Willdan Group, Inc. (“Willdan”) (Nasdaq: WLDN) today reported
financial results for its third quarter ended September 29,
2023.
“We delivered another quarter of strong results in revenue,
profit, and cash,” said Tom Brisbin, Willdan’s Chairman and Chief
Executive Officer. “Our strategy to provide affordable solutions to
reduce the amount of electricity and natural gas that people use is
working. For the nine months, consolidated contract revenue grew
12.2% while net revenue grew 16.6%. Based on our year-to-date
results and continued positive momentum in the fourth quarter, we
are raising our full-year guidance for all financial targets.”
Third Quarter 2023 Highlights*
- Consolidated contract revenue of $132.7 million, up 9.3%.
- Net revenue** of $65.3 million, up 10.8%.
- Net income of $1.6 million, up from $0.1 million.
- Adjusted EBITDA** of $10.1 million, up 27.0%.
- GAAP Diluted EPS of $0.11, up from $0.01.
- Adjusted Diluted EPS** of $0.37, down 11.9%.
Nine Months Year to Date 2023 Highlights*
- Consolidated contract revenue of $354.4 million, up 12.2%.
- Net revenue** of $188.9 million, up 16.6%.
- Net income of $2.9 million, up from net loss of $(8.0)
million.
- Adjusted EBITDA** of $28.2 million, up 145.6%.
- GAAP Diluted EPS of $0.21, up from $(0.62).
- Adjusted Diluted EPS** of $0.95, up 86.3%.
Fiscal Year 2023 Financial Targets
Willdan is increasing all of its financial targets for 2023 and
now expects¥:
- Net revenue** growth between 10% and 12%.
- Adjusted Diluted EPS** between $1.33 per share and $1.38 per
share.
- Adjusted EBITDA** between $40 million and $42 million.
*As compared to the same period of fiscal 2022. **See “Use of
Non-GAAP Financial Measures” below. ¥ These updated financial
targets supersede any previously disclosed financial targets and
investors should not rely on any previously disclosed financial
targets, and do not include any uncompleted or future
acquisitions.
Third Quarter 2023 Conference Call
Willdan will be hosting a conference call to discuss its third
quarter financial results today, at 5:30 p.m. Eastern/2:30 p.m.
Pacific. To access the call, listeners should dial 866-682-6100 (or
862-298-0702) approximately five minutes prior to the scheduled
start time. The conference call will be webcast simultaneously on
Willdan’s website at
https://edge.media-server.com/mmc/p/i3g848wa.
A replay of the conference call will be available through
Willdan’s website at
https://ir.willdangroup.com/events-presentations and selecting
“Events & Presentations”.
An Investor Report containing supplemental financial information
can also be accessed through Willdan’s website at
https://ir.willdangroup.com and selecting “Stock Information”.
About Willdan Group, Inc.
Willdan is a nationwide provider of professional, technical and
consulting services to utilities, government agencies, and private
industry. Willdan’s service offerings span a broad set of
complementary disciplines that include electric grid solutions,
energy efficiency and sustainability, engineering and planning, and
municipal financial consulting. For additional information, visit
Willdan's website at www.willdan.com.
Use of Non-GAAP Financial Measures
“Net Revenue,” defined as contract revenue as reported in
accordance with GAAP minus subcontractor services and other direct
costs, is a non-GAAP financial measure. Net Revenue is a
supplemental measure that Willdan believes enhances investors’
ability to analyze Willdan’s business trends and performance
because it substantially measures the work performed by Willdan’s
employees. In the course of providing services, Willdan routinely
subcontracts various services. Generally, these subcontractor
services and other direct costs are passed through to Willdan’s
clients and, in accordance with U.S. generally accepted accounting
principles (“GAAP”) and industry practice, are included in
Willdan’s revenue when it is Willdan’s contractual responsibility
to procure or manage such subcontracted activities. Because
subcontractor services and other direct costs can vary
significantly from project to project and period to period, changes
in revenue may not necessarily be indicative of Willdan’s business
trends. Accordingly, Willdan segregates subcontractor services and
other direct costs from revenue to promote a better understanding
of Willdan’s business by evaluating revenue exclusive of
subcontract services and other direct costs associated with
external service providers. A reconciliation of Willdan’s contract
revenue as reported in accordance with GAAP to Net Revenue is
provided at the end of this press release. A reconciliation of
targeted contract revenue for the full fiscal year 2023 as reported
in accordance with GAAP to targeted Net Revenues for fiscal year
2023, which is a forward-looking non-GAAP financial measure, is not
provided because Willdan is unable to provide such reconciliation
without unreasonable effort. The inability to provide a
reconciliation is due to the uncertainty and inherent difficulty of
predicting the subcontractor services and other director costs that
are subtracted from contract revenues in order to derive Net
Revenues. While subcontractor costs have increased recently,
subcontractor costs can vary significantly from period to period.
Subcontractor costs and other direct costs were 50.8% and 47.2% of
contract revenue for the quarter ended September 29, 2023 and
fiscal year 2022, respectively, and 51.4% and 43.0% for the quarter
ended September 30, 2022 and fiscal year 2021, respectively.
“Adjusted EBITDA,” defined as net income plus interest expense,
income tax expense, stock-based compensation, interest accretion,
depreciation and amortization, and gain on sale of equipment, is a
non-GAAP financial measure. Adjusted EBITDA is a supplemental
measure used by Willdan’s management to measure Willdan’s operating
performance. Willdan believes Adjusted EBITDA is useful because it
allows Willdan’s management to evaluate its operating performance
and compare the results of its operations from period to period and
against its peers without regard to its financing methods, capital
structure and non-operating expenses. Willdan uses Adjusted EBITDA
to evaluate its performance for, among other things, budgeting,
forecasting and incentive compensation purposes.
Certain items excluded from Adjusted EBITDA are significant
components in understanding and assessing a company’s financial
performance, such as a company’s costs of capital and stock-based
compensation, as well as the historical costs of depreciable
assets. A reconciliation of net income as reported in accordance
with GAAP to Adjusted EBITDA is provided at the end of this press
release. A reconciliation of targeted net income for the full
fiscal year 2023 as reported in accordance with GAAP to Adjusted
EBITDA for fiscal year 2023, which is a forward-looking non-GAAP
financial measure, is not provided because Willdan is unable to
provide such reconciliation without unreasonable effort. The
inability to provide a reconciliation is due to the uncertainty and
inherent difficulty of predicting the interest expense, income tax
expense, stock-based compensation, interest accretion, depreciation
and amortization, and gain on sale of equipment that are subtracted
from net income in order to derive Adjusted EBITDA.
“Adjusted Net Income,” defined as net income plus stock-based
compensation, intangible amortization, and interest accretion, each
net of tax, is a non-GAAP financial measure.
“Adjusted Diluted EPS,” defined as net income plus stock-based
compensation, intangible amortization, and interest accretion, each
net of tax, all divided by the diluted weighted-average shares
outstanding, is a non-GAAP financial measure. Adjusted Net Income
and Adjusted Diluted EPS are supplemental measures used by
Willdan’s management to measure its operating performance. Willdan
believes Adjusted Net Income and Adjusted Diluted EPS are useful
because they allow Willdan’s management to more closely evaluate
and explain the operating results of Willdan’s business by removing
certain non-operating expenses. Reconciliations of net income as
reported in accordance with GAAP to Adjusted Net Income and diluted
EPS as reported in accordance with GAAP to Adjusted Diluted EPS are
provided at the end of this press release. Reconciliations of
targeted net income as reported in accordance with GAAP to targeted
Adjusted Net Income for the full fiscal year 2023, which is a
forward-looking non-GAAP financial measure, and targeted diluted
EPS as reported in accordance with GAAP to targeted Adjusted
Diluted EPS for the full fiscal year 2023, which is a
forward-looking non-GAAP financial measure, are not provided
because Willdan is unable to provide such reconciliations without
unreasonable effort. The inability to provide such reconciliations
is due to the uncertainty and inherent difficulty of predicting the
stock-based compensation, intangible amortization, and interest
accretion, each net of tax, that are subtracted from net income and
diluted EPS in order to derive Adjusted Net Income and Adjusted
Diluted EPS, respectively.
Willdan’s definitions of Net Revenue, Adjusted EBITDA, Adjusted
Net Income and Adjusted Diluted EPS have limitations as analytical
tools and may differ from other companies reporting similarly named
measures or from similarly named measures Willdan has reported in
prior periods. These measures should be considered in addition to,
and not as a substitute for, or superior to, other measures of
financial performance prepared in accordance with GAAP, such as
contract revenue, net income and diluted EPS.
Forward Looking Statements
Statements in this press release that are not purely historical,
including statements regarding Willdan’s intentions, hopes,
beliefs, expectations, representations, projections, estimates,
plans or predictions of the future are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, as amended, including statements regarding Willdan’s
ability to capitalize on increased energy efficiency spending in
large markets and expected benefits from its acquisitions. All
statements other than statements of historical fact included in
this press release are forward-looking statements. It is important
to note that Willdan’s actual results could differ materially from
those in any such forward-looking statements. Important factors
that could cause actual results to differ materially from its
expectations include, but are not limited to, Willdan’s ability to
adequately complete projects in a timely manner, Willdan’s ability
to compete successfully in the highly competitive energy services
market, Willdan’s reliance on work from its top ten clients;
changes in state, local and regional economies and government
budgets; Willdan’s ability to win new contracts, to renew existing
contracts and to compete effectively for contracts awarded through
bidding processes; Willdan’s ability to make principal and interest
payments on its outstanding debt as they come due and to comply
with financial covenants contained in its debt agreements;
Willdan’s ability to manage supply chain constraints, labor
shortages, rising interest rates, and rising inflation; Willdan’s
ability to obtain financing and to refinance its outstanding debt
as it matures; Willdan’s ability to successfully integrate its
acquisitions and execute on its growth strategy; and Willdan’s
ability to attract and retain managerial, technical, and
administrative talent.
All written and oral forward-looking statements attributable to
Willdan, or persons acting on its behalf, are expressly qualified
in their entirety by the cautionary statements and risk factors
disclosed from time to time in Willdan’s reports filed with the
Securities and Exchange Commission, including, but not limited to,
the Annual Report on Form 10-K filed for the year ended December
30, 2022, as such disclosures may be amended, supplemented or
superseded from time to time by other reports Willdan files with
the Securities and Exchange Commission, including subsequent Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current
Reports on Form 8-K. Willdan cautions investors not to place undue
reliance on the forward-looking statements contained in this press
release. Willdan disclaims any obligation to, and does not
undertake to, update or revise any forward-looking statements in
this press release unless required by law.
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
value)
September 29,
December 30,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
12,887
$
8,806
Restricted cash
—
10,679
Accounts receivable, net of allowance for
doubtful accounts of $263 and $640 at September 29, 2023 and
December 30, 2022, respectively
66,343
60,202
Contract assets
78,530
83,060
Other receivables
1,467
4,773
Prepaid expenses and other current
assets
5,279
6,454
Total current assets
164,506
173,974
Equipment and leasehold improvements,
net
26,160
22,537
Goodwill
131,144
130,124
Right-of-use assets
12,695
12,390
Other intangible assets, net
34,155
41,486
Other assets
15,613
10,620
Deferred income taxes, net
17,347
18,543
Total assets
$
401,620
$
409,674
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
32,755
$
28,833
Accrued liabilities
45,773
59,110
Contingent consideration payable
—
4,000
Contract liabilities
15,406
12,585
Notes payable
7,995
16,903
Finance lease obligations
1,166
1,113
Lease liability
4,729
4,625
Total current liabilities
107,824
127,169
Notes payable
91,386
90,544
Finance lease obligations, less current
portion
1,249
1,601
Lease liability, less current portion
9,829
8,599
Other noncurrent liabilities
259
259
Total liabilities
210,547
228,172
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000
shares authorized, no shares issued and outstanding
—
—
Common stock, $0.01 par value, 40,000
shares authorized; 13,647 and 13,296 shares issued and outstanding
at September 29, 2023 and December 30, 2022, respectively
136
133
Additional paid-in capital
184,391
177,718
Accumulated other comprehensive loss
—
—
Retained earnings
6,546
3,651
Total stockholders’ equity
191,073
181,502
Total liabilities and stockholders’
equity
$
401,620
$
409,674
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2023
2022
2023
2022
Contract revenue
$
132,738
$
121,399
$
354,418
$
315,882
Direct costs of contract revenue
(inclusive of directly related depreciation and amortization):
Salaries and wages
21,856
21,420
63,568
61,514
Subcontractor services and other direct
costs
67,454
62,457
165,508
153,896
Total direct costs of contract revenue
89,310
83,877
229,076
215,410
General and administrative expenses:
Salaries and wages, payroll taxes and
employee benefits
23,805
20,373
68,606
60,169
Facilities and facility related
2,303
2,228
7,200
6,999
Stock-based compensation
1,244
1,607
4,064
6,626
Depreciation and amortization
4,190
4,405
12,518
13,240
Other
8,049
9,664
22,629
25,099
Total general and administrative
expenses
39,591
38,277
115,017
112,133
Income (Loss) from operations
3,837
(755
)
10,325
(11,661
)
Other income (expense):
Interest expense, net
(2,437
)
(1,435
)
(7,110
)
(3,216
)
Other, net
879
740
1,392
1,266
Total other expense, net
(1,558
)
(695
)
(5,718
)
(1,950
)
Income (Loss) before income taxes
2,279
(1,450
)
4,607
(13,611
)
Income tax (benefit) expense
713
(1,526
)
1,712
(5,588
)
Net income (loss)
1,566
76
2,895
(8,023
)
Other comprehensive income (loss):
Unrealized gain (loss) on derivative
contracts, net of tax
—
—
—
38
Comprehensive income (loss)
$
1,566
$
76
$
2,895
$
(7,985
)
Earnings (Loss) per share:
Basic
$
0.12
$
0.01
$
0.22
$
(0.62
)
Diluted
$
0.11
$
0.01
$
0.21
$
(0.62
)
Weighted-average shares outstanding:
Basic
13,462
13,110
13,357
12,971
Diluted
13,709
13,360
13,563
12,971
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 29,
September 30,
2023
2022
Cash flows from operating activities:
Net income (loss)
$
2,895
$
(8,023
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
12,518
13,240
Deferred income taxes, net
1,196
(4,111
)
(Gain) loss on sale/disposal of
equipment
(63
)
(67
)
Provision for doubtful accounts
194
230
Stock-based compensation
4,064
6,626
Accretion and fair value adjustments of
contingent consideration
—
1,659
Changes in operating assets and
liabilities, net of effects from business acquisitions:
Accounts receivable
(6,335
)
6,605
Contract assets
4,530
(15,636
)
Other receivables
3,306
1,155
Prepaid expenses and other current
assets
1,686
256
Other assets
(4,993
)
1,981
Accounts payable
3,922
(13,185
)
Accrued liabilities
(2,658
)
15,354
Contract liabilities
2,821
(1,336
)
Right-of-use assets
1,029
(245
)
Net cash (used in) provided by operating
activities
24,112
4,503
Cash flows from investing activities:
Purchase of equipment, software, and
leasehold improvements
(7,583
)
(6,969
)
Proceeds from sale of equipment
68
75
Cash paid for acquisitions, net of cash
acquired
(1,600
)
—
Net cash (used in) provided by investing
activities
(9,115
)
(6,894
)
Cash flows from financing activities:
Payments on contingent consideration
(4,000
)
(10,206
)
Payment on restricted cash
(10,679
)
—
Payments on notes payable
(1,463
)
(1,577
)
Payments on debt issuance costs
(1,114
)
—
Borrowings under term loan facility and
line of credit
105,000
20,000
Repayments under term loan facility and
line of credit
(111,000
)
(9,750
)
Principal payments on finance leases
(951
)
(827
)
Proceeds from stock option exercise
38
270
Proceeds from sales of common stock under
employee stock purchase plan
2,779
3,036
Cash used to pay taxes on stock grants
(205
)
(958
)
Net cash (used in) provided by financing
activities
(21,595
)
(12
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(6,598
)
(2,403
)
Cash, cash equivalents and restricted cash
at beginning of period
19,485
11,221
Cash, cash equivalents and restricted cash
at end of period
$
12,887
$
8,818
Supplemental disclosures of cash flow
information:
Cash paid (received) during the period
for:
Interest
$
8,025
$
2,790
Income taxes
(3,154
)
(903
)
Supplemental disclosures of noncash
investing and financing activities:
Equipment acquired under finance
leases
652
2,137
Willdan Group, Inc. and
Subsidiaries
Reconciliation of GAAP Revenue
to Net Revenue
(in thousands)
(Non-GAAP Measure)
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2023
2022
2023
2022
Consolidated
Contract revenue
$
132,738
$
121,399
$
354,418
$
315,882
Subcontractor services and other direct
costs
67,454
62,457
165,508
153,896
Net Revenue
$
65,284
$
58,942
$
188,910
$
161,986
Energy segment
Contract revenue
$
111,030
$
102,625
$
292,330
$
262,186
Subcontractor services and other direct
costs
66,377
61,557
162,557
151,445
Net Revenue
$
44,653
$
41,068
$
129,773
$
110,741
Engineering and Consulting
segment
Contract revenue
$
21,708
$
18,774
$
62,088
$
53,696
Subcontractor services and other direct
costs
1,077
900
2,951
2,451
Net Revenue
$
20,631
$
17,874
$
59,137
$
51,245
Willdan Group, Inc. and
Subsidiaries
Reconciliation of GAAP Net
Income to Adjusted EBITDA
(in thousands)
(Non-GAAP Measure)
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2023
2022
2023
2022
Net income (loss)
$
1,566
$
76
$
2,895
$
(8,023
)
Interest expense
2,437
1,435
7,110
3,216
Income tax expense (benefit)
713
(1,526
)
1,712
(5,588
)
Stock-based compensation
1,244
1,607
4,064
6,626
Interest accretion(1)
—
1,548
—
1,659
Depreciation and amortization
4,190
4,405
12,518
13,240
(Gain) Loss on sale of equipment
(13
)
2
(63
)
(67
)
Tax benefit distribution
—
434
—
434
Adjusted EBITDA
$
10,137
$
7,981
$
28,236
$
11,497
_______________ (1)
Interest accretion represents the imputed interest and fair
value adjustments to estimated contingent consideration.
Willdan Group, Inc. and
Subsidiaries
Reconciliation of GAAP Net
Income to Adjusted Net Income and Adjusted Diluted EPS
(in thousands, except per
share amounts)
(Non-GAAP Measure)
Three Months Ended
Nine Months Ended
September 29,
September 30,
September 29,
September 30,
2023
2022
2023
2022
Net income (loss)
$
1,566
$
76
$
2,895
$
(8,023
)
Adjustment for stock-based
compensation
1,244
1,607
4,064
6,626
Tax effect of stock-based compensation
(252
)
(238
)
(823
)
(981
)
Adjustment for intangible amortization
2,662
2,841
7,910
8,531
Tax effect of intangible amortization
(539
)
(421
)
(1,601
)
(1,263
)
Adjustment for interest accretion
—
1,548
—
1,659
Tax effect of interest accretion
—
(229
)
—
(246
)
Adjustment for refinancing costs
467
—
467
—
Tax effect of refinancing costs
(95
)
—
(95
)
—
Adjustment for tax benefit
distribution
—
434
—
434
Tax effect of tax benefit distribution
—
(64
)
—
(64
)
Adjusted Net Income (Loss)
$
5,053
$
5,554
$
12,817
$
6,673
Diluted weighted-average shares
outstanding
13,709
13,360
13,563
12,971
Diluted earnings (loss) per share
$
0.11
$
0.01
$
0.21
$
(0.62
)
Impact of adjustment:
Stock-based compensation per share
0.09
0.12
0.30
0.51
Tax effect of stock-based compensation per
share
(0.02
)
(0.02
)
(0.06
)
(0.08
)
Intangible amortization per share
0.19
0.21
0.58
0.66
Tax effect of intangible amortization per
share
(0.03
)
(0.03
)
(0.11
)
(0.10
)
Interest accretion per share
—
0.12
—
0.13
Tax effect of interest accretion per
share
—
(0.02
)
—
(0.02
)
Refinancing costs per share
0.03
—
0.03
—
Tax effect of refinancing cost per
share
—
—
—
—
Tax benefit distribution per share
—
0.03
—
0.03
Tax effect of tax benefit distribution per
share
—
—
—
—
Adjusted Diluted EPS
$
0.37
$
0.42
$
0.95
$
0.51
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102048874/en/
Willdan Group, Inc. Al Kaschalk VP Investor Relations
Tel: 310-922-5643 akaschalk@willdan.com
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