WLDN - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Willdan Group Second Quarter 2019 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Tony Rossi of Financial Profiles. Please, go ahead.

Tony Rossi

Thank you, Vicky. thank results joining ended for XXXX. and Willdan to June everyone financial Group's the afternoon, you us for discuss XX, Good second 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 open will Management then prepared to call and remarks the review your will we up questions.

Reform of statements Act could are not Private are risk forward-looking within Statements such statements meaning that risks to, which Securities time XXXX. involve statements. made on Factors to from future year Form from purely XX-Q. any company's and results to it subsequent of could call, that time Litigation in in XXXX, The in to forward-looking XX-K uncertainties reports results reports, today's Form forward-looking conference the December limited company's are materially and not factors the XX, including but and is the the the course note listed of certain differ historical, actual those important the other for SEC the cause differ materially quarterly and

of company disclaims conference revise not cautions undue course place on call. forward-looking statements made to forward-looking The any statements does the during Willdan to the Group not and any made or obligation reliance undertake investors this update today.

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

Adjusted issued our revenue, adjusted items the adjusted all work reconciliations revenue for non-GAAP are for are the include of results. EPS and the derived we Our the supplemental allows the employees. today. at impact an believe measures EBITDA removes GAAP performance, of of by net operating of release included certain non-GAAP measures of revenue our earnings and these expense performed end EBITDA. measure measures EPS adjusted We operating from which improved net from

Stacy? McLaughlin. to call I'd Stacy Financial With Chief turn Officer, to now the like over that,

Stacy McLaughlin

Thanks on our I'd of our those start like joining us balance overview Tony. welcome statement, revenue was XXXX. Total growth guidance. of $XXX.X sheet, the Energy finally to from my for by the million in income our XX% I'll to call. an increase today's then segment, of to our contract The second for add the with XXXX quarter quarter and driven primarily recent second our $XX.X from increased contributions acquisitions. to related million

$XX.X Net as revenue, revenue in million, increase defined other minus XX% $XX.X services the of was direct subcontractor quarter. contract ago and from million costs, an year

net segment, XX%. revenue by Within increased the Energy

Consulting segment, X%. net increased revenue Within and the by Engineering

$XX.X the increase Direct contract second period revenue, from costs related were $XX.X to of revenue quarter of same million million recent acquisitions. from the XXX% in The increase in was an resulting primarily year. for the growth last the contract of XXXX,

we Additionally, to project had recognized revenue we high on the compared start-up those programs. costs disproportionately

subcontractors direct same Our and revenue total that The compared prior of our equipment attributable of costs the acquisitions, amount the with a higher was XX% period that and of increase include programs a in our primarily has contract XXXX, year. recent costs of utilized impact percentage significant quarter pass-through. to material of second which the in XX% are were of contract revenue the

and $X quarter compared was was primarily General we last utility quarter increase an to approximately the by acquisitions related administrative three $XX.X the making The driven period. added second were wages, prior and for investor-owned million, salaries investment proposal investment million expenses the year we to are $XX made and personnel for through California this The the million. California the procurement. in higher

expense, in from largely assets and increase our due amortization $X.X primarily increase depreciation to The resulting acquisitions. in remainder of the to increase due was million intangible

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

costs. acquisition Our second $XXX,XXX quarter results in approximately in XXXX included

in the income to operating same the $X.X in the We year. to in compared second to increase period the $X.X last generated quarter of of finance operating debt million acquisition. $XX,XXX million The to second was XXXX quarter $X.X XXXX. expense for of due our incurred in XXXX, of income second interest million of compared recent the We quarter utilized

$XX,XXX, second quarter, the tax credits. benefit of we an income During recorded tax tax attributable deductions to various approximately primarily and

$X.X amortization same quarter million year. costs; share. million $X.X of Adjusted the an net Net our income XXXX, was per diluted second the or per or with intangible million second adjusted transaction On for share of basis; compensation, $X.X net and $X.XX compared for quarter stock-based the the share, second of for diluted $X.XX per $X.XX was quarter of income period EBITDA income was XXXX $X last million with compared $X.X diluted million, excluding XXXX. or in

to me. million the the up was from balance XX, excuse or We Turning had the cash at in cash fiscal previous equivalents sheet. -- year $XX.X which XXXX quarter, and June of end

six from in of the first flow cash was months $XX.X million operations the Our year.

June or loans. delayed of outstanding, term credit had million As but our our draw we facility amounts XXXX no XX, on revolving term $XXX loan outstanding

with of Water and the In will of state growth half and Department from to to four year, the due and New clients: increased that have in of already ramp Edison, Power, back work accelerate Energy of Los half of increase will This Dormitory Duke Authority organic to the we Con each the the have drive the the funding we York back revenue year, booked. that expect of we year. our largest Angeles

margins expect significantly first rise year. to the compared to We half the of

fiscal our our financial to for XXXX. like to Turning outlook. I update would targets

$X.X we of count For approximately $X.X to now an diluted of share EPS $X.XX between the effective $X.X million shares; tax a rate of XX%; approximately million diluted year, approximately range compensation adjusted $XXX approximately million; of and interest million. expect; of and between $XXX $X.XX; range million; depreciation of approximately XX.X to million; $XX.X stock-based and million; net expense amortization revenue full

over Tom. call to the turn to like now I'd

Thomas Brisbin

would but a another better, Stacy of growth. afternoon, few Thanks, good We We not did done five months programs approximately we anticipated. everyone. until June delivered and revenue ramp have than strong later quarter

before. We have experienced this

on scoping growth the remainder finally two we of transitions. renewed, track. year, and are the three for back is Now because not but next increase years that go organic in we of our only program revenue to the to Generally, subject of this clients years Not years. few funding major are

have accounted transitions growth These the organic in minus for the X% quarter.

said I up. a the expect and We second function like step in positive have organic is on low now that growth double-digit our the we are growth and are step going right half. stairs the previously

work. -- that for clients our although for We're problems. Ed we and and DASNY and these mentioned: as LADWP, the pleased largest to same. overall outlook Unfortunately Duke, remains time more are As look the up Stacy end very positive are people our better adding four in deliver Stacy our overall indicated well year scrambling our guidance Con less running additional remains

the company been team a Our pursuing California The diligently today. capabilities from invaluable people experience. procurements. been Willdan members much working acquisitions is have have their stronger new and with

Electric there that's PG&E process we August call initially XX. we is on been full on short-listed August due indicated our X; this tomorrow. the submitted summer. we the We're As for had in last & of due on. during preparing all programs abstracts Diego proposals of Gas on San XX that

awards is year. end due XX. California by of the October we to And Southern Edison see on this start hopefully will

have for construction track new a we and been to and by submitted record would acquisition those for in to opportunity. our believe administered expertise program not also to Willdan's substantial Weidt XX-year PG&E. addition this XX, an new of Group, we pursue Group's In have history effectively been the in abstract this compete The able statewide we Weidt construction But we program. have with to The California qualifications Prior

possible. as on we're highly is as California opportunity once-in-a-generation-type much a and focused winning

efforts California the to of let us procurement Our Onsite related Energy. development the business also recent acquisition opportunities to

joint As only important acquisitions culture, we our method other the believe very capabilities also themselves get work It bidding that that and they in grow strategies identifying but understand and We each and mentioned they opportunities. through to preferred overall. can our synergies. know project and for review and is Willdan not objectives our past have is

partnered Onsite energy addition an previously in at working with that an the This we we're abstract that part an both program project facilities. determined submitting efficient had Willdan. didn't firm services and address. We excellent industrial for their of efficiency the and be is will implementation Onsite market to is Energy industrial firm energy

The industrial commercial. market. than energy the commercial than market is efficiency less be larger It competitive can

industry from So Onsite California a perspective cement, attractive aerospace, telecom, has data market. example strong our for record centers. it's built refrigeration, and track with petrochemicals working a in very

municipal These strong we the addressable utilities, broad expertise market. win to expand good believe our momentum our results municipal program from pipeline be which will QX. other work. and of in is in programs also seeing We're geographic able will adding been start we take the the our substantially this With We've leverage nationwide able to California. in LADWP to generated to presence,

other work and have expand continues opportunities generation. energy as fossil We Los to efficiency Angeles close LADWP prioritize with to our fuel

work as From feasibility build microgrid fire, integrating our to are country We're our impact natural in as to disasters track development. part studies doing deal continue a efforts record communities. deal of grid. the great with for the resiliency longer-term we Utilities that around perspective, earthquakes storms, to conceptual a microgrids of from enhance and development such

cities data our the analytics. capabilities serve We're ways for that also developers, software new to and has to our their in quest finding and utilities, assets to deploy de-carbonization. apply We team feel

period we of words we undergone within we to edge at enormous short for The next leader I fully new to leading presents era in change Before an to say impact wrap-up industry isn't The remain a enormous industry energy in that in positioning innovation. and the has have I understand technologies ensure have progress the opportunity be a about Willdan. investments of of efficiency. very made that time a made today, the want the of and Willdan significant the few

to We programs that leading-edge success lead will Willdan. for more have

I back that, like the turn call to would now operator With Q&A. the for to

Operator

Roth Craig Thank [Operator Instructions] Capital And with first you. go Partners. to we'll Irwin

Craig Irwin

my thanks questions. and for evening, Good taking

bit Or that the projects more quarter. Can if bit had happened in this had a you in to the was a us in just Or little certain something of your I geography? wished was maybe about concentrated wanted So have startup little this or might ask for color areas mentioned not that five different customers? country you on more you the color that this us? give certain whether on was largest delayed of among a

Thomas Brisbin

better a few I Craig, few we did that, months were approximately not done programs five we And June. anticipate write later than I a few said, said a so in restated Duke. down and because and I I June glad, I'm have this LADWP but ramp-up

Craig Irwin

Excellent. Okay.

maybe you are customers. one Can number of involved Duke executing and what is sort startup describe number the whether them the program? line us goes really and what's and startup for a the the of LADWP always of two programs? of cost So in or care Taking impeccably customer expected? for Whether not in? time preparation was not – What the increased or you And focus. saw had these

Thomas Brisbin

they're waiting your question. for Mike. Mike,

Here you go.

Mike Bieber

adding Carolina previously states. we a three lighting-only And states We it and and Sure. were have Kentucky. Duke, it of were and was HVAC and only North involves the On Ohio, now Indiana South in they added program.

measures. So configured people to – the new new new program completely XX reconfigured we hired approximately the geographies those new ramp-up staff, for and

recognizing days So were had up XX and in typically you sales. prior now revenue. May and to terms June, weak April of costs ramped Sales we've have has actually much about now better the a pretty

You'll measure you program, do you'll XX the revenue the install after sell about days our work. the and then recognize you'll

look and is of the and big back that and same year. And and level the May remainder started revenue the in of LAUSD will is that revenue at million of $XX thing program in ramped the you in think provide effort recognizing of excess they've about also. new then the added higher year. added June a the throughout ramping a that the month-by-month boost to going up that in on LADWP really We work school half we and if system from will we continue So April is in standpoint, that the up

Craig Irwin

for you that. Thank Excellent.

wanted was about I thing Lime. Next to the cross-selling ask of

be number Jersey So good additive of there have enhanced couple international you're markets. the of where for opportunity; a were were you the as you number New traction optimistic York, seeing projects and Duke obviously be maybe potential start with other New on cross-selling an both LADWP. additional the you us a might geographies, potential already But to projects to XXXX Can kick-in? of these update scope, that this maybe in some there

Thomas Brisbin

where expect that until to XXXX. adding don't New now. right We That's stands see Jersey. revenue I'll address that

LADWP. As is turned big one beyond far is a as – few municipal. a which plus we've utility Lime added California, municipal

mentioned You international.

that some got are be at started cross-selling? countries energy we mentioned else yet We efficiency you have to on work looking Mike, anything on. in

Mike Bieber

something work right the think come about months for future won't mid-Atlantic from in doing the XXXX nine opportunities we're till the upfront but out that now, I now. states are work, procurements

Thomas Brisbin

Yeah.

Craig Irwin

Excellent, the the clear is to on to take rate We then the out excellent. time to? is into the give the from cycle awards amount review us some view line your when and see scope we investors, tremendous us maybe investors of that your And a to a opportunity? potential That's time good responded I California And to line right all now. California. to you've hear. know talked come of enhanced really beginning Can effort capture that's on shape what thinking you project development and about put can for get everybody of color start activity of there's for RFAs the

Thomas Brisbin

didn't proposal all. wise, phase spoke now we for due I California for submitted And or for we RFAs think proposals that's the submitted. Okay. said leading The They're been a the Schedule selected pack real XX last tomorrow. quarter IOUs. which we the are is PG&E of right We like all last progress. have time have the

Gas will next San be & Diego proposals now. the So Electric

interviews Phase happen was were to We going then don't at to And So an there's look you Then next. be what's award. if the as know X. know can don't the this proposals. to Phase Phase X they're have we going abstract. going X questions.

of around SCE October & Electric which the the XX, we stage. are X due is XX is days XX. in Diego proposal Phase now So San Gas August is and due from

of as will it see it let's and probably award, year. because I And won't negotiation hopefully, long-term stated end some a by be we'll the public, say, type be of the

lead public So think year. by and next if the PG&Es by we'll quarter we it's to time, the next awards there year the be continues first quarter first beginning of way, the the

Craig Irwin

along same Excellent, the question lines. excellent. And then another just

it up move So much and California selected as us everything share the Can field on you from with narrowed, you looking were up for essentially is you accurate approximately has to the utilities abstract that contractors. proposal opportunity? you've to been obviously selected have how chase certain the basically

Thomas Brisbin

accurate. is That

upscale have been you what do say? We

Mike Bieber

selected. Up

Thomas Brisbin

-- for selected Up selected. Up okay.

an have selected we How competitors do Up say, because we been Sorry, of don't all couldn't know, many it selected not I percentage if not I for Craig. up XX. let's say know it. I probably but have how that be say on that. don't been would And a estimate, did I that have selected.

question? other Your

Craig Irwin

certain would else for likely a proposal? program? And they this you if takes stage someone business likely proposal you awarded the one kind scope another then to will winner and once off proposal get were the where a something of be all the where get all proposal into move certain it is of would scenario win all a Or contractors couple maybe a you is business

Thomas Brisbin

to was award I to say to it reality the listening they'll I three ago. would XXX we I had be is all you utilities if they -- talking should if not this believe were contractors but Willdan, Well, years call, the

I think see really, you're down going few go contractors. to a to really that

there And award. so a I not single will think be do

one, XX of but four I area or two, awards, there the in will think be will there multiple per probably be segment where were before. maybe three, XX

best guess. my that's So

Craig Irwin

Consulting, are kind to local Excellent. not the anything constrained help quite you be of was trajectory there? of I Engineering that suggests the share thinking? question How us at pleasantly should growth as that may. might as people understand surprised And sort municipal intermediate-term This were by we this the there. short last looking then budgets if and I Can business?

Mike Bieber

might the was building the quarter we're and permits has will that X% quarter. it check cautious The high they that has but had of remained indicator down. in been been organically not year quarter. performance. it that and reducing. up in business. each number still previous Good So, thought flattish that is it business It And We for quarters. the We a about processing has we be be down We're leading think that. good in about

Craig Irwin

that. I'll queue Great. hop in for Thanks back the now.

Operator

to Securities. Instructions] with next Katri And go we'll Wedbush Moshe [Operator

Moshe Katri

Hey, question. thanks for taking my

taking that in, comfortable is these time deals to there delays seeing or are fact are terms the that So, Is the this I of for of second function this project be the we'll to the starts. trend with? structure Is that year specific larger get here? in guess, longer client anything it

that recurring that follow-on. some given this I us give a least Thanks. fact have it phenomena year on bit just more a at of -- then seems can you the Maybe like and kind color another

Thomas Brisbin

question second we're the still it's last -- of second The what in first time. continued happened not the it's and part now. of about operating the on still It's the time actually end until year

on So, this with we're LADWP Duke immensely. in has two more the measures their Mike in more on deeper states transition new which And the and dealing measures Duke. award reauthorization LADWP for of funding on same funding states still said, the the increased from and issues

as the We're delay, So, said a new we-- not delay. it's just it's -- same I

Moshe Katri

delay? extended just it's So,

Thomas Brisbin

seeing and thought we're out We we're I progress months. June by -- be again. months of it so went it in than And we'd won't say rather five and it And of now. a we said we out couple we're Yes. it now believe

Moshe Katri

rates at Can of quantify nicely point? fact us assuming people just going I'm during that up a of margins billable terms Okay. second for And to the utilization are a lot in then this half. this And of you function the levels? it you spoke be about of getting is kind

Stacy McLaughlin

second around adjusted expect the mid-XXs EBITDA margin of for the would the to half year. the be We Yes.

be year entire would the XX%. around low for the we So,

our kilowatt lot a of utilization as are far based programs savings. As on

So, of it's a direct our not the just utilization of result employees.

Moshe Katri

some And the the cycle on we in pipeline? on color can of then Thanks we Integral sales where are terms Okay. lot. get Analytics a

Mike Bieber

Sure.

to First Integral contributing of is all our efficiency. nicely utility in Analytics energy programs

this So, opportunities no this mature a do half there. have major of we're will sales of had well They and we but the back in some robust quarter, they larger integrating that expect them past year. opportunities pipeline some

Moshe Katri

Thanks.

Operator

next Gordon Gordon go we'll Capital. to And with EF Andrew

Andrew Gordon

I'm opening thanks I remarks you afternoon time the margin And revenue Lime's from to this And first guys subcontractors. as approach. if net I I something margin couple to for your using noted wondered and taking so expansion one which might you approach good you let's the or my your guessing due is Hey believe in say weaker have is through for is years over your by possibly get questions. was that next over

Mike Bieber

of a removes revenue report subcontractors. use net a subcontractors as percent It of bigger of is not result margin Lime's which because we

Our margin quarter-- think was EBITDA I XX% this

Andrew Gordon

no. No, I'm sorry.

your think revenue, versus I margin your clear. maybe the wasn't net gross I I been portion margin, given to subcontractors? your revenue that's meant contract

Mike Bieber

Okay.

Thomas Brisbin

That increased. Pass-through increase.

Mike Bieber

pass-through to about our result acquisition. now you're did of right revenue a XX% I The Lime think from year increase. up XX% the of pass-through is that and -- up last It's is

are correct. you So,

so to but primarily that's pass-through. as due We acquisition will margin down, result and the reported subcontractors And equipment and equipment. it's right, primarily supposed equipment, pass-through to the Lime you're gross of it's revenue come a to

Andrew Gordon

opportunity of premier so impression that your a able is wondering was approach source see. it… you've if margin I past forward, I going but to that by core a the subcontractors, use increase business, in My the of in been was

Mike Bieber

a potential back-office off that costs. better right is our absorbing of though the source It's What's we're opportunity. bat Yes. happening

rising. that rising the not are costs corporate rate Our is revenue at

also that contribute So to will margin.

Andrew Gordon

for My or you pretty you is are moving on -- revenue hand, that the range, thoughts whether how whether parts in you revenue that wondering might your there work any the be sounds just, just opportunities? comment be awarded I'm some year on as conviction projects to other next might on depending on in your than net based it rest better you. and will of question like have guidance Got high

Mike Bieber

customers let in increased and this Well, a customers, so It get QX. of going well. Tom lot their the us mentioned our budgets good. work hand got for year as as we're only and pretty through fiscal have looks and We've halfway us major year our into through XXXX

can see this it next let's get how and call. complete actually We'll in much we So guidance update work year.

Andrew Gordon

Okay. Thanks much. so

Operator

Koch Tom And we'll Trancoso go Partners. next with to

Tom Koch

Hi, everyone. me? Can you hear

Thomas Brisbin

time, hear. Yeah. no Long

Tom Koch

Long hear. time, no

one one be Is or be of now one and I like of contractor Okay. gives to those in just grants the utility used of Question. when it you that say to it person like five those going hospitals, kind a but to just one person? thought five. or Willdan previous thought a for four Hey, you verticals like it's Tom, going I five a heard questions a I can utilities, down that schools just program four -- -- whole to of hospitality, there yourself clarify or be bunch or one four there’s

Thomas Brisbin

Oh, boy.

strategy. now So competitive you're getting into

will… I So

Tom Koch

No, I'm you strategy. a Willdan grants and of Usually the I Not of that When case. say just only not people. one that. using when the whole is award on as no, the know there program I'm PG&E hospitality provider there's if is it a the no. that's trying bunch website don't go to an understand example,

Thomas Brisbin

Right.

lane, to And they one they contractor. a So biotech, hospitality, within it schools. generally swim XX programs. programs; have whole that give of hospitals, generally They have bunch

Now you can look bigger, Tom.

residential, and there where biotech, break and what hospitality, -- under can schools we're and there's into And hospitals, on. industrial commercial, You then about commercial public. and is talking it on on

that usually right. to you're So yes level, down once break award. you it one There's

in commercial. within asked a they've to for they programs What that. They'd residential have XX like to consolidation see alluded possibly They'd like might program to see they a in residential. have is or consolidation like within what been consolidation

as we Tom? there that maybe that categories, Does question your into So some you believe answer up consolidation. the within go

Tom Koch

It does. It does. It does.

to was the guys the ask regarding and information you Onsite, acquisition question such second price I the provide And Okay. did for and EBITDA that? going revenues as the

Mike Bieber

balance press price will the of in it be will the -- that our indicated that $XX QX was and release in revenue. not was press release in the The effect that in acquisition Stacy said about sheet, it We is correct? disclosed million

Stacy McLaughlin

Correct.

Tom Koch

Okay. profitable? And is it

Mike Bieber

It is. Yes.

Tom Koch

Okay.

going when not you because guess that has I that are closed is guidance deal guidance yet, not that's So yet correct? your through in the

Mike Bieber

That the deal the get only or until line. acquisitions they're that we on not for the accretive These closed. slightly We year. to very six guidance the are in first months quarter or moderately accretive effect so first elected has update of down only but in

adjust and within didn't We get we range for we reassess. and quarter perform to So guidance that. next thought still we'll would the

Tom Koch

Okay.

divided two So $XX that guidance approximately $XX Onsite? million by million of revenues from are in

Mike Bieber

yes. revenue, one-third Gross that. much about number Yes. of smaller Net revenue is

Tom Koch

Okay. Perfect.

So $XX gross million is revenue.

very Okay. Thank All you right. much.

Mike Bieber

Thank you, Tom.

Operator

further time. this no show I at questions

would So over the I like any call to remarks. for management hand closing back to

Thomas Brisbin

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

Operator

does conference. All today's conclude thank you your right. participation. We It for

Willdan (WLDN) 3 Aug 192019 Q2 Earnings call transcript