolidated cost of revenues also increased. These costs were $309.8 million and $193.5 million for the three-month periods ended July 31, 2026 and 2025, respectively.

For the three-month period ended July 31, 2026, we reported a consolidated gross profit of approximately $74.2 million, which represented a gross profit percentage of approximately 19.3% of corresponding consolidated revenues. For the three-month period ended July 31, 2025, we reported a consolidated gross profit of approximately $44.3 million, which represented a gross profit percentage of approximately 18.6% of corresponding consolidated revenues. The gross profit percentage increased between periods primarily due to the changing mix of projects and contract types and strong execution in our Power segment. The increase in gross profit percentage was partially offset by decreased performance on certain projects in our Industrial and Teledata segments. The gross profit percentages of corresponding revenues for the Power, Industrial, and the Teledata segments were 22.4%, 7.3% and 16.6%, respectively, for the quarter ended July 31, 2026. The gross profit percentages of corresponding revenues for the Power, Industrial, and the Teledata segments were 19.6%, 12.5% and 24.7%, respectively, for the quarter ended July 31, 2025.

Selling, General and Administrative Expenses

These costs were $17.4 million and $14.2 million for the three months ended July 31, 2026 and 2025, respectively, and represented 4.5% and 6.0% of corresponding consolidated revenues, respectively.

Other Income, Net

For the three months ended July 31, 2026 and 2025, the net amounts of other income were $10.1 million and $5.6 million, respectively, which primarily reflected income earned during the periods on investments, cash and cash equivalent balances. The increase in other income, net, period-over-period was driven by higher average balances of cash and invested funds, partially offset by a lower weighted average annual yield during the three months ended July 31, 2026 compared to the same period in the prior year.

Provision for Income Taxes

We recorded income tax expense for the three months ended July 31, 2026 in the net amount of approximately $13.6 million. Our effective income tax rate for the three months ended July 31, 2026 was 20.3%. This effective tax rate differed from the U.S. federal statutory rate of 21% due primarily to the favorable tax benefit resulting from stock option exercises and other share-based award settlements during the period.

We recorded income tax expense for the three months ended July 31, 2025 in the net amount of approximately $0.4 million. Our effective income tax rate for the three months ended July 31, 2025 was 1.0%, which differed from the U.S. federal statutory rate due primarily to the favorable tax benefit resulting from stock option exercises during the period.

Comparison of the Results of Operations for the Six Months Ended July 31, 2026 and 2025

The following schedule compares our operating results for the six months ended July 31, 2026 and 2025 (dollars in thousands):

Revenues

Power Segment

The revenues of the Power segment increased by 47.7%, or $170.6 million, to $527.9 million for the six months ended July 31, 2026 compared with revenues of $357.3 million for the six months ended July 31, 2025 as the construction activities increased for the 1.4 GW Thermal Project, the 700 MW Combined-Cycle Project, the 1.2 GW Power Station, and the 860 MW Thermal Project. The primary drivers for this segment’s revenues for the six months ended July 31, 2025, were the construction of the 405 MW Midwest Solar Project and the 700 MW Combined-Cycle Project. The revenues of this business segment represented approximately 78.2% of consolidated revenues for the six months ended July 31, 2026 and 82.8% of consolidated revenues for the corresponding prior year period.

Industrial Segment

The revenues of the Industrial segment increased by $69.2 million, or 106.1%, to $134.5 million for the six months ended July 31, 2026 compared to revenues of $65.2 million for the six months ended July 31, 2025, as the amounts of field services construction activities and vessel fabrication work increased between periods. For the six months ended July 31, 2026 and 2025, the revenues of this segment represented 19.9% and 15.1% of consolidated revenues for the corresponding periods, respectively.

Teledata Segment

The revenues of the Teledata segment were $12.6 million for the six months ended July 31, 2026, compared with revenues of $8.9 million for the six months ended July 31, 2025.

Cost of Revenues

Due primarily to the increase in consolidated revenues for the six months ended July 31, 2026 compared with revenues for the six months ended July 31, 2025, consolidated cost of revenues also increased. These costs were $539.6 million and $350.3 million for the six-month periods ended July 31, 2026 and 2025, respectively.

For the six-month period ended July 31, 2026, we reported a consolidated gross profit of approximately $135.3 million, which represented a gross profit percentage of approximately 20.1% of corresponding consolidated revenues. For the six-month period ended July 31, 2025, we reported a consolidated gross profit of approximately $81.1 million, which represented a gross profit percentage of approximately 18.8% of corresponding consolidated revenues. The gross profit percentage increased between periods primarily due to the changing mix of projects and contract types and strong execution in our Power segment. The increase in gross profit percentage was partially offset by decreased performance on certain projects in our Industrial and Teledata segments. The gross profit percentages of corresponding revenues for the Power, Industrial, and the Teledata segments were 23.0%, 9.2% and 13.9%, respectively, for the six months ended July 31, 2026. The gross profit percentages of corresponding revenues for the Power, Industrial, and the Teledata segments were 20.0%, 11.8% and 21.6%, respectively, for the six months ended July 31, 2025.

Selling, General and Administrative Expenses

These costs were $33.1 million and $26.7 million for the six months ended July 31, 2026 and 2025, respectively, and represented 4.9% and 6.2% of corresponding consolidated revenues, respectively.

Other Income, Net

For the six months ended July 31, 2026 and 2025, the net amounts of other income were $18.5 million and $11.0 million, respectively, which primarily reflected income earned during the periods on investments, cash and cash equivalent balances. The increase in other income, net, period-over-period was driven by higher average balances of cash and invested funds, partially offset by a lower weighted average annual yield during the six months ended July 31, 2026 compared to the same period in the prior year.

Provision for Income Taxes

We recorded income tax expense for the six months ended July 31, 2026 in the net amount of approximately $21.3 million. Our effective income tax rate for the six months ended July 31, 2026 was 17.6%. This effective tax rate differed from the U.S. federal statutory rate of 21% due primarily to the favorable tax benefit resulting from stock option exercises and other share-based award settlements during the period.

We recorded income tax expense for the six months ended July 31, 2025 in the net amount of approximately $7.6 million. Our effective income tax rate for the six months ended July 31, 2025 was 11.6%, which differed from the U.S. federal statutory rate due primarily to the favorable tax benefit resulting from stock option exercises during the period.

Liquidity and Capital Resources as of July 31, 2026

As of July 31, 2026 and January 31, 2026, our balances of cash and cash equivalents were $364.5 million and $339.5 million, respectively, which represented an increase of $25.0 million during the current fiscal year.

The net amount of cash provided by operating activities for the six months ended July 31, 2026 was $210.4 million. Our net income for the six months ended July 31, 2026, adjusted favorably by the net amount of non-cash income and expense items, represented a source of cash in the total amount of $106.6 million. The increase in contract liabilities of $113.1 million and the increase in the combined level of accounts payable and accrued expenses in the amount of $41.1 million represented sources of cash during the period. The decrease in contract assets of $7.8 million also represented a source of cash during the period. The increase in accounts receivable of $44.5 million and the increase in other assets in the amount of $13.7 million represented uses of cash during the period.

During the six months ended July 31, 2026, we used $130.7 million for investing activities, including $85.1 million, net of maturities, to invest in AFS securities consisting of U.S. Treasury notes. We also used $30.0 million, net of maturities, to invest in CDs. We also used $7.7 million for purchases of property, plant, and equipment. We also used $8.0 million, net of cash acquired, for the acquisition of ValCor.

For the six months ended July 31, 2026, we used $51.7 million in cash for financing activities, including $28.1 million for share-based award settlements, which represented payments for withholding taxes reimbursed by shares of common stock, net of proceeds received from stock option exercises. We also used $14.0 million for the payment of regular cash dividends and $9.6 million used to repurchase shares of common stock pursuant to our share purchase program. As of July 31, 2026, there were no restrictions with respect to intercompany payments between the holding company and all subsidiaries.

In connection with the ValCor acquisition, we may be required to pay contingent consideration in cash over the three-year period following the closing upon the satisfaction of specified conditions, and to pay additional cash and issue shares of our common stock under a three-year deferred compensation arrangement with a key employee of ValCor upon the achievement of specified performance targets. The purchase price also remains subject to customary post-closing adjustments, including those related to net working capital and indemnification obligations. We do not expect these amounts to have a material effect on our liquidity or capital resources.

As of July 31, 2026, certain amounts of our cash equivalents were invested in money market funds with assets invested in cash, U.S. Treasury obligations, other obligations issued by U.S. Government agencies and sponsored enterprises, and repurchase agreements secured by such obligations. Most of our operating bank account balances are maintained with the Bank. We do maintain certain euro-based bank accounts in Ireland and certain pound sterling-based bank accounts in the U.K. in support of our overseas operations.

In order to monitor the actual and necessary levels of liquidity for our business, we focus on net liquidity, or working capital, in addition to our cash balances. During the six months ended July 31, 2026, our net liquidity increased by $19.4 million to $440.4 million from $421.0 million as of January 31, 2026, due primarily to our net income, partially offset by the payment of cash for the ValCor acquisition, payment of cash dividends, common stock repurchases, and settlements of share-based awards, net of withholding taxes paid. Our working capital levels are less subject to the volatility that affects our cash and cash equivalents because we carry no debt service obligations, fixed asset acquisitions in a reporting period are typically low, and our net liquidity includes short-term investments and AFS investments.

We believe that cash on hand, our cash equivalents, cash that will be provided from the maturities of short-term investments and other debt securities and cash generated from our future operations, with or without funds available under our Credit Agreement, will be adequate to meet our general business needs in the foreseeable future. In general, we maintain significant liquid capital in our consolidated balance sheet to ensure the maintenance of our bonding capacity and to provide parent company performance guarantees for EPC and other construction projects.

However, any significant future acquisition, investment, or other unplanned cost or cash requirement may require us to raise additional funds through the issuance of debt and/or equity securities. There can be no assurance that such financing will be available on terms acceptable to us, or at all.

Financing Arrangements

On May 24, 2024, we executed with the Bank the Credit Agreement with an expiration date of May 31, 2027. The Credit Agreement, which was amended on October 23, 2025, has a base lending commitment amount of $35.0 million and establishes the interest rate for revolving loans at SOFR plus 1.85%. In addition to the base commitment, the credit facility includes an accordion feature that allows for an additional commitment amount of $30.0 million, subject to certain conditions. We may use the borrowing ability to cover other credit instruments issued by the Bank for our use in the ordinary course of business as defined in the Credit Agreement. Further, on May 31, 2024, we entered into a companion facility, in the amount of $25.0 million, pursuant to which an overseas subsidiary of the Company may cause the Bank’s European entity to issue letters of credit on its behalf that are secured by a blanket parent company guarantee issued by Argan to the Bank.

As of July 31, 2026, we did not have any outstanding borrowings under the Credit Agreement. However, the Bank has issued a letter of credit in the total outstanding amount of $0.5 million as of July 31, 2026. The comparable outstanding total amount of the letter of credit at January 31, 2026 was $0.3 million.

We have pledged the majority of the Company’s assets to secure its financing arrangements. The Bank’s consent is not required for acquisitions, divestitures, cash dividends, or significant investments as long as certain conditions are met. The Credit Agreement requires that we comply with certain financial covenants at its fiscal year-end and at each fiscal quarter-end. The Credit Agreement includes other terms, covenants and events of default that are customary for a credit facility of its size and nature, including a requirement to achieve positive adjusted earnings before interest, taxes, depreciation, and amortization, as defined, over each rolling twelve-month measurement period. As of July 31, 2026, we were in compliance with the covenants and other requirements of the Credit Agreement.

Performance Bonds and Guarantees

In the normal course of business and for certain major projects, we may be required to obtain surety or performance bonding, to provide parent company guarantees, or to cause the issuance of letters of credit (or some combination thereof) in order to provide performance assurances to clients on behalf of one of our subsidiaries.

If our services under a guaranteed project would not be completed, or if it would be determined to have resulted in a material defect or other material deficiency, then we could be responsible for monetary damages or other legal remedies. As is typically required by any surety bond, we would be obligated to reimburse the issuer of any surety bond provided on behalf of a subsidiary for any cash payments made thereunder. The commitments under performance bonds generally end concurrently with the expiration of the related contractual obligation.

As of July 31, 2026, the estimated amount of our unsatisfied bonded performance obligations, covering all of our subsidiaries, was approximately $0.9 billion. In addition, as of July 31, 2026, the outstanding amount of bonds covering other risks, including warranty obligations and contract payment retentions related to completed activities, was $104.3 million.

When sufficient information about claims related to performance on projects would be available and monetary damages or other costs or losses would be determined to be probable, we would record such losses. As our subsidiaries are wholly-owned, any actual liability related to contract performance is ordinarily reflected in the financial statement account balances determined pursuant to the Company’s accounting for contracts with customers. Any amounts that we may be required to pay in excess of the estimated costs to complete contracts in progress as of July 31, 2026 are not estimable.

Solar Energy Project Investments

We make investments in limited liability companies that make equity investments in solar energy projects that are eligible to receive energy tax credits, for which we have received substantially all of the income tax benefits associated with those investments. As of July 31, 2026, we had no remaining cash investment commitments related to the solar tax credit entities in which we have invested. It is likely that we will evaluate opportunities to make other alternative energy project investments in the future.

Development Financing

We selectively participate in power plant project development and related financing activities. As is common in our industry, EPC contractors and third parties periodically form joint ventures, limited partnerships and limited liability companies for purposes of executing a project or program for a project owner. These special purpose entities are typically dissolved upon completion of the project or program.

We have agreed to support arrangements with independent project developers, primarily by providing development financing to special purpose entities formed to advance natural gas-fired power plant projects. Several of these arrangements have resulted in our successful construction of gas-fired power plants. In each case, we received project development fees, and our loans were repaid in full plus interest and fees. Not all such business development endeavors are successful, and we have recorded impairment losses as a result in the past. As of July 31, 2026, there were no development financing loans outstanding.

Deferred Tax Assets and Liabilities

We maintain a valuation allowance against certain deferred tax assets of our U.K. subsidiary, consisting primarily of net operating loss carryforwards. Our U.K. operations have generated taxable income in recent periods, and it is reasonably possible that we could release all or a portion of this valuation allowance within the next 12 months. A full or partial release would result in a material income tax benefit in the period of release and would reduce our effective income tax rate for that period. See Note 11 to the accompanying condensed consolidated financial statements.

Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”)

We believe that EBITDA is a meaningful presentation that enables us to assess and compare our operating performance on a consistent basis by removing from our operating results the impacts of our capital structure, the effects of the accounting methods used to compute depreciation and amortization and the effects of operating in different income tax jurisdictions. Further, we believe that EBITDA is widely used by investors and analysts as a measure of performance.

However, as EBITDA is not a measure of performance calculated in accordance with U.S. GAAP, we do not believe that this measure should be considered in isolation from, or as a substitute for, the results of our operations presented in accordance with U.S. GAAP that are included in our consolidated financial statements. In addition, our EBITDA does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs.

The following tables present EBITDA for the three and six months ended July 31, 2026 and 2025, respectively (amounts in thousands):

Critical Accounting Policies

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report filed with the SEC on March 26, 2026.

Recently Issued Accounting Pronouncements

See Note 1 to the accompanying condensed consolidated financial statements for discussion on recently issued accounting pronouncements.

There have been no material changes in our exposure to market risk during the six months ended July 31, 2026.

For a broader discussion of the Company’s exposure to market risks, refer to the Company’s market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of the Annual Report.

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of July 31, 2026. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of July 31, 2026, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified by the SEC, and the material information related to the Company and its consolidated subsidiaries is made known to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure in the reports.

Changes in internal controls over financial reporting. There have been no significant changes in our internal control over financial reporting (as defined in Rules 13a-15 and 15d-15 under the Exchange Act) during the fiscal quarter ended July 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Quarterly Report on Form 10–Q, carefully consider the factors discussed in Part I, Item 1A Risk Factors in our Annual Report on Form 10–K, which could materially affect our business, financial condition, or future results.