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Willdan Group Reports First Quarter 2022 Results

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ANAHEIM, Calif., May 05, 2022--(BUSINESS WIRE)--Willdan Group, Inc. ("Willdan") (Nasdaq: WLDN), a provider of professional, technical and consulting services, today reported financial results for its first quarter ended April 1, 2022.

First Quarter 2022 Summary

  • Consolidated contract revenue of $91.8 million

  • Net revenue* of $50.2 million

  • Net loss of $3.8 million, or $(0.30) per diluted share

  • Adjusted net income* of $0.9 million, or $0.07 per diluted share

  • Adjusted EBITDA* of $2.3 million

*See "Use of Non-GAAP Financial Measures" below.

"Our first quarter results were in-line with our internal plan," said Tom Brisbin, Willdan’s Chairman and Chief Executive Officer. "Revenue and earnings growth is expected to continue accelerating throughout the year, thus remaining on track with our fiscal 2022 financial targets. The trend toward EV’s and electrification to decarbonize energy, points toward growth in demand, which drives our business."

First Quarter 2022 Financial Results

Consolidated contract revenue increased $12.8 million, or 16.1%, in the three months ended April 1, 2022, compared to the three months ended April 2, 2021, primarily due to the resumption of Covid-19 suspended projects combined with increases from construction management projects in our Energy segment.

Net Revenue increased 4.6% to $50.2 million from $48.0 million for the first quarter of 2021 (see "Use of Non-GAAP Financial Measures" below) due to the change in the mix in our contract revenues in our Energy segment as well as additional start-up costs associated with the new California IOU programs. Gross profit for the first quarter of fiscal 2022 decreased by $0.8 million, or 2.4%, to $31.4 million, or 34.1% of contract revenue, compared to $32.1 million, or 40.6% of revenue in the first quarter of fiscal 2021.

General and administrative expenses increased $0.6 million, or 1.8%, in the three months ended April 1, 2022, compared to the three months ended April 2, 2021 primarily due to higher professional service fees and higher computer-related expenses, partially offset by lower stock-based compensation expenses.

Income tax benefit was $2.4 million for the three months ended April 1, 2022, compared to a tax benefit of $1.5 million for the three months ended April 2, 2021. The increase in the income tax benefit is primarily attributable to additional energy efficiency building deductions derived from prior years.

As a result, the reported net loss for the first quarter of fiscal 2022 was $3.8 million, matching the net loss of $3.8 million for the same period last year.

Adjusted Net Income (see "Use of Non-GAAP Financial Measures" below) for the first quarter of fiscal year 2022 was $0.9 million, or $0.07 per diluted share, as compared to Adjusted Net Income of $2.7 million, or $0.22 per diluted share, for the same period last year.

Adjusted EBITDA (see "Use of Non-GAAP Financial Measures" below) was $2.3 million for the first quarter of 2022 compared to $4.7 million for the same period last year.

Liquidity and Capital Resources

As of April 1, 2022, cash and cash equivalents totaled $7.7 million. Cash flows used in operating activities were $7.8 million for three months ended April 1, 2022, as compared to cash flows provided by operating activities of $5.6 million for the same period last year. Cash flows for the three months ended April 1, 2022 were impacted primarily from the changing mix of revenues, combined with the increased demand for working capital related to the resumption of our utility programs that were suspended in 2021 and start-up costs associated with certain new contract awards.

As of April 1, 2022, there was $115.8 million outstanding under our term loan credit facilities. We had no borrowings under our $50.0 million revolving credit facility. On March 8, 2022, we amended our credit agreement to, among other things, draw the remaining $20.0 million available under the Delayed Draw Term Loan facility and adjust certain covenants to ensure an adequate margin for compliance obligations through fiscal year 2022. We believe that we have adequate resources and liquidity to fund cash requirements and debt repayments for at least the next 12 months.

Full Year 2022 Financial Targets

  • Net revenue* growth of approximately 20%

  • Adjusted EBITDA* growth of approximately 50%

  • Adjusted Diluted EPS* growth of approximately 20%

*See "Use of Non-GAAP Financial Measures" below.​

First Quarter 2022 Conference Call

Willdan will be hosting an investor conference call related to first quarter earnings today, May 5, 2022, at 5:30 p.m. Eastern/2:30 p.m. Pacific. To access the call, listeners should dial 800-285-6670 approximately five minutes prior to the scheduled start time. There is no conference code required. The conference call will be webcast simultaneously on Willdan’s website at ir.willdangroup.com/events-presentations.

A replay of the conference call will be available through May 20, 2022 by dialing 877-660-6853 and entering access identification 13729431.

An Investor Report containing supplemental financial information can also be accessed on the home page of Willdan’s investor relations website.

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 2022 as reported in accordance with GAAP to targeted Net Revenues for fiscal 2022, 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 45.4% and 43.0% of contract revenue for the quarter ended April 1, 2022 and fiscal year 2021 and 39.4% and 50.2% for the quarter ended April 2, 2021 and fiscal year 2020, respectively.

"Adjusted EBITDA," defined as net income plus interest expense, income tax expense, stock-based compensation, interest accretion, depreciation and amortization, transaction costs 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, 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.

"Adjusted Net Income," defined as net income plus stock-based compensation, intangible amortization, interest accretion and transaction costs, each net of tax, is a non-GAAP financial measure.

"Adjusted Diluted EPS," defined as net income plus stock-based compensation, intangible amortization, interest accretion, transaction costs, and deferred tax valuation, 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.

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 the impact of Covid-19 on Willdan’s business, 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. These forward-looking statements involve risks and uncertainties including, but not limited to, the extent to which the Covid-19 pandemic and measures taken to contain its spread ultimately impact Willdan’s business, results of operation and financial condition, including the speed with which its various direct install programs for small businesses are able to resume normal operations following government mandated shutdowns and phased re-openings. 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 successfully integrate its acquisitions and execute on its growth strategy, 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 obtain financing and to refinance its outstanding debt as it matures, Willdan’s ability to attract and retain managerial, technical, and administrative talent, and Willdan’s ability to manage supply chain constraints and labor shortages.

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 31, 2021, 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)

April 1,

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

$

7,651

$

11,221

Accounts receivable, net of allowance for doubtful accounts of $897 and $1,115 at April 1, 2022 and December 31, 2021, respectively

49,477

67,211

Contract assets

59,184

59,288

Other receivables

7,772

6,267

Prepaid expenses and other current assets

4,777

4,972

Total current assets

128,861

148,959

Equipment and leasehold improvements, net

18,343

16,757

Goodwill

130,124

130,124

Right-of-use assets

14,315

15,177

Other intangible assets, net

49,866

52,713

Other assets

13,406

13,843

Deferred income taxes, net

17,822

16,849

Total assets

$

372,737

$

394,422

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

19,894

$

36,672

Accrued liabilities

27,154

35,680

Contingent consideration payable

912

10,206

Contract liabilities

11,068

13,499

Notes payable

16,357

15,036

Finance lease obligations

732

539

Lease liability

5,629

5,575

Total current liabilities

81,746

117,207

Contingent consideration payable

832

Notes payable

100,324

85,538

Finance lease obligations, less current portion

1,291

778

Lease liability, less current portion

9,760

10,768

Other noncurrent liabilities

78

78

Total liabilities

193,199

215,201

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; 13,206 and 12,804 shares issued and outstanding at April 1, 2022 and December 31, 2021, respectively

132

128

Additional paid-in capital

171,080

167,032

Accumulated other comprehensive loss

(38

)

Retained earnings

8,326

12,099

Total stockholders’ equity

179,538

179,221

Total liabilities and stockholders’ equity

$

372,737

$

394,422

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

Three Months Ended

April 1,

April 2,

2022

2021

Contract revenue

$

91,838

$

79,086

Direct costs of contract revenue (inclusive of directly related depreciation and amortization):

Salaries and wages

18,810

15,820

Subcontractor services and other direct costs

41,668

31,134

Total direct costs of contract revenue

60,478

46,954

General and administrative expenses:

Salaries and wages, payroll taxes and employee benefits

19,357

19,444

Facilities and facility related

2,398

2,643

Stock-based compensation

3,305

4,206

Depreciation and amortization

4,409

4,187

Other

7,499

5,841

Total general and administrative expenses

36,968

36,321

Income (Loss) from operations

(5,608

)

(4,189

)

Other income (expense):

Interest expense, net

(751

)

(1,064

)

Other, net

197

29

Total other expense, net

(554

)

(1,035

)

Income (Loss) before income taxes

(6,162

)

(5,224

)

Income tax (benefit) expense

(2,389

)

(1,458

)

Net income (loss)

(3,773

)

(3,766

)

Other comprehensive income (loss):

Unrealized gain (loss) on derivative contracts, net of tax

38

128

Comprehensive income (loss)

$

(3,735

)

$

(3,638

)

Earnings (Loss) per share:

Basic

$

(0.30

)

$

(0.31

)

Diluted

$

(0.30

)

$

(0.31

)

Weighted-average shares outstanding:

Basic

12,786

12,147

Diluted

12,786

12,147

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

April 1,

April 2,

2022

2021

Cash flows from operating activities:

Net income (loss)

$

(3,773

)

$

(3,766

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

4,409

4,187

Deferred income taxes, net

(973

)

(1,058

)

(Gain) loss on sale/disposal of equipment

(36

)

1

Provision for doubtful accounts

64

170

Stock-based compensation

3,305

4,206

Accretion and fair value adjustments of contingent consideration

80

398

Changes in operating assets and liabilities, net of effects from business acquisitions:

Accounts receivable

17,670

17,819

Contract assets

104

(4,547

)

Other receivables

(1,505

)

1,015

Prepaid expenses and other current assets

253

974

Other assets

437

3,952

Accounts payable

(16,778

)

(15,122

)

Accrued liabilities

(8,488

)

(3,801

)

Contract liabilities

(2,431

)

1,280

Right-of-use assets

(92

)

(63

)

Net cash (used in) provided by operating activities

(7,754

)

5,645

Cash flows from investing activities:

Purchase of equipment and leasehold improvements

(2,103

)

(1,327

)

Proceeds from sale of equipment

39

8

Net cash used in investing activities

(2,064

)

(1,319

)

Cash flows from financing activities:

Payments on contingent consideration

(10,206

)

(5,371

)

Payments on notes payable

(701

)

(508

)

Borrowings under term loan facility and line of credit

20,000

Repayments under term loan facility and line of credit

(3,250

)

(3,250

)

Principal payments on finance leases

(342

)

(127

)

Proceeds from stock option exercise

23

527

Proceeds from sales of common stock under employee stock purchase plan

1,561

1,385

Cash used to pay taxes on stock grants

(837

)

(12

)

Restricted Stock Award and Units

(1

)

Net cash used in financing activities

6,248

(7,357

)

Net increase (decrease) in cash and cash equivalents

(3,570

)

(3,031

)

Cash and cash equivalents at beginning of period

11,221

28,405

Cash and cash equivalents at end of period

$

7,651

$

25,374

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest

$

699

$

954

Income taxes

(385

)

(320

)

Supplemental disclosures of noncash investing and financing activities:

Equipment acquired under finance leases

1,048

254

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Revenue to Net Revenue

(in thousands)

(Non-GAAP Measure)

Three Months Ended

April 1,

April 2,

2022

2021

Consolidated

Contract revenue

$

91,838

$

79,086

Subcontractor services and other direct costs

41,668

31,134

Net Revenue

$

50,170

$

47,952

Energy segment

Contract revenue

$

74,886

$

62,007

Subcontractor services and other direct costs

40,848

29,258

Net Revenue

$

34,038

$

32,749

Engineering and Consulting segment

Contract revenue

$

16,952

$

17,078

Subcontractor services and other direct costs

820

1,876

Net Revenue

$

16,132

$

15,202

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted EBITDA

(in thousands)

(Non-GAAP Measure)

Three Months Ended

April 1,

April 2,

2022

2021

Net income (loss)

(3,773

)

$

(3,766

)

Interest expense

751

1,064

Income tax expense (benefit)

(2,389

)

(1,458

)

Stock-based compensation

3,305

4,206

Interest accretion (1)

80

398

Depreciation and amortization

4,409

4,187

Transaction costs (2)

34

(Gain) Loss on sale of equipment

(36

)

1

Adjusted EBITDA

2,347

$

4,666

_________________________

(1)

Interest accretion represents the imputed interest and fair value adjustments to estimated contingent consideration.

(2)

Transaction costs represents acquisition and acquisition related costs.

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

April 1,

April 2,

2022

2021

Net income (loss)

$

(3,773

)

$

(3,766

)

Adjustment for stock-based compensation

3,305

4,206

Tax effect of stock-based compensation

(806

)

(579

)

Adjustment for intangible amortization

2,847

2,886

Tax effect of intangible amortization

(695

)

(397

)

Adjustment for interest accretion

80

398

Tax effect of interest accretion

(20

)

(55

)

Adjustment for transaction costs

34

Tax effect of transaction costs

(5

)

Adjustment for deferred tax valuation

Tax effect of deferred tax valuation

Adjusted Net Income (Loss)

$

938

$

2,722

Diluted weighted-average shares outstanding

12,786

12,147

Diluted earnings (loss) per share

$

(0.30

)

$

(0.31

)

Impact of adjustment:

Stock-based compensation per share

0.26

0.34

Tax effect of stock-based compensation per share

(0.06

)

(0.05

)

Intangible amortization per share

0.22

0.24

Tax effect of intangible amortization per share

(0.06

)

(0.03

)

Interest accretion per share

0.01

0.03

Tax effect of interest accretion per share

(0.00

)

Transaction costs per share

Tax effect of transaction costs per share

Deferred tax valuation per share

Tax effect of deferred tax valuation per share

Adjusted Diluted EPS

$

0.07

$

0.22

View source version on businesswire.com: https://www.businesswire.com/news/home/20220505006105/en/

Contacts

Willdan Group, Inc.
Al Kaschalk
VP Investor Relations
Tel: 310-922-5643
akaschalk@willdan.com

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