Argan Inc.

Company Overview

Business Model: Argan, Inc. is primarily an engineering and construction firm that operates through three wholly-owned subsidiaries across distinct reportable business segments: Power, Industrial, and Teledata. The Company functions as a holding company, pursuing opportunistic acquisitions and investments. Its core value proposition involves providing a comprehensive suite of services, including engineering, procurement, construction, commissioning, maintenance, project development, and technical consulting for the power generation market. Additionally, it offers on-site services for industrial operations and provides project management, construction, installation, maintenance, repair, and emergency response services for power distribution and information, communications, and data networks. Revenue is primarily generated from long-term construction contracts, often fixed-price, with recognition over time based on progress towards completion.

Market Position: Argan, Inc. positions itself as a diversified provider in the construction and engineering sectors.

• Power Segment: Emphasizes a proven track record for designing, building, and commissioning natural gas-fired and alternative energy power systems, supported by extensive design, construction, project management, start-up, and operating experience. It competes with large, well-capitalized global firms and regional companies, differentiating through responsiveness, experienced teams, and a customer-focused culture. The number of capable competitors for domestic gas-fired EPC work has declined, though growing demand may attract new entrants.
• Industrial Segment: Serves industrial customers primarily in the Southeastern United States, including leading companies in aluminum rolling and recycling, data center development, electric vehicle manufacturing, fertilizer and specialty chemicals, and pulp and paper. Competition is based on technical expertise, safety performance, project execution, reputation, cost competitiveness, and adherence to schedules.
• Teledata Segment: Operates in the fragmented and competitive telecommunication and infrastructure services industry. It competes with regional to large national and multinational contractors by emphasizing its high-quality reputation, customer base, security-cleared personnel, and motivated workforce.

Recent Strategic Developments:

• Power Segment:
  • Secured significant EPC contracts in Fiscal 2026, including an approximately 860 MW natural gas-fired power plant in the ERCOT market (construction began Q4 Fiscal 2026, expected completion 2028), a 1.4 GW combined-cycle natural gas-fired power plant in Ward County, Texas (construction began Q4 Fiscal 2026, expected completion 2029), and a 1.2 GW combined-cycle natural gas-fired power plant in Lee County, Texas (project activity commenced Q2 Fiscal 2026, expected completion 2028).
  • Commenced project activity for a 170 MW power plant in County Meath, Ireland (Q3 Fiscal 2026, expected completion 2028), and an approximately 300 MW biofuel power plant in County Kerry, Ireland (Tarbert Next Generation Power Station) in Q1 Fiscal 2026, expected completion late 2027.
  • Achieved substantial completion of the 950 MW Trumbull Energy Center in Lordstown, Ohio, during Q4 Fiscal 2026, with project completion scheduled for H1 Fiscal 2027.
  • Completed the Louisiana LNG Facility project (installation of five 90 MW gas turbines) during H1 Fiscal 2026.
• Industrial Segment: Promoted the segment's then-president to also serve as chief executive officer of the segment in Fiscal 2026 as part of long-term succession planning. The segment added contracts related to an automotive plant, data centers, an aluminum rolling and recycling facility, a water treatment plant, and other industries to its project backlog during Fiscal 2026.
• Teledata Segment: Hired a new chief executive officer in Fiscal 2025 to focus on expanding market presence.
• Corporate: Appointed a senior vice president, legal, to headquarters staff in Fiscal 2024 to enhance commercial risk standardization and minimization in customer contracts.

Geographic Footprint:

• United States: Primary operational region for all three segments. Power segment projects are located across the U.S., Industrial segment primarily in the Southeastern U.S., and Teledata segment primarily in the Mid-Atlantic region, with additional operations in New England and the Southeast.
• International Exposure:
  • Republic of Ireland: Primary international operation for the Power segment, focusing on engineering and construction services for major electric utilities, independent power plant owners, major data center operators, and original equipment manufacturers.
  • United Kingdom: Primary international operation for the Power segment, focusing on engineering and construction services for major electric utilities, independent power plant owners, major data center operators, and original equipment manufacturers.

Financial Performance

Revenue Analysis

Profitability Metrics (Fiscal 2026):

• Gross Margin: 20.5%
• Operating Margin: 14.3%
• Net Margin: 14.6%

Investment in Growth:

• R&D Expenditure: Not explicitly stated as a separate line item in the financial statements.
• Capital Expenditures: $3.9 million
• Strategic Investments:
  • $11.5 million in Fiscal 2026 (following $13.0 million in Fiscal 2025) for an additional solar tax credit entity, with no remaining cash investment commitments as of January 31, 2026.
  • Repayment of a $5.0 million development loan to a special purpose entity for a natural gas-fired power plant in Fiscal 2026, which was funded in Fiscal 2025.

Business Segment Analysis

Power Segment

Financial Performance:

• Revenue: $756.5 million (+9.2% YoY)
• Operating Margin: 18.0%
• Key Growth Drivers: Increased construction activity for the 405 MW Midwest Solar Project, the 700 MW Combined-Cycle Project, and the commencement of several recently started gas-fired projects. The segment experienced significant improvement in profitability, reflecting strong execution and strategic discipline, particularly with the Trumbull Energy Center.
• Project Backlog: Over $2.7 billion as of January 31, 2026, up from approximately $1.3 billion as of January 31, 2025.

Product Portfolio:

• Full range of engineering, procurement, construction (EPC), commissioning, maintenance, project development, and technical consulting services.
• Projects include combined-cycle facilities, simple-cycle peaking plants, biofuel plants, biomass plants, solar fields, solar fields with battery storage, and wind farms.
• International operations provide turbine, boiler, and large rotating equipment engineering, procurement, installation, commissioning, and outage services.

Market Dynamics:

• Customers: Primarily independent power producers, public utilities, power plant equipment suppliers, and other commercial firms with significant power requirements. Three Power segment customers accounted for 23%, 16%, and 11% of consolidated revenues in Fiscal 2026.
• Market Trends: Driven by increased U.S. electricity demand (data centers, electric vehicles, manufacturing onshoring), an aging power generation fleet, and the need for dispatchable, reliable power sources. Natural gas remains a primary source, complemented by growing utility-scale solar and battery storage. Overseas markets (Republic of Ireland, United Kingdom) offer opportunities due to renewable energy objectives and the need for flexible generation. The market faces a supply-constrained environment due to a limited number of experienced EPC contractors, specialized labor, and equipment manufacturing capacity.

Industrial Segment

Financial Performance:

• Revenue: $167.6 million (0.0% YoY)
• Operating Margin: 7.8%
• Key Growth Drivers: Increased field services construction activities were largely offset by decreased supporting vessel fabrication work. Project backlog significantly increased to approximately $253.0 million as of January 31, 2026, from $53.2 million in the prior year, driven by new contracts for automotive plants, data centers, aluminum rolling and recycling facilities, and water treatment plants.

Product Portfolio:

• On-site services supporting new plant construction and additions, maintenance turnarounds, shutdowns, and emergency mobilizations for industrial operations.
• Fabrication, delivery, and installation of metal components, including piping systems and pressure vessels.

Market Dynamics:

• Customers: Leading companies in the aluminum rolling and recycling industry, data center development, electric vehicle manufacturing, fertilizer and other specialty chemicals, pulp and paper, water and wastewater treatment facilities, and other industrial customers, primarily in the Southeastern U.S. Many are large multinational organizations.
• Market Trends: Demand is driven by increased manufacturing investment, infrastructure upgrades, data center development, biotechnology and life sciences projects, energy storage deployment, and clean water and environmental initiatives in the Southeastern U.S. The market faces headwinds such as rising labor costs, skilled labor availability constraints, and supply chain volatility.

Teledata Segment

Financial Performance:

• Revenue: $20.6 million (+52.0% YoY)
• Operating Margin: 1.1%
• Key Growth Drivers: Expansion of market presence and growing demand for telecommunications and technology infrastructure. Project backlog increased to $8.4 million as of January 31, 2026, from $3.6 million in the prior year.

Product Portfolio:

• Project management, construction, installation, maintenance, repair, and emergency response services.
• Strengthens and modernizes both outside plant and inside plant infrastructure supporting information technology, operational technology, IoT connectivity, and power infrastructure.
• Services include trenchless directional boring, excavation for underground communication and power networks, aerial cable services, installation of buried cable, high and low voltage electric lines, private area outdoor lighting systems, structured cable installations, terminations, and connectivity.

Market Dynamics:

• Customers: Commercial and industrial organizations, as well as state and federal government agencies, primarily throughout the Mid-Atlantic region of the U.S., with additional operations in New England and the Southeast. Major customers include electricity cooperatives, counties and municipalities, and state government agencies.
• Market Trends: Demand for telecommunications and technology infrastructure continues to grow, driven by increased data center development, expansion of broadband and fiber networks, deployment of IoT-enabled systems, and ongoing grid modernization initiatives.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $9.9 million (64,699 shares) in Fiscal 2026. The board of directors authorized an additional $25 million increase on April 10, 2025, bringing the total authorized amount to $150 million, with the program extended through January 2027.
• Dividend Payments: $24.3 million in Fiscal 2026. The regular quarterly dividend was increased from $0.375 to $0.50 per share for the quarter ended October 31, 2025.
• Future Capital Return Commitments: The Share Repurchase Program is authorized for up to $150 million through January 2027. The board of directors evaluates dividend payments quarterly.

Balance Sheet Position (as of January 31, 2026):

• Cash and Equivalents: $339.5 million
• Total Debt: $0 (no borrowings outstanding under the Credit Agreement)
• Net Cash Position: $895.0 million
• Debt Maturity Profile: The Credit Agreement with Bank of America, N.A. has an expiration date of May 31, 2027, with a base lending commitment of $35.0 million and an accordion feature for an additional $30.0 million. No borrowings were outstanding as of January 31, 2026.

Cash Flow Generation (Fiscal 2026):

• Operating Cash Flow: $414.7 million
• Free Cash Flow: $410.8 million
• Cash Conversion Metrics: The temporary increase in contract liabilities of $214.7 million represented a significant source of cash, primarily due to the early phase of construction activities on certain projects. A decrease in accounts receivable of $42.3 million also contributed to cash generation.

Operational Excellence

Production & Service Model: Argan, Inc. provides full-service engineering, procurement, construction (EPC), commissioning, maintenance, project development, and technical consulting services. The Company emphasizes efficient project completion and maintenance. It employs a flexible workforce model, utilizing direct hires, subcontractors, and existing internal personnel based on project requirements and regional labor dynamics. The Industrial segment also operates a pipe and vessel fabrication facility.

Supply Chain Architecture:

• Key Suppliers & Partners: The Company is not dependent on any single source for major equipment components or construction materials, although the number of suppliers can be limited in certain cases. Project owners may directly procure major components, sometimes with the Company's assistance. The Company has significant experience working with major gas-fired turbine manufacturers.
• Supply Chain Management: Actively manages risks associated with supply chain disruptions and sourcing issues. Mitigates exposure to price volatility by limiting pricing quote durations and procuring equipment and construction supplies during the early phases of major fixed-price contracts.
• Industrial Segment Fabrication: The Industrial segment's fabrication facility provides internal flexibility for certain pipe and vessel fabrication work.

Facility Network:

• Corporate Headquarters: Leased office space in Arlington, Virginia.
• Power Segment: Owns a three-story office building in Glastonbury, Connecticut (U.S. headquarters). International operations own two floors and lease an additional floor of an office building in Limerick, Republic of Ireland (headquarters), and own an operations support facility in Nenagh, Republic of Ireland (10,663 sq ft warehouse/office). Leases office space in Derby, England.
• Industrial Segment: Owns and occupies an industrial fabrication and warehouse facility (approximately 90,000 sq ft) with office space in Winterville, North Carolina (headquarters). Leases several nearby offices.
• Teledata Segment: Leases facilities in Tracys Landing, Maryland (headquarters, 5 acres, 2,400 sq ft maintenance facility, office space). Also leases office and warehouse space (approximately 11,460 sq ft) in Hampton, Virginia.
• Project-Specific Facilities: May lease local office space, construction offices on or near job sites, storage yards for equipment and materials, and temporary housing units under short-term arrangements for field operations.

Operational Metrics:

• Safety Performance: OSHA reportable incident rates (weighted by hours worked by subsidiaries) were 0.45 in calendar year 2025, 0.56 in 2024, 0.43 in 2023, 0.60 in 2022, and 0.48 in 2021. These rates were significantly lower than the national average rates in the industry (NAICS – 2379) for 2021-2024.
• Workforce: 1,409 employees as of January 31, 2026, including craft and non-craft labor, substantially all full-time. The non-craft workforce is currently at its highest level, supporting growth across all business segments.
• Bonded Performance Obligations: Estimated unsatisfied bonded performance obligations of all subsidiaries were approximately $0.5 billion as of January 31, 2026. Outstanding bonds covering other risks, including warranty obligations and contract payment retentions related to completed activities, were $44.7 million.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Direct Sales: Utilizes project leadership and dedicated field project management teams for direct customer engagement, with project owners having direct access to business segment senior management.
• Competitive Bidding: Competes for projects through a combination of negotiated contracts, repeat business with existing customers, and competitive bidding processes.

Customer Portfolio:

• Enterprise Customers:
  • Power Segment: Primarily independent power producers, public utilities, power plant equipment suppliers, and other commercial firms with significant power requirements.
  • Industrial Segment: Leading companies in the aluminum rolling and recycling industry, data center development, electric vehicle manufacturing, fertilizer and other specialty chemicals, pulp and paper, and water and wastewater treatment facilities. Many are large multinational organizations.
  • Teledata Segment: Commercial and industrial organizations, state and federal government agencies, electricity cooperatives, counties and municipalities, and technology-oriented government contracting firms.
• Customer Concentration:
  • For Fiscal 2026, three Power segment customers accounted for approximately 23%, 16%, and 11% of consolidated revenues.
  • As of January 31, 2026, accounts receivable balances from three major customers represented 29%, 19%, and 11% of the consolidated balance.
  • As of January 31, 2026, contract asset balances attributable to three major customers represented 23%, 22%, and 19% of the consolidated balance.

Geographic Revenue Distribution (Fiscal 2026):

• United States: 90.2% of total revenue
• Republic of Ireland: 6.9% of total revenue
• United Kingdom: 2.9% of total revenue
• Growth Markets: The Republic of Ireland and the United Kingdom are identified as important overseas power markets with ongoing construction opportunities, driven by ambitious renewable energy objectives and the need for flexible, dispatchable generation.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics:

• Engineering and Construction Industry: Subject to cyclical fluctuations influenced by economic conditions, project owners’ business cycles, labor and materials constraints, interest rate changes, and regulatory or political developments.
• Power Generation Market: Characterized by increased U.S. electricity demand (driven by data centers, electric vehicle sales, and manufacturing onshoring), an aging power generation fleet, and challenges for grid reliability. There is a growing recognition of the importance of dispatchable, reliable power sources. Natural gas remains a primary source, complemented by utility-scale solar and battery storage. The market faces a supply-constrained environment due to a limited number of experienced EPC contractors, specialized labor, equipment manufacturing capacity, and project development timelines.
• Industrial Construction Market: Demand is driven by manufacturing investment, infrastructure upgrades, data center development, biotechnology and life sciences projects, energy storage deployment, and clean water and environmental initiatives, particularly in the Southeastern U.S. The market faces headwinds such as rising labor costs, skilled labor availability constraints, and supply chain volatility.
• Telecommunication and Infrastructure Services Industry: Fragmented and competitive, with growing demand for network capacity, connectivity, and digital infrastructure driven by data center development, broadband and fiber network expansion, deployment of IoT-enabled systems, and ongoing grid modernization initiatives.

Competitive Positioning Matrix (Argan, Inc.):

Direct Competitors

Primary Competitors:

• Power Segment: Large and well-capitalized private and public firms in the construction and engineering services industry, including global businesses. Also competes with regional construction services companies.
• Industrial Segment: A range of regional and national industrial construction contractors, specialty mechanical contractors, and fabrication companies.
• Teledata Segment: Providers ranging from regional companies to larger firms servicing multiple regions, as well as large national and multi-national contractors.

Emerging Competitive Threats:

• Artificial Intelligence (AI): The increasing use of AI, including AI-enabled features in third-party products, poses risks related to data security, confidentiality, and privacy. Evolving AI-related laws and regulations may impose additional compliance costs. Competitors adopting AI more effectively or rapidly could gain a competitive advantage.
• New Entrants/Re-engagement: Growing demand for new gas-fired generation may attract new entrants or prompt former competitors to re-engage in the EPC market.

Competitive Response Strategy:

• Emphasizes its proven track record, value-add services, efficient project completion, and maintenance.
• Focuses on quick reaction to customer requirements, strong experienced teams, and a customer-focused culture.
• Maintains training and safety programs to support workforce development and compliance.
• Actively manages supply chain risks and price volatility through procurement strategies and contractual terms.
• Pursues selective construction opportunities in international markets consistent with its experience in power generation and related infrastructure.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Economic Downturns/Cycles: Demand for services may decrease during economic downturns or unpredictable economic cycles, potentially leading to project delays, reductions, or cancellations. Adverse industry conditions may reduce customers' ability or willingness to fund capital expenditures.
• Project Awards & Completion: Future revenues are dependent on securing utility-scale natural gas-fired and renewable energy EPC project awards, receiving corresponding full notices-to-proceed, and successfully completing projects. Failure to do so could adversely affect future revenues, profitability, and cash flows.
• Power Market Economics: Disruptions or unfavorable changes in power market economics, such as reductions in spark spreads or changes in capacity market pricing, could reduce demand for new power generation projects in certain regions.
• Natural Gas Price Volatility: If the price of natural gas increases or becomes more volatile, the demand for natural gas-fired power plants could decline, reducing demand for EPC services.
• Soft Demand for Electrical Power: Future softness in the demand for electrical power in the U.S. could result in the delay, curtailment, or cancellation of future gas-fired power plant projects.
• Electricity Generation Resource Mix Changes: Shifts in electricity generation resource mix, particularly accelerated growth in renewable energy and energy storage, could affect demand for new natural gas-fired power plant projects.
• International Operations: Unexpected changes in foreign countries where the Company operates (primarily Republic of Ireland and United Kingdom) could result in project disruptions, increased costs, and potential losses due to changes in government policies, trade restrictions, currency exchange rate fluctuations, labor conditions, or other social, political, and economic instability.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on subcontractors and third-party manufacturers and suppliers for specialized equipment and materials, which may be available only from a limited number of qualified sources. Inability to obtain these could adversely affect project performance, schedules, and budgets.
• Cost Overruns on Fixed-Price Contracts: A significant portion of work is performed under long-term, fixed-price contracts. If estimates are inaccurate or projects cannot be completed within agreed cost and schedule parameters, the Company may experience cost overruns, reducing profitability or resulting in losses.
• Guaranteed Completion/Performance: In certain fixed-price contracts, the Company guarantees timely completion or specific performance standards. Failure to meet these could result in responsibility for costs incurred by the customer, liquidated damages, or obligations to re-perform substandard work.
• Contract Variations Recovery: Failure to adequately recover on contract variations submitted to project owners for additional amounts or scope changes could have a material effect on financial results.
• Third-Party Performance: Dependence on subcontractors, manufacturers, or suppliers; their failure to perform, deliver, or meet contractual requirements could adversely affect project schedules and profitability.
• Work Stoppages/Labor Problems: Work stoppages, union negotiations, or other labor problems could result in cost overruns, schedule delays, or lawsuits, potentially damaging business reputation.
• Acquisition/Integration Risks: Future acquisitions or investments may not occur, or if completed, may not be successfully integrated, which could limit growth and adversely affect results (e.g., diversion of management attention, difficulty retaining key personnel, discovery of previously unknown liabilities, challenges integrating systems and controls, impairment of goodwill).

Financial & Regulatory Risks

Market & Financial Risks:

• Project Backlog Uncertainty: Project backlog amounts may be uncertain indicators of future revenues as project realization may be subject to unexpected adjustments, delays, and cancellations.
• Development Financing: Unsuccessful efforts to develop energy plant projects could result in write-offs and the loss of future business opportunities.
• Bonding Requirements: Future bonding requirements may adversely affect the Company's ability to compete for certain projects if bonding capacity becomes limited or costly.
• Litigation/Liability Claims: Involvement in litigation, liability claims, and contract disputes could reduce profits and cash flows. Insurance coverage may be insufficient or unavailable for some exposures.
• Cybersecurity Risks: Failure to protect management information systems against security breaches (unauthorized access, cyberattacks, phishing, malware, system intrusions) could adversely affect business and results of operations, leading to misappropriation of assets or information, operational disruptions, regulatory investigations, fines, or reputational harm. The Company was a victim of a complex criminal scheme in Fiscal 2024, resulting in a $2.7 million loss.
• Tax Laws/Rates: Changes in tax laws, tax treaties, or regulations, or in their interpretation or enforcement, could increase tax expense or liabilities.
• Tax Position Challenges: Certain tax positions may be successfully challenged by tax authorities, resulting in additional income tax expense.
• Foreign Corrupt Practices Act (FCPA) Violations: Violations of the U.S. Foreign Corrupt Practices Act or similar anti-bribery laws could result in criminal or civil penalties, sanctions, and damage to reputation.

Regulatory & Compliance Risks:

• Environmental Laws: Operations are subject to federal, state, local, and foreign environmental laws and regulations, which may add unforeseen costs. Compliance obligations and enforcement priorities may change over time.
• Greenhouse Gas Emissions/Sustainability Reporting: Evolving regulatory frameworks for greenhouse gas emissions disclosures and sustainability reporting may impose additional compliance costs, data collection, internal controls, and third-party assurance requirements.
• U.S. Trade Policy: Changes in U.S. trade policy, including the imposition or expansion of tariffs, trade restrictions, export controls, or other regulatory measures, could increase costs, disrupt supply chains, and reduce demand for construction projects.
• Regulatory Approvals: Delays or failures in obtaining required regulatory approvals, including environmental, construction, and operating permits, interconnection agreements, and pipeline approvals, could delay or prevent energy projects.
• Work Site Safety: Failure to maintain safe work sites could result in significant losses, liability, and adversely impact the ability to complete awarded projects, obtain future projects, or recruit and retain qualified craft labor.

Geopolitical & External Risks

Geopolitical Exposure:

• Geopolitical Conflicts: Geopolitical conflicts and related global disruptions (e.g., the war in Ukraine, other international conflicts) may contribute to volatility in global energy supply and pricing, increased transportation costs, shipping disruptions, and delays in the delivery of materials and equipment.
• Natural Disasters/Catastrophic Events: Natural disasters (e.g., hurricanes, floods) or other catastrophic events (e.g., public health crises, terrorism, civil disturbances) could disrupt operations, supply chains, or cause customers to delay or cancel projects.

Innovation & Technology Leadership

Research & Development Focus:

• Core Technology Areas: The Power segment has proven capabilities in designing, building, and commissioning large-scale energy projects, including experience with the latest turbine technology and collaboration with major gas-fired turbine manufacturers.
• Innovation Pipeline: The Company invests in solar energy projects and evaluates opportunities to make other alternative energy project investments in the future. The One Big Beautiful Bill Act (OBBBA) in the U.S. includes the restoration of immediate expensing for domestic research and development expenditures, indicating ongoing R&D activities, though specific focus areas or a formal pipeline are not detailed.

Intellectual Property Portfolio: Not explicitly mentioned in the filing.

Technology Partnerships:

• Strategic Alliances: The Power segment works with major gas-fired turbine manufacturers and power plant equipment suppliers.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company promoted the Industrial segment's then-president to also serve as chief executive officer of the segment in Fiscal 2026 as part of long-term succession planning.

Board Composition: The audit committee of the board of directors oversees management’s cybersecurity programs and the reporting of cybersecurity incidents. The responsible business committee of the board of directors assists senior management in setting strategy, developing, implementing, and monitoring initiatives and policies related to responsible business matters, overseeing communications with stakeholders, and anticipating/monitoring developments.

Human Capital Strategy

Workforce Composition:

• Total Employees: 1,409 employees as of January 31, 2026, including craft and non-craft labor, substantially all full-time.
• Geographic Distribution: Employees are located across different states and countries where the Company operates.
• Skill Mix: Workforce consists of project leadership, skilled craft labor, and administrative and support staff. The non-craft workforce is currently at its highest level, supporting growth across all business segments.

Talent Management:

• Acquisition & Retention: The Company is committed to maintaining a stable and experienced workforce, considering employee retention an important factor for efficient project execution, meeting customer expectations, and managing safety and quality performance. Efforts include competitive compensation and benefits, regular communication, training and professional development initiatives, and programs promoting workplace safety, employee engagement, and accountability.
• Hiring Strategy: A carefully considered and tailored approach is taken at each job site to acquire and retain required personnel resources, especially craft labor, to maintain optimum productivity. The Company may utilize direct hires, subcontractors, or existing internal personnel.

Diversity & Development:

• Development Programs: Training and professional development initiatives are in place to support workforce development.
• Culture & Engagement: Programs are designed to promote workplace safety, employee engagement, and a culture of accountability.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Renewable Energy: The Power segment has experience with biofuel plants, biomass plants, solar fields, solar fields with battery storage, and wind farms. The Company invests in solar energy projects and evaluates opportunities for other alternative energy project investments. Overseas power markets (Republic of Ireland, United Kingdom) are pursuing ambitious renewable energy objectives while emphasizing the need for flexible, dispatchable generation.

Social Impact Initiatives:

• Community Investment: The responsible business committee of the board of directors assists senior management in overseeing community outreach.
• Product Impact: The Company's vision is to safely contribute to the construction of energy infrastructure and state-of-the-art industrial facilities that are essential to future economic prosperity in its operating areas.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: The timing of equipment purchases, subcontractor services, and other project activities may vary over the life of a contract, which can result in fluctuations in quarterly or annual revenues and operating results.
• Economic Sensitivity: The engineering and construction industry is subject to cyclical fluctuations due to economic conditions, project owners’ business cycles, labor and materials constraints, interest rate changes, and regulatory or political developments. Demand for services may decrease during economic downturns.
• Industry Cycles: Forecasts generally indicate a significant increase in U.S. electricity demand, driven by data centers, electric vehicle sales, and manufacturing onshoring, which has resulted in increased demand for EPC contract services. However, future softness in electricity demand could delay, curtail, or cancel future projects.

Planning & Forecasting: Not explicitly detailed in the filing.

Regulatory Environment & Compliance

Regulatory Framework:

• Industry-Specific Regulations: The Company's operations are subject to various federal, state, local, and foreign laws and regulations, including contractor licensing, building codes, permitting and inspection requirements, worker safety and environmental protection regulations, and special bidding, procurement, and employee compensation requirements.
• Energy Facilities: Energy facilities, including natural gas pipelines, are subject to federal and state laws and regulations governing environmental protection, air quality, water quality, noise, and height restrictions. Evolving regulatory frameworks are generally creating a more favorable environment for the continued development of natural gas-fired power plants, while still allowing renewable energy facility development.
• International Compliance: International operations are subject to economic, political, regulatory, and social conditions that may change rapidly and are outside the Company's control.

Trade & Export Controls:

• Export Restrictions: Changes in U.S. trade policy, including the imposition or expansion of tariffs, trade restrictions, export controls, or other regulatory measures affecting imports or international supply chains, could increase costs, disrupt supply chains, and reduce demand for construction projects.
• Sanctions Compliance: International operations are subject to risks such as embargoes or other trade restrictions.

Legal Proceedings:

• Material Litigation: In March 2025, Argan, Inc.'s U.K. subsidiary sued EP NI Energy Limited and EP UK Investment Limited ("EP") in the High Court of Justice, Business and Property Courts of England and Wales for breach of contract and failure to remedy events that negatively impacted the schedule and costs of an overseas project. The contract was terminated on May 3, 2024, due to project owner breaches. Subsequently, the project owner improperly drew on a $10.0 million irrevocable letter of credit, which the Company believes should be refunded. The U.K. subsidiary has significant billable receivables, unresolved contract variations, and claims for extensions of time, while EP has asserted counterclaims. The Company intends to vigorously assert its rights.
• Regulatory Investigations: In January 2026, the IRS concluded its examination of the Company’s Fiscal 2020 federal income tax return, proposing no changes. In July 2025, the IRS disallowed in full the research and development tax credits claimed by the Company for Fiscal 2021 and Fiscal 2022, which the Company is formally challenging and has filed a notice of claim under its corresponding tax liability insurance policy. The Company is also protesting conclusions of a state tax authority that disallowed certain research and development credits.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 14.2% for Fiscal 2026, compared to 23.2% for Fiscal 2025.
• Rate Drivers (Fiscal 2026): The effective tax rate differed from the statutory federal tax rate of 21% due to the favorable effects of the windfall benefit from stock-based compensation and the change in valuation allowance for Net Operating Losses (NOLs). These benefits were partially offset by the unfavorable effects of state income taxes and certain nondeductible expense amounts.
• Geographic Tax Planning: The Company is subject to federal and state income taxes in the U.S., and income taxes in the Republic of Ireland and the United Kingdom.
• Deferred Taxes: As of January 31, 2026, the Company had net deferred tax liabilities of approximately $6.6 million. Deferred tax assets of approximately $13.7 million related to NOLs of its foreign subsidiaries (primarily the U.K. subsidiary) are fully offset by a valuation allowance.

Tax Reform Impact:

• One Big Beautiful Bill Act (OBBBA): Enacted July 4, 2025, this legislation includes changes to U.S. federal income tax law that generally allow for more favorable deductibility of certain business expenses beginning in calendar year 2025, such as the restoration of immediate expensing for domestic research and development expenditures and the reinstatement of 100% bonus depreciation for qualified property. The OBBBA also includes modifications to the U.S. taxation of foreign activity, mostly effective for tax years beginning after December 31, 2025. The impacts of these benefits were not material to the provision for income taxes for Fiscal 2026.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: The Company retains qualified insurance brokerage assistance for regular evaluation of the adequacy of insurance coverage amounts and annual negotiation of premiums across property and casualty, general liability, umbrella coverage, director and officer insurance, cybersecurity insurance, and other specialty coverages. The Company believes its insurance coverage amounts are adequate.
• Risk Transfer Mechanisms: Construction contracts frequently require payment and/or performance bonds from surety companies. The Company maintains significant liquid capital to ensure bonding capacity and provides parent company performance guarantees for EPC and other construction projects. It also has a credit facility with Bank of America, N.A. to issue irrevocable standby letters of credit up to an aggregate amount of $60.0 million (with an accordion feature for an additional $30.0 million).
• Cybersecurity Insurance: The Company maintains cybersecurity insurance obtained from industry-leading underwriters to limit financial loss from cybersecurity risks.