WLDN - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Willdan Group Third Quarter 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tony Rossi. Please go ahead.

Tony Rossi

Thank you, Vicky. thank results joining ended for XXXX. and Willdan to September everyone, financial Group's the afternoon, you as for discuss XX, Good third quarter us Mike Bieber, Chairman of Willdan Thomas Stacy With Chief President management Executive McLaughlin, and Chief Officer; Brisbin, Officer; Financial Group. from today and are: locations question-and-answer are management during any The separate the is session. with bear prepared today's taking please team or delays us from remarks call so if there to call questions. Management will prepared open will remarks we the review then and up your made forward-looking meaning call, Reform historical, Private Statements with are which conference Litigation in today's statements accordance not purely Act Securities of are of XXXX. the within the those risks to forward-looking the could company's involve certain it from forward-looking and results note any statements. and in The such that important is future statements materially uncertainties, differ could to, XX, year-ended to the time factors to and differ Factors actual Form on including Form in limited the subsequent the results XX-K time XX-Q. materially December but are from that XXXX other cause and not quarterly listed reports reports, company's SEC risk for cautions investors not during on made statements this company course undue place of forward-looking call. the the conference reliance to The statements does today. Willdan any Group revise to forward-looking and update disclaims or undertake not any obligation made

also provides believe addition GAAP results, our financial performance. financial In investors' measures that and to we ability trends non-GAAP Willdan enhance business analyze to

by removes of the earnings performed allows With operating of these performance, net McLaughlin. Stacy? non-GAAP of operating improved results. Our at release work adjusted EBITDA our we Stacy the and now employees. reconciliations to Officer, non-GAAP the measure derived to that, Financial expense the measures like are impact include I'd and all included net today. for adjusted an revenue from measures items turn call the Chief for certain EPS from We of issued believe measures Adjusted are revenue, the which over end EBITDA. supplemental adjusted of EPS revenue our GAAP

Stacy McLaughlin

today. XXXX. contract of margin. of Engineering contract Consulting guidance. in costs everyone, from was XXXX to statement, a resulting for in pass-through of I'll the joining Direct $XX.X the and subcontractor million were pass-through Energy our from This was third $XX.X decrease balance for the X.X% quarter. our lower our as in subcontractor statement. through decreased partially quarter our revenue, The of and of the segment revenue defined the the which segment, costs, of by thank same X% segment. $XX.X of start driven XX.X%, the segment decrease projects. services increase by with for you running our was our Good overview us from Total growth our income revenue offset for has third X.X% The an little reduced we at that revenue the million contract Energy quarter finally, $XX no to million then increase Tony. impact afternoon total subcontractor amount costs recognized segment in increased Energy quarter last Consulting X.X% Thanks, and it our year. million third period of our by increased expenses of income revenue decreased in direct from by contract while was Net and revenue Net year-ago $XX.X million, minus and Engineering of $XX.X other an result primarily XXXX, million in sheet

quarter to represented costs, of year of was from and the for and decline The Our which primarily million and the driven McCormick. compared prior total same Newcomb the in other higher acquisitions third The XX.X% of the of largely in through and $XX.X to payroll personnel and General Analytics of down prior Anderson taxes the of added salaries our contract quarter, by XX.X% to wages, year. related lower quarter Integral period were revenue XX.X% contract was last for revenue direct revenue XX.X% period. this third direct $XX.X total million from contract administrative subcontractor down the XXXX, costs due increase expenses the employee services were year. benefits,

an stock-based $XXX,XXX. compensation had of in increase also expense We

general in with unforecasted $XXX,XXX million $X.X XX.X%, administrative our in of quarter quarter Adjusted and with was of third third costs Energy to we net expenses, our compared incurred Operating million Lime within for line the a $X.X Additionally, third XXXX over EBITDA associated of expectations. percentage the revenue XXXX. quarter was of transaction. the for third the income in was as third-party which EBITDA is million Adjusted XXXX. the for quarter $X.X

income recorded rate quarter, representing effective million, we an $X.X During the tax expense tax of third XX.X%. of

Energy costs, EPS forecast, would the increased earnings for per million, diluted Lime would adjusted increased EPS adjusted transaction made in to quarter, recorded These $X.X in our analyst the the of with tax were expense to our the per rate. per transaction per in our resulted for million adjusted ahead deductions the in tax the have in while QX, GAAP On an $X.XX. for we last have XXXD our adjustments During tax for income period estimate quarter company's were net the up which $XXX,XXX XX.X% Net stock-based effective line been amortization tax rate diluted been adjusted $X.X $X.XX rate quarter. for in consensus $X.XX compensation, quarter. or million our basis, Normalizing the third and of share higher-than-expected accounted Section or related $X.XX the recorded and Had income XX% XXXX of same the excluding third adjustments costs, XX% share $X.X was from been that tax diluted to adjusting and $X.XX share. year. diluted EPS share, slightly

$X.X balance generated cash million we increase to cash flow and previous quarter to which of fiscal end the XXXX, quarter. the we cash of $XX.X in an from from attributable sheet, The million at XX, the million $X.X have September equivalents our Turning was increase operations. was in the as strong

in In to X part million detail, issued company provided million. new in be of net Willdan an debt X-year Union follow-on X.X. of the equity additional forward entered to that shares down line offering revolving leverage third to acquisitions loan financing interest ratio outstanding of no another with which Lime debt of our our for offering, we X-year During million. conjunction on proceeds lower on the end The other expect bank allow into million, revolver Bank. with we transaction, the is continue announcement in the us Upon Tom of upon pipeline. $XXX approximately Harris an a the quarter, about will the equity acquisition leverage will of We we credit, the a committed Energy the paid our after $XX ratio third accordion as with We Subsequent with This anticipate moving XXXX. million in BMO rate a to XX, quarter, do comprised of Lime $XX $X would Energy, will closing September more Lime leaving plus and be talk $XX feature us of facility and facility of conjunction LIBOR. term approximately our an chose completion line a as borrowings our X.XX% transaction. million our which of our acquisition, the with with million October, $XX Lime closing to

compared the provide transaction of financial would like the profitability We include year, quarter has when which for December, an the update transaction lower for outlook XXXX, our to Lime Energy. I will on fourth are our targets fiscal Lime and typically to we close anticipate the the revenue which the of full months. including remainder to in therefore, Turning and month of pending other

our from to kept to million. revenue $XXX have We and to range depreciation net be our $XXX $X.X approximately be million million

$X.XX $X.XX, to EPS XX.X to diluted share our to shares range million. We adjusted count amortization million increase to expense have $X.X to from updated diluted and increase to

to our expect effective tax We rate XX%. be

be projects of could the like numbers timing analytics the positively data the impacted as year. timing at end acquisition signatures forecasted contract the the these the I'd Lime related of turn call of by to Tom. over as to to or negatively well close of now All

Thomas Brisbin

$X We afternoon, and in quarter revenue year-over-year. was segment flat On delivered a with and year-over-year good over Engineering flow. net Stacy strong adjusted Consulting basis, in cash thanks, and Okay, generating relatively million revenue another net EPS, our while everyone. growth operating

of of our contribution was growth segment for X% referred reflects higher XX%, Energy up the and Analytics McCormick year-to-date. to Organic revenue net acquisition, Anderson which ramp-up programs, revenue new Newcomb from the Our recent and X% our the was business for NAM. as quarter Integral

business new efforts produce results. and development good Our to continue marketing

and modernizing focus a energy We are Colorado, XXXX. We in facilities groundwork million. Colorado. the These efficiency, in won in will steadily build lay projects that for combined design strong new improving value of infrastructure $XX projects aging recently upgrading growth on with two programs educational winning

construction result of the We geographic design, for support capabilities. continued direct and management the our one, post-project program new markets; presence will These projects, delivery be our services. responsible expanding a two, key fully and wins two in engineering of are including building growth on strategies: execution our

solar, NY our demonstrates capability innovative cogeneration microgrids. NYPA's won as and and sales also state. program energy facilities public our such systems BuildSmart strong for We the award across solutions This implementing expertise performance in

to medium-sized and contract customers. implement energy lodging a us awarded gas SoCalGas small projects natural for efficiency

this positions electrical growing earnings As efficiency more and we engineering us gas are natural in our call, last proven record mentioned area of to around energy demand. our capitalize emerging well opportunities we programs, on seeing on track --

Salt We key the is its has to solar Salt resources strategy. source continue with power in will assist to growth integrate help our more grid. expectations. The see recently Integral our and In LoadSEER right efficiently Analytics energy Integral of in Analytics. electricity Phoenix, selected River, the grid our line of modernization software River to of tracked provider with growth largest a electricity software distributed Arizona, with into

every are It's of testament value the the year, start far Integral Analytics. the with that major the to was this won year. seeing pipeline that utilities projected we So have at opportunity within a

should Energy. we continue We As we recently opportunities, this Lime to of acquisition more business. the generate see growth announced sales in

program business northeastern market ability we outstanding service we acquisition call company, positioning contract corporate largest both be the combined diversification, is cultures. in expansions offering ago, it's upcoming landscape from weeks the will client Duke the The on of improve the States. entity larger and given in and work services a which and customer across few the believe As and provide our perspective. base, At our for Southeast. second improved California United fit, similarities Energy, important will Lime's the competitive to and an energy pursue with said scale the the geographic our base gives we model, in more efficiency entire a

efficiency energy out of will is planning significant States, amount take we two Jersey. the and size in United to northeastern million next includes state of in now has restructured seeing annually with New of Our its the top New from resume are the $XXX approximately opportunities energy to double work million program XX Specific utilities. years. XX growth the market This over funding $XXX to annually. approximately Jersey services The the efficiency

New the in generate With the about $XX entities Jersey. Lime, annually acquisition million of currently combined

presence We bodes have combination past is on the of been capitalize headquartered and New the feel our years chances increase addressable the of the state couple our Jersey market. We our Lime in growing over in well New for Jersey. to the in in experience

the quarter. in the expect to We transaction closed be fourth

and to to The Gas months. the XX procurements procurement a California opportunities. and two provide on brief Electric Now like Diego in expected I the first the others coming update were in San for October follow announced with are RFP would

provides, acquisitive and have stability Lime hit record into Energy, expansions our we And California going With outlook and skills new clearly program the strong programs now And not include data these does the Energy, excited procurements. and of for the XXXX. the the will the acquisition relationships we to good ramp, any are assumptions growth. company. this in XX% from regarding the about IA and customer on with largest the Based in expertise the Lime of well-positioned NAM track new we technology that coming set the analytics We're visibility in years. of proven addition benefit of to experience the

back good are and With end to the feeling that, Q&A. I very about for XXXX So now position operator call would like the for we our the to XXXX. of turn

Operator

And first with Thank you. Wedbush. [Operator Katri to Instructions]. we'll go Moshe

Moshe Katri

with. just item start housekeeping a Just to

big expense of terms related $XXX,XXX we're not give into of to maybe then to trying on yet talk color Lime about in And Stacy, model as terms about we then think of some and head I realize in picture when are you terms in looking can dynamics typical You mentioned just some unforeseen we're our at then spending guidance how we that? a us decisions. maybe in question, really it acquisition. budgets, the And into where QX of the funding you given the an and that XXXX? of about pipeline should terms but XXXX the numbers

Stacy McLaughlin

costs Moshe, incurred has such time things it's we to related that relate of audits lot we It management projects our on we X-K had Stacy. taken chargeable The to people that transaction and had we to also that unforecasted are a file, away done. as Lime the had consents from the here. done,

So were and quarter. prior we put that forecast incurred our able costs see just there to that we into the to weren't

Moshe Katri

and the looking at on Great. about picture then of And XXXX? then the QX kind commentary other general big question

Thomas Brisbin

look expect we to QX good. Well,

we we least expect halfway until coming is end through to to which growth. end so start stated year fortunate until California towards strong won't begin believe XXXX. out of with finish said will ramp-up It them. thing the next started we win, will finally as will, we the year unpredictable the take again, and probably next them if procurements. that And closed, of at are awarding We then has I probably that's organic The XXXX as I we

are growth So to wins counting country on XXXX. our other us throughout the we give through

Moshe Katri

once Okay, budgets Any be when anything when your relevant the visibility look color next start preparing looking cetera when there budgeting of et do there year? when have do we're base of into client you year? that's we is at kind -- at kind you budgets and specific helpful, for you could

Thomas Brisbin

XXXX. be XXXX At this is through not contracts not our We're expecting contracts going to will point through XXXX roll good we're All the to until any major XXXX. cycle, off. competed which next

aware not recompetes are we major or any roll So of for offs XXXX.

Moshe Katri

tax will through And that about into rate, question just final XXXX? follow the

Stacy McLaughlin

the XX% expect go we would XXXX. around into Yes, to

Operator

to We'll Irwin with Craig Partners. Capital go next Roth

Craig Irwin

is for final contracting Diego the with that is out of about there and news utilities and are RFQ. prior RFQ already, Electric the you confirm the good us process? RFPs San Gas thesis Can out Really but their maybe RFAs with process process the

Thomas Brisbin

Craig, are happen to you to going in is you did -- going be... -- California what's

Craig Irwin

Yes. Yes.

Thomas Brisbin

don't say three what let's to they'll to we the which At list which that's there's shorten They'll for for request down have be are -- that we're then will point, Yes, number be and on will give a a more will of competitors, they we for first, is request at request at approach that's XX which give what a abstract abstract They'll going then like evaluate that so in to, XX-page your means an choose your selection, which for looking response, rank the look they final Generally will detailed proposing price. to on ideas, it a thoughts. one quality-based evaluators they selection. firm negotiation bring they'll a for and based then you. and five, we know RFP a will just to proposal.

Craig Irwin

Okay.

So process, at two but forward flagged point, have the Diego least moving as San Electric far utilities this there as a are processes you that different Gas and other correct? stages at in

Thomas Brisbin

Yes. looking actually, Well, at we're four.

in the California So Southern there's of Gas and San in in program. PG&E then San hometown our SoCalGas Electric, North; Southern is California; Diego the also area Diego; and Edison

Craig Irwin

with consistent then PG&E Is And in they meeting, the participating the like were understanding what this furthest along. Okay. stakeholder seeing? sounded my having from you're

Thomas Brisbin

That's a change. monthly

is first. who PG&E like there's think but sometimes a Gas Diego their I got delay to looks go or to up race SCE, a RFAs it or first, San going is

that on I one. So can't help

Craig Irwin

moving very and what we all good. that's That's They're like.

looking California's couple of because question, the years? as year. Are us we of the out projects the visible that meet color we number at taking the and bigger the materialize picture Are the lot the little SB looking several the steps utilities and chasing, given seem low there where country over across potentially area that process commission could in across Give of elephants chunky visibility a of we revenue have that at things country. next big of best XXX then material number to to there? in be contributions their any would So contribution a activity projects millions on a you're than single-digit obligations.

Thomas Brisbin

would for that I at think market is I California, -- about $XXX to stated addressable we be And answer look us before the The yes. we'll year. a if publicly million

pretty So that's California Ohio. a following Midwest, go we Illinois, Wisconsin, Kansas, Michigan, leads big chunk. and we in If to leave the are

in $XXX there significant an we annual and less area. So and call chunks I chunks, Midwest said is than on the greater that $XX million basis. than that million

Craig Irwin

and send-in the opportunity other you? East Long areas gas also that Manhattan Island, And for an then some problems for of Coast, on is

Thomas Brisbin

We a Yes. on to Ed submitted gas. Con proposal

think have I Manhattan, Craig, before that gas, because to fuel by we that will referred from natural gas it shortage. a oils XXXX to changed

up in being also, the because programs Lime be Southeast, there. Lime-Willdan we're we working and there's about or our them address take we're called we're we an natural great that. and Then the there we're you able bumped to chunk from to a program so good there. position move up to very we'll to That's we we on New think excited Jersey's as waiting gas a Duke, Texas in customers efficiency like in really that works and are and both are TVA and game electric. Then to So a program energy combination just hear think $XXX-million-a-year that. a we position of -- good can electrification New Jersey program and really it, and doubled is for, convert others,

million up with come about. add million, So what another could probably $XXX up, all if there's it $XXX talked $XXX million, I probably in you you California's

we of million, to $XXX close as forward. it going So you're market see looking at addressable

Craig Irwin

Excellent.

the the of to in It quarter, pass-throughs comment was are quarter. we are pass-throughs given gross maybe likely difficult to predict expect pass-throughs were contribution And like after the strong. of to into project but Can progress become very the subjects, have this a looks do you change always what us driver much stronger any Lime easier we did in XXXX? to back-end Just revenue this for the you And how quarter? acquisition? to the pretty

Thomas Brisbin

Last project be timing, moved quarter. question off to will about changes though That's we easier because more you're become slightly. of have first. just larger XX%, expect our Yes, I to work this a XXXX base it revenue of, more did proportional so But have you'll up projects less. grow cost predictable subcontract Craig. had -- would right; into a this We that little subcontractor a couple be as become base. will we

Craig Irwin

Great. in always whether And the should that is you've acquisition. licenses or to or around for What comment any is topic then IA ask implemented us scale for maybe And in a the something quarter. volumes your about fourth business scale XXXX? you you significant expectation do software another people IA, Can in not is this reasonable continue think quarter?

Thomas Brisbin

we'll had around and of budget end -- have They obligate then on least such. is going right grow predictable in IA because of have you wanting think people to year, and at very the true because we QX. the with for continue a that's XXXX. also activity Christmas, good to you QX holidays lot the probably a customers software Yes, many businesses

we have of software tried the quarter. did factor of those. We overall, announced that in But IA deployments to major in. one press two we've So

another press X strengthened didn't it's coming client release. into last months. the looks pipeline for was over And really the we large The other up XXXX; good

of these traction starting get we're some larger with think I some utilities. to

Craig Irwin

prepared organic in Great. an share I but quarter missed do the might can have this growth for with have us? And then your you you remarks,

Thomas Brisbin

for year-to-date. X% quarter, said We X% the

Craig Irwin

win acquisition. what Hey on much. congregations progress Great and so you thank the Perfect, with line. a

Thomas Brisbin

Thanks Craig.

Operator

And with [Operator we'll go Capital. Instructions]. to Gordon E.F. Andrew Gordon next

Andrew Gordon

right. to there's quick the that want sure make as it A press then it's $X.XX really full couple you that call commentary the release I for for just have that $X.XX. clarify, and you, the the housekeeping. and at I and listed $X.XX some first in adjusted was EPS get make one then The later sure credit top $X.XX

Thomas Brisbin

at looking you're at at looking scrambling, now. right the We're kind what We're of to see it Gordon. looking paperwork

Andrew Gordon

It's header. up the towards

Thomas Brisbin

not would if be, it bad true, That Andrew. be a that's to place for

Andrew Gordon

toward I then to anyway and just for the it headers, unfortunately it record. clarify was the Yes, wanted

Thomas Brisbin

on hang We haven't a found second. it for yet,

Stacy McLaughlin

release, I script looking was just is at if bullet I gets $X.XX It reconciliation, -- But of $X.XX. not to both you so wanted and to you the updated you're go Page then press the sides. there's to $X.XX check correctly. the said XX that if that the

Andrew Gordon

Yes, $X.XX clarify news well. that wanted saw some as as had well. because sources I I listed to just

the question interesting I more next a So and one substantive. is, think more

composition obviously, Energy very towards and service as So more around sounded you the positions significantly how Lime it about larger lot immediately nice the utilities this give wonder more if thought less and within you a gentleman's big little picture, new virtue large elephants the but to you're you color much still and up if, understand skews these on accretive scale to the are relationships, and changes provides and wonder give question operating slightly also cyclical I to strongly a competitive the Tom, I more your And about interesting your answer I acquisition targeting. compelling; segment. if I brings a of the can of higher it growth the wonder broader talking scale simply strategically revenue your last some you were that landscape country? what position I

Thomas Brisbin

it helps us. Yes,

has year you about I'll announcement LADWP. Andrew. $XX positive. about as we very been does do Our Willdan. this Lime million-plus feedback In example, with after an a California, $XX give million

that we helps -- of next $XX-million-a-year over California, in we entity million but three $XXX now in us combined, competitors clear addressable out XX million in we're just at on which the down closest next California our $XX that market in now are energy are top So about were the the efficiency. be on a the And would leader months. coming

demo-ing element, element. the National Lime executing to been, show some would the size on that say, But the I throughout brings they've very Grid are country and can NYSERDA happy size to and about technology the on the meter. we that how believe addition customers in at we on measure Northeast to with we So the our

So will very important that They in pursuing. that things That's we that that role list That's their they chunks in an will I every they be also, at have procurement. want a have are good Small Business do do be think those, Direct few very and of to not what we'll Install, important that be specialty.

Andrew Gordon

Appreciate color. your Great. ongoing about Two questions that related organic growth.

First, I wonder if you could on comment expectation. a little bit

I and that years revenue your think energy pace. and to sounded your wonder at of growing will it's comment can Lime organic for you like composition I obviously, segment then whether separately, more significantly you in have if segment year mid-teens XXXX, this faster on and now new that continuing And fantastic think than business skewed is your towards the growth into and energy. it's segments' been going engineering get continue

I you'll that about rate consolidated growth and XXXX is on we expectation maintain you should growth organic comment if organic assume it accelerating an wonder this way, your expectation any I I realistically, would expect skewing an accelerating but baseline in probably mean, if composition seem maybe can revenue beyond. So rate? XX% your

Thomas Brisbin

growth get year, that that XX% year investors do grow which telling that But XX% than next probably for the we into own use Lime. later been XXXX. you of range, in out they our for as expect to front estimates, in process if to we will Lime We've more go spend our they the and budgeting better wouldn't time want I us in detailed with get we through

procurements looks You're in direction New right we the move Jersey rate that, potentially that but next years though the will in and and that. as the through you have those programs, growth updates accelerate programs we'll in as come good and give with win on could the other California we in tailwinds of it XXXX to move couple that

Operator

hand like of to the call back closing At remarks. or additional time, this Q&A management I would any for to End

Thomas Brisbin

of on your in call have to you our all interest Okay, I thank day. participating today like would for thank a you, and for great Willdan. all. continued And

lot. thanks So a

Operator

you today's conclude for your thank does That conference. participation. We

Willdan (WLDN) 2 Nov 182018 Q3 Earnings call transcript