WLDN - Earnings call transcript Q3 2019

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Operator

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

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

Tony Rossi

Thank you, Eduardo. thank results joining ended for XXXX. and Willdan to September everyone financial Group's the afternoon you us for discuss XX, Good third quarter

us remarks Mike to Bieber, Chairman of Willdan the Thomas Stacy With call will your Chief will President management review then Management Executive up prepared McLaughlin, and Chief we Officer; Brisbin, Officer; Financial Group. from today and questions. and are open

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

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

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

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

Stacy McLaughlin

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

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

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

and Consulting period with segment, revenue the net year. Engineering the same was Within last consistent

an for $XX.X period last the $XX.X of million revenue XX.X% Direct costs quarter Contract of of year. in million from increase were XXXX, third the same

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

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

resulting increase from largely increase in due assets The to next million most in an intangible expense, significant change $X.X acquisitions. of our the was amortization

had $X.X million. an approximately in of expense also increase We compensation stock-based

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

diluted During income basis, quarter, for an or tax we the was third Net the benefit $XXX,XXX. $X.XX adjusted recorded quarter of third our an approximately income $XXX,XXX XXXX of On per share. compensation net of share. amortization $X.X net $X.X tax. The of and adjustments intangible GAAP were income diluted or $X.XX most per of million $X.X million was both significant from million stock-based

performance third of quarter million XX.X% increased within not of an a of the XXXX. of these non-cash Adjusted result items for are was the from segments. increase million third XXXX, $X.X and operating the EBITDA $XX.X quarter Both are the for of

to Turning million we accounts sheet, had balance XXXX, $XX receivable December $XX.X XXXX. net in September XX, to XX, as at the million at compared

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

$XX.X revolving $X a our outstanding, term on million XX, outstanding and facility million amount As no our September outstanding. credit of term on loan million we loan. had But $XX XXXX, delayed-draw

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

range For $XXX Adjusted and and expect EPS million. $XXX the we full-year diluted now to range $X.XX $X.XX. net between revenue to between million

XXXX. discuss top through end fourth the the will end anticipate continue because we that in quarters the the to ramp $X.XX by experienced first slower have detail. reducing of are this we will further three that and ramp of We We by this bottom earnings Tom quarter. earnings $X.XX range of in the

of million, a an million, $X.X We shares, of stock-based amortization of XX%, effective of million, expense approximately and share depreciation count rate also expect $XX.X million. approximately approximately approximately $X.X XX.X approximately of interest compensation tax diluted of $XX

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

Thomas Brisbin

we a with meet our and did of the expectations. We to York. State earnings, Stacy, We expansions improvement steady finalizing scope in up of our for LADWP, afternoon Compared expansions, of strong for Duke Ed, we Since New have and good work Thanks. ramped for clients. the year, program Dormitory seen and largest but of in profitability first increases Authority number funding not significant Con the York, New these quarter half saw program the delivered everyone. the the

minus disappointed organic was Organic growth. the XX% a were in was growth X% area that software reduction Analytics. quarter, Integral was we IA, due to One through sales for

a is to strong a due down pipeline, the for has has due cycle be than expectation California contracts. -- sales providing IOUs, X% expected. was longer utilities, slowing Software the growing but our investor-owned to to new

before. caught have this process We been in

greater and in We expect our XX%. rate return than XXXX California to to to growth organic start

from for this California the quarter, at $XX million in on a million IA $X.X missed and from $X perspective the Looking from we in sales sales dollar million IOUs.

update sustain presence California than better that when want I have growth, can in we previous much given are on California. national am our We prior earnings discussion. and fortunate diversity to that broad our positions, the you only the sure an concentrated

before, As have short-listed on. mentioned we for been all we abstracts programs submitted XX we've that

to in proposal any Diego were been proposals do Seven California not Edison. and SCE, submitted PG&E the full & now phase. Gas announcements Electric. until We XXXX. expect We have submission are We San waiting on Southern

negotiations fourth start the could in However, quarter.

contract. of which Small with also a million, are for country. time. We increase recently fifth were Program having scope a customers Sound work the $X from It's Puget expanding awarded We of is the consecutive with million value Direct $XX Energy's Install Business other success two-year contract the a the prior around in our

services the as representative to has program to that to the scope controls. Beyond been previous Lighting. services, efficiency it energy include HVAC of energy This across a programs, larger we're In offering our relating we've to trend, addition, seeing of expanded efficiency and is our refer

Willdan's for and the positive development capabilities organic very This is a in growth opportunities for creates future.

the Authority the for We task of growing we Port our reflective also York received This New first is New operations. have York. orders our in momentum of

Energy Group Onsite have development acquiring begun efforts Energy earlier relationship the to with AT&T. activity and increase, building California. is great The we Group a business with Weidt have In each our joint and is we this to general, pipeline. Weidt business good expanding firm development since continues year, Onsite

or said, Turning we one EX we top to Economics always consulting was we today, With and a Environmental fulfill been it's firm as able of that today's policy our our announcement of acquisition priorities. have to that goal. Energy called, the have announced

in young XXXX was firm. Horii the EX Brian later, the from Orans, years four is Mr. country. top Mr. of transitioned In in Ren PG&E. EX the top Dr. firms one founded by our student opinion, joined Olson from Arne a Stanford XXXX professional Washington Mr. strong. in first partner, senior Price, fourth was Energy Snuller graduate The office. the State new is from XX hire. EX Today

are The professionals fields. the in experts XXX portfolio most has respective they the projects, in impactful energy a subject-matter are industry. of EX their

Climate have worked creates have worked on Accord, sustainable which to -- We the policies. countries they how their Paris led

enact and again, their sustainability creating progressive at to New states, York, on a that and we energy states then EX trend other fast work to forward most rate been Hawaii clean has path expect for very a policies, growing They the goals. on continue. California

own value the We customers. this provide the of to performance, will Beyond the a providing to effectively or or will the future. economic EX value of needs our enable strategic into position us to enhance with planning believe us roadmap visibility efforts, strategic company Willdan, serve its our

generation been to Now a wrap profit about multi-year finalized have each comments higher our month. programs outlook. I June, we Since are The want we with that programs. seeing have up a few

have growth, budgets. on program now organic we So based on better visibility

strong efforts would backlog. procurements business our Any the development program through to wins California additional or other already additive be

the through quarter. We on based third we delivered have have reduced guidance what

We want revised current to ramp would -- us the and maintain. our to there for what a most cause to is higher our incremental than expect perform guidance. we Informing continue to awards up with investors ramp is that information possibility this

I for the turn With questions-and-answers. now that back would the to like to operator call

Operator

Please Chip first [Operator Moore from Instructions] question go ahead. Canaccord. at Our

Chip Moore

and it Tom, Mike. is going? Hey How Stacy,

Stacy McLaughlin

Hello.

Chip Moore

on and are new one thinking a the of the you the about quarter outlook? that of left, low-end that and back of specifically bit we in if high-end now about -- what Wondering things talk ramp quarter sort held for more could projects. we've What the got

Thomas Brisbin

took basically as we Yeah. what we down Chip, bottom $X.XX guidance, EPS Stacy $X.XX, quarter. That's were revised down mentioned. top-end while guidance the short of end the and we the this

continue can quarter you and implied expect do the one, Edison, we from the more that. What's than has number to incremental Con ramping So calculate ramp goal. specifically EPS our next is budget into

that in energy the so for to The due the to those, have more continue year-to-date down ramp work. what's driving up it, and really we do in So brought budget fourth quarter Ed can similar to only guidance the Duke But us, have we the not for customers it's had and the we budget quarterly to that to throughout performance, able we've hit execute more efficiency, if that's Con issue have we why happening to do because annual if LADWP, phenomenon is both and we we're going that's guidance. guidance are program.

Chip Moore

you Tom, how now about do three net deals about perhaps on And side helpful. that? That's XX% the confident still need sense. that? makes talked organic, to back it's IA or get That a think to row you're really it. something Got down, should we in quarters some lumpier Or goal, going see in California right -- still to we get that

Thomas Brisbin

bit of get A will in California little are IA other deals there help. going, but pipeline that both. things Lumpier the and

not a too bad like looks I about in and wait we're concerned So it. mean, but number, bad it know year a we're big number, quarter see. I

Chip Moore

sense. makes That Yeah.

Thomas Brisbin

Overall not concerned. we're

Chip Moore

business? of more That's them, we good what contributions $XX thinking that they terms to what about, that then bit about in is a EX talk and known and you've from are how hear. net long million bring, And maybe

Thomas Brisbin

projects We've with known to speak got the last business. together over common worked already. business. of the X.X we've announced. name haven't I they I EX we reputation great have They EX long We've and will in been them can't be jointly know the a synergy the But been Willdan for a won on We've years, their think is because to fantastic. them projects. pretty as as reputation. doing

are about very We excited it.

revenue to have through. regards the of They the other all net that pass and your synergy it answer the they very Does a don't With question, I -- long... most question, that's revenue, is how type part net and of little revenue. have think of net

Chip Moore

back others No, here. let in and good. guys. hop on queue Thanks I'll Yeah. that's hop

Operator

Instructions] next our [Operator question at ROTH ahead. We'll take Craig from Irwin Capital. now go Please

Craig Irwin

for thanks questions. taking and evening, Good my

you So this expense intangible in I to quarter. thing the about discuss million an the that Can is and impact drove as you the for $X.X this out what million accounting $X.X ask wanted first amortization adverse -- called the expense?

Stacy McLaughlin

Hi, purchase -- It's allocation The related price Yeah. from acquisitions. Craig. to the

then the first it as when price So with purchase specialists. valuation our working is recorded, well as adjusted is auditors, via

intangibles. the adjustment to an was it So

in increase expense is brought in intangibles, the it increase an which So, an side. in

Craig Irwin

So mean traditionally then maybe pull why standpoint the had you on of companies your will included with didn't you means, mean, that out, I fantastic $X.XX. can a you quarter -- in evaluated pull release. most is it out? EPS adjusted which actually logic you the earnings us out in of of share an how you versus I

Stacy McLaughlin

intangible pull out EPS. We do when amortization, our Yeah. calculating adjusted

is there. pulled out. go release if on the detail is the Page it So XX you to And press

Craig Irwin

not standard in amortization? is separate just bundled your this a So This charge? is

Stacy McLaughlin

Correct.

Craig Irwin

the No, the in Yeah. thought a it release Okay. way called out charge. was was I it press

Okay.

you So target then XX% Lime. Can about in traction. Lime California? do 'XX? what us you revenue frame take integrations, of update quarter, is key out the capturing beyond right how bit the them you now? Right? maybe did trajectory business additional Sometimes growth thing growth Can to your is a what likely time for feel And is maybe for us Lime Lime exceed to on of in gain little

Michael Bieber

have but for is this like. quarterly Mike. Craig, Yeah. know I what annual I the numbers exactly the don't numbers Lime, look

are So a last did to $XXX Lime them revenue trajectory million $XXX expecting $XXX and in million year and XX-ish maybe to they and on net gross million about million gross in in do EBITDA. $XX and revenue in EBITDA, this we're year

are work do would we acquired that and do trajectory customers, higher talked had growth that from on that even support to -- their they XX% We funding than XX% right a So they to about that to that have done number, we ability better maybe thought the the when get they but on that have they ramped up. company. that

like think for I it's this number more So, a growth XX% year.

Craig Irwin

Good in fair. any that's year acquisition. execution Okay, the first for

year, and coming see key is you've we bit if to investors of Duke California one little a then, rectified slow do LADWP have Right? up So taken. materialize. these were seemed the that's through but So this and execution questions with actions been probable the when

IOUs the You had slowness the quarter. with in the

contracts are talk direct a planning of to six months these significant capacity, preparation level you contracts some take could are some preparation generation? your of execute and little to late negotiations? really realistically seeing of stage in bit that readiness contracts Or offices just existing about Can to related these and expertise? revenue nine and of hiring, more or with Are start existing to that these

Thomas Brisbin

part, your hiring. to Craig, first

large we the You've are got to keep all in at three mind, IOUs. of a incumbent the or incumbent

in place, managers, have people program in we have the staff we So the place.

contracts. made that have We on California have that acquisitions have Southern been these in Northern California working and been

Without are are doing, can the we but part talking about we're work, teaming it not too to structured much our doing use you people we way already this I that, the are an the who efforts. tell incumbent, of what only

incumbency large in plan. So there is our

the ramp up, more contracts. smaller It's So so consolidation utility a of idea -- fewer the not much. by of into

deliver to industry the Does consolidated to have we that. you? make that So sense

Craig Irwin

That's That's helpful. clear. very perfectly

very it materializes. margin shortfall, Analytics high Integral million revenue to that's obviously, revenue on Moving $X when

is not the where So, been customers quarter, IA. particularly quarter in the this sticky first to see but not that for have sad

maybe share losing is with stickiness think is causing just this the and Is issue your business you of decisions? customers? IA the you final utility budgeting other Can or what extended vendors customer with cycle purchase potentially to us really

Thomas Brisbin

tools, What customer IT beat planning at software aware been level offer. have is instance a we're towards who we another slow by another utility advanced we where company chosen a though the a of not Craig, -- which IA evaluating or very IA more has single seen is change solution.

periods we've we've utilities really presentations where had technical for in made two the of upwards They years. to and opportunities along, crawl pipeline

originally pipeline is would thought, IA years two say slower ago. than I we the So for sales

that, are contracts but done strong think said have to, they do all we're Having we pipeline. a which there, number There of larger of a it's out it's done. until some close not pretty

to and release pretty to can't -- to happen continue you earnings. to it potentially you events, it We'll really we'll When are going does can. So the have update be it forecasting it extent been timing happens. because significant a though, press the we predict IA we activity those impact on would and of cautious until have

Craig Irwin

hear. to good that's Yes,

million So then far is there acquisition, $XX know share you quarter, I right? cash. In sheet $XX.X were or more to can your balance as the the us in cash, you as question manage as as some with next you less, investments leverage? used million sort where of but want far to

generation growth accretive important the leverage pursue? is an a over for as prioritizing fair And company you you cash more and acquisitions the priority company? the are for of opportunities What year see for next item or as a to you ratio

Stacy McLaughlin

is Cash item for most definitely. an us, important

allows leverage. Our go -- to and We're currently we agreement to above don't times go us that's that. X.X up want X where credit to we about

we don't we range. X -- aren't the even though comfortable have there, So we some still flexibility in to X.X

Thomas Brisbin

of investment. that In come do after EX. future down, a and number will actually now, -- probably it's is right number at peak terms expect We that

not balance looking now. reflected about will at, and up priority be down. in EX right the looked but come we X it's to cash, our pace. It'll that that We've investment at could it at keep current pretty such So type of this you're sheet generate we're after closely,

probably state on ideal steady is leverage a of X.X think business turns X more EBITDA. I to

Craig Irwin

given always quarter? EX question look you Got disruption happens impact there acquisition. we revenue for the any operations where actually quarter? the the limited that's is How fourth in stub at should the slightly do booked to it. period left expectations Is for closed integration and really got this it, what the in revenue of And fourth you quarter, XX you've then last just have days kind after the

Michael Bieber

really On minimis. is EX it de Yeah.

of, in left something on it call revenue. XX a $XX days have million run rate like We

and are chase looked we the this. that at we So going it it was so not of at small, said anything because We end. built to

was, terms mentioned, is major with already two as in this contracts working In that disruption working Tom EX disruptive, will maybe we the highly a be we're of actually though, with awarded Lime we're so closely were one like company, and right not them, is dating this process, very with now.

The good. relationship very is

kind get with has you the acquisitions, Sometimes but been very pull-through don't good that a process with of this EX.

expect working doing We're would disruption already with I that. no with them. So

Craig Irwin

contracts? or you're curious, Efficiency just you the the answer I'm this, other were these contracts national maybe And related procurements California to maybe to can Energy referring

Michael Bieber

Because Because don't they about announced have client not been the client. talk the has believe that. announced not I to I'm going publicly,

Thomas Brisbin

though. give least in Midwest, who can to We you controlling blocks smart let's well wants an idea, say two place a state-of-the-art some the as Take of energy amount They load, everything using to using renewables. from turn the the to want into be in, city. as

We with partnered you us to give I that pretty allowed confidence EX, high that partnership can job. win and

for So we in campus Chicago very comparable will Edison. at Commonwealth blocks be building Midwest. what's -- at A be the campus a very smart something the IIT smart this will two to in

Craig Irwin

the I happens your often details with asking you where customers? I'm mean, Last in contract, the notified California as contract. of this Excellent. ironing execution I I out the not the a of to have final kind selected an contracts if award indications had you're disclose are of where procurements fairly any been negotiation EE in of procurement. understand that but may. but winner you are for that really and just of terms there you question do conditions names, Are you in

Thomas Brisbin

will they next you make can utility that and it. for That's all decision. I not be made step next to The have the tell

Craig Irwin

similar the hopefully We on forward Thank the quarters in and congratulations quarter. progress. a -- Well, to Great. fourth IOU at IA look you.

Thomas Brisbin

Craig. Thanks,

Operator

Capital. take our Hellaur [Operator Casey go now next Instructions] from Robert Please ahead. will question We at

Robert Hellaur

for Thanks my everyone. Hi, question. taking

lighting information little how a ramp for in think forward? release kind of looking margin going added the about comment should more we HVAC. from about I a guys evolving the the press know Just on you industry toward

the of programs growth increase, couple walk how through of kind those seen can I'm over you we curious, cost short-term as in should that And the that the like kind juxtapose just of the thank of maybe question. in of long- kind ramp like you've us you last you see kind taking for kind very my term? sector long-term of versus could growth and the quarters over much tail And

Michael Bieber

Mike. is this Yeah,

not net our QX. QX you that margin complex improve around in had even be We there quarter, effect about will If lighting had it profile. The towards EBITDA and a on margin. the would may predicted and look percent was in as higher more up XX% in revenue be evolution margin an has it that from of did measures

that Even as if measures, for and transition has over last impact the not may year back IOUs, time, that we more one, happened. years, the a become pricing gradual far. you the over hasn't more two had is on an complex think or thus The margin go improve, complex they but

between our It's lighting still projects measures. and measures XX% somewhere that -- IOU early to more and simpler complex more most of have compared XX% the

a slow still and it's So gradual change.

Robert Hellaur

Okay. Got it. Thank you.

Operator

appears to further It turn no this I'd or to additional closing management questions remarks. back conference time. the like for are there any at

Thomas Brisbin

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

Operator

concludes today's for Thank That your you participation. call.

now disconnect. may You

Willdan (WLDN) 1 Nov 192019 Q3 Earnings call transcript