• Contract Revenue: $158 million, up 19% year-over-year.
• Net Revenue: $76 million, an increase of 16% year-over-year.
• Adjusted EBITDA: $15.2 million, up 50% year-over-year.
• Adjusted Earnings Per Share (EPS): $0.73, nearly doubled year-over-year.
• Free Cash Flow Per Share: $2.30 through three quarters.
• Net Debt: $39 million, down from $75 million at year-end 2023.
• Net Cash Provided from Operations: $38.6 million for the first nine months, up from $24.1 million a year ago.
• Total Liquidity: $103 million, including a $50 million untapped line of credit and $53 million cash balance.
• Full Year Guidance: Net revenue between $285 million and $295 million; adjusted EBITDA between $52 million and $54 million; adjusted diluted EPS between $2.15 and $2.25.

• Warning! GuruFocus has detected 5 Warning Sign with WLDN.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Willdan Group Inc (NASDAQ:WLDN) reported a record third quarter, exceeding consensus estimates with a 19% organic increase in contract revenue and a 50% year-over-year rise in adjusted EBITDA.
• The company generated $2.30 of free cash flow per share through the first three quarters, showcasing strong cash conversion.
• Willdan Group Inc (NASDAQ:WLDN) raised its full-year financial targets, indicating confidence in its growth trajectory and continued momentum.
• The acquisition of Enica Engineering is expected to expand Willdan's commercial energy consulting business and be accretive to 2025 margins, earnings, and EPS.
• The company is experiencing strong geographic expansion in Florida and Texas, with significant growth in municipal engineering and project management revenues.

Negative Points

• The company faces challenges from rising electricity rates in California, driven by wildfire preparedness costs, which could impact the cost-effectiveness of energy efficiency programs.
• Willdan Group Inc (NASDAQ:WLDN) anticipates a $15 million headwind to Q4 2024 net revenue and a $3 million headwind to adjusted EBITDA comparisons due to expanded energy efficiency services delivered in Q4 2023.
• The revenue mix resulted in a slightly lower gross profit margin compared to the previous year.
• The company is underweighted in the commercial sector, with only 7% of revenue coming from this area, indicating a need for further diversification.
• There is uncertainty regarding the future speed and scale of electricity load growth, which could impact Willdan's growth projections.

Q & A Highlights

Q: Can you discuss the sensitivity of Willdan to federal policy changes, especially with potential shifts in energy policy? A: Michael Bieber, President and CEO, explained that state policy primarily influences Willdan's work, as state public utility commissions make most electricity-related decisions. Federal policy changes have historically not significantly impacted business, as Willdan has performed well under different administrations.

Q: Are rising energy prices affecting utility commissions' attitudes towards energy efficiency programs? A: Michael Bieber noted that public utility commissions are increasingly focused on energy efficiency due to rising electricity prices. Some rate cases have been rejected, and the value of energy efficiency is growing, particularly in high-cost areas like California.

Q: What is the growth outlook for 2025, considering the strong performance in 2024? A: Michael Bieber suggested modeling a high single-digit organic growth rate for 2025, around 7-9%. While exceeding this is possible, detailed guidance will be provided in early 2025.

Q: Can you elaborate on the opportunities in Florida and Texas mentioned in the prepared remarks? A: Michael Bieber highlighted significant growth in these states, with employee numbers increasing from about 10 to over 50. Opportunities are expanding, particularly in Northern Florida and Texas, driven by state and local demand for Willdan's services.

Q: What are the strategic goals following the Enica acquisition, and are there plans for further acquisitions? A: Michael Bieber stated that Enica will help expand Willdan's commercial sector, which is currently underrepresented. The company aims to pursue additional acquisitions, particularly in the data center space, to capitalize on growing opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.