Willdan Group, Inc. ("Willdan") (NASDAQ:WLDN) today reported financial results for its second quarter ended June 28, 2024.

Second Quarter 2024 Highlights*

Contract revenue of $141.0 million, up 18.4%.
Net revenue** of $72.5 million, up 17.0%.
Net income of $4.6 million, up from net income of $0.4 million.
Adjusted EBITDA** of $12.8 million, up 56.2%.
GAAP Diluted EPS of $0.33, up from $0.03.
Adjusted Diluted EPS** of $0.55, up from $0.26.

Recent Notable Wins

Meta (formerly Facebook) contract to study emissions related to voluntary clean energy procurement
State of Virginia contract to perform analysis on grid impact from increased energy demand
City of Paramount, CA contract for solar, storage, and EV charging infrastructure

Executive Management Comments

"We had a strong second quarter, exceeding consensus estimates and our own expectations," said Mike Bieber, Willdan's President and Chief Executive Officer. "The electric load growth macrotrend strengthened over the quarter, fueled by growth in electricity demand at data centers from artificial intelligence. Given the results for the first half of 2024 and the current momentum, we are raising our full year targets for fiscal 2024."

Six Months Year to Date 2024 Highlights*

Contract revenue of $263.5 million, up 18.9%.
Net revenue** of $141.4 million, up 14.4%.
Net income of $7.5 million, up from net income of $1.3 million.
Adjusted EBITDA** of $23.9 million, up 31.9%.
GAAP Diluted EPS of $0.54, up from $0.10.
Adjusted Diluted EPS** of $0.95, up from $0.58.

Fiscal Year 2024 Financial Targets

Willdan is increasing all of its financial targets for fiscal year 2024 and now expects^¥:

Net revenue** between $280 million and $290 million.
Adjusted EBITDA** between $50 million and $52 million.
Adjusted Diluted EPS** between $2.00 per share and $2.10 per share.

Assumes 14.2 million diluted shares, 14% effective tax rate, and no future acquisitions.

*As compared to the same period of fiscal 2023.

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

^¥These updated financial targets supersede any previously disclosed financial targets and investors should not rely on any previously disclosed financial targets, and do not include any uncompleted or future acquisitions.

Second Quarter 2024 Conference Call

Willdan will be hosting a conference call to discuss its second quarter financial results today, at 5:30 p.m. Eastern/2:30 p.m. Pacific. To access the call, listeners should dial 877-407-2988 (or 201-389-0923). The conference call will be webcast simultaneously on Willdan's website at https://edge.media-server.com/mmc/p/j8fw5j5u/.

A replay of the conference call will be available through Willdan's website at https://ir.willdangroup.com/events-presentations.

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 U.S. generally accepted accounting principles ("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 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 fiscal year 2024 as reported in accordance with GAAP to targeted Net Revenues for fiscal year 2024, 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 48.6% and 47.1% of contract revenue for the quarter ended June 28, 2024 and fiscal year 2023, respectively, and 48.0% and 47.2% for the quarter ended June 30, 2023 and fiscal year 2022, respectively.

"Adjusted EBITDA," defined as net income plus interest expense, income tax expense, stock-based compensation, interest accretion, depreciation and amortization, 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 and 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. A reconciliation of targeted net income for fiscal year 2024 as reported in accordance with GAAP to Adjusted EBITDA for fiscal year 2024, 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 interest expense, income tax expense, stock-based compensation, interest accretion, depreciation and amortization, and gain on sale of equipment that are subtracted from net income in order to derive Adjusted EBITDA.

"Adjusted Net Income," defined as net income plus stock-based compensation, intangible amortization, interest accretion, refinancing costs, and tax benefit distribution, 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, refinancing costs, and tax benefit distribution, 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. Reconciliations of targeted net income as reported in accordance with GAAP to targeted Adjusted Net Income for fiscal year 2024, which is a forward-looking non-GAAP financial measure, and targeted diluted EPS as reported in accordance with GAAP to targeted Adjusted Diluted EPS for fiscal year 2024, which is a forward-looking non-GAAP financial measure, are not provided because Willdan is unable to provide such reconciliations without unreasonable effort. The inability to provide such reconciliations is due to the uncertainty and inherent difficulty of predicting the stock-based compensation, intangible amortization, and interest accretion, each net of tax, that are subtracted from net income and diluted EPS in order to derive Adjusted Net Income and Adjusted Diluted EPS, respectively.

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, assumptions, aims, 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 financial targets for fiscal year 2024. All statements other than statements of historical fact included in this press release are forward-looking statements. 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 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 manage supply chain constraints, labor shortages, rising interest rates, and rising inflation; Willdan's ability to obtain financing and to refinance its outstanding debt as it matures; Willdan's ability to successfully integrate its acquisitions and execute on its growth strategy; and Willdan's ability to attract and retain managerial, technical, and administrative talent.

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 29, 2023, 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)

	June 28,			December 29,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	44,267		$	23,397
Restricted cash		—			—
Accounts receivable, net of allowance for doubtful accounts of $898 and $866 at June 28, 2024 and December 29, 2023, respectively		61,985			69,677
Contract assets		87,872			93,885
Other receivables		218			1,169
Prepaid expenses and other current assets		6,108			3,888
Total current assets		200,450			192,016
Equipment and leasehold improvements, net		28,228			27,097
Goodwill		131,144			131,144
Right-of-use assets		15,338			12,465
Other intangible assets, net		28,279			31,956
Other assets		2,978			4,949
Deferred income taxes, net		14,872			15,961
Total assets	$	421,289		$	415,588
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	31,917		$	33,193
Accrued liabilities		45,305			54,129
Contract liabilities		17,464			13,183
Notes payable		9,530			8,452
Finance lease obligations		1,096			1,186
Lease liability		5,515			4,537
Total current liabilities		110,827			114,680
Notes payable, less current portion		84,164			88,979
Finance lease obligations, less current portion		1,132			1,184
Lease liability, less current portion		11,604			9,758
Other noncurrent liabilities		557			1,142
Total liabilities		208,284			215,743

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; 13,916 and 13,682 shares issued and outstanding at June 28, 2024 and December 29, 2023, respectively		139			137
Additional paid-in capital		190,882			185,795
Accumulated other comprehensive loss		(129	)		(664	)
Retained earnings		22,113			14,577
Total stockholders' equity		213,005			199,845
Total liabilities and stockholders' equity	$	421,289		$	415,588

WILLDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2024			2023			2024			2023
Contract revenue	$	140,996		$	119,077		$	263,485		$	221,680

Direct costs of contract revenue (inclusive of directly related depreciation and amortization):
Salaries and wages		23,647			21,302			45,159			41,712
Subcontractor services and other direct costs		68,545			57,142			122,104			98,054
Total direct costs of contract revenue		92,192			78,444			167,263			139,766

Gross profit		48,804			40,633			96,222			81,914

General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits		26,064			22,416			52,573			44,801
Facilities and facility related		2,405			2,619			4,850			4,897
Stock-based compensation		1,945			1,287			3,335			2,820
Depreciation and amortization		3,629			4,128			7,221			8,328
Other		8,313			7,709			16,434			14,580
Total general and administrative expenses		42,356			38,159			84,413			75,426

Income (Loss) from operations		6,448			2,474			11,809			6,488

Other income (expense):
Interest expense, net		(1,960	)		(2,207	)		(4,097	)		(4,673	)
Other, net		826			373			1,530			513
Total other expense, net		(1,134	)		(1,834	)		(2,567	)		(4,160	)

Income (Loss) before income taxes		5,314			640			9,242			2,328
Income tax (benefit) expense		720			243			1,706			999
Net income (loss)		4,594			397			7,536			1,329

Other comprehensive income (loss):
Unrealized gain (loss) on derivative contracts, net of tax		101			—			535			—
Comprehensive income (loss)	$	4,695		$	397		$	8,071		$	1,329

Earnings (Loss) per share:
Basic	$	0.33		$	0.03		$	0.55		$	0.10
Diluted	$	0.33		$	0.03		$	0.54		$	0.10

Weighted-average shares outstanding:
Basic		13,725			13,344			13,665			13,305
Diluted		14,074			13,487			14,001			13,481

WILLDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Six Months Ended
	June 28,			June 30,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	7,536		$	1,329
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		7,221			8,328
Other non-cash items		185			162
Deferred income taxes, net		1,089			851
(Gain) loss on sale/disposal of equipment		(17	)		(50	)
Provision for doubtful accounts		144			146
Stock-based compensation		3,335			2,820
Changes in operating assets and liabilities, net of effects from business acquisitions:
Accounts receivable		7,548			5,484
Contract assets		6,013			3,760
Other receivables		951			1,921
Prepaid expenses and other current assets		(2,220	)		1,055
Other assets		1,971			(4,987	)
Accounts payable		(1,276	)		6,322
Accrued liabilities		(8,874	)		(11,477	)
Contract liabilities		4,281			2,365
Right-of-use assets		(49	)		880
Net cash (used in) provided by operating activities		27,838			18,909
Cash flows from investing activities:
Purchase of equipment, software, and leasehold improvements		(4,125	)		(5,762	)
Proceeds from sale of equipment		23			55
Net cash (used in) provided by investing activities		(4,102	)		(5,707	)
Cash flows from financing activities:
Payments on contingent consideration		—			(4,000	)
Payment on restricted cash		—			(10,679	)
Payments on notes payable		(172	)		(971	)
Borrowings under term loan facility and line of credit		—			5,000
Repayments under term loan facility and line of credit		(3,750	)		(9,000	)
Principal payments on finance leases		(698	)		(599	)
Proceeds from stock option exercise		1,137			7
Proceeds from sales of common stock under employee stock purchase plan		1,402			1,392
Cash used to pay taxes on stock grants		(785	)		(188	)
Net cash (used in) provided by financing activities		(2,866	)		(19,038	)
Net increase (decrease) in cash, cash equivalents and restricted cash		20,870			(5,836	)
Cash, cash equivalents and restricted cash at beginning of period		23,397			19,485
Cash, cash equivalents and restricted cash at end of period	$	44,267		$	13,649
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest	$	3,983		$	4,464
Income taxes		551			(1,696	)
Supplemental disclosures of noncash investing and financing activities:
Equipment acquired under finance leases		556			278

Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Revenue to Net Revenue
(in thousands)
(Non-GAAP Measure)

	Three Months Ended				Six Months Ended
	June 28,		June 30,		June 28,		June 30,
	2024		2023		2024		2023
Consolidated
Contract revenue	$	140,996	$	119,077	$	263,485	$	221,680
Subcontractor services and other direct costs		68,545		57,142		122,104		98,054
Net Revenue	$	72,451	$	61,935	$	141,381	$	123,626

Energy segment
Contract revenue	$	117,852	$	98,015	$	218,598	$	181,300
Subcontractor services and other direct costs		67,556		56,102		120,210		96,180
Net Revenue	$	50,296	$	41,913	$	98,388	$	85,120

Engineering and Consulting segment
Contract revenue	$	23,144	$	21,062	$	44,887	$	40,380
Subcontractor services and other direct costs		989		1,040		1,894		1,874
Net Revenue	$	22,155	$	20,022	$	42,993	$	38,506

Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to Adjusted EBITDA
(in thousands)
(Non-GAAP Measure)

	Three Months Ended						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2024			2023			2024			2023
Net income (loss)	$	4,594		$	397		$	7,536		$	1,329
Interest expense		1,960			2,207			4,097			4,673
Income tax expense (benefit)		720			243			1,706			999
Stock-based compensation		1,945			1,287			3,335			2,820
Depreciation and amortization		3,629			4,128			7,221			8,328
(Gain) Loss on sale of equipment		(4	)		(40	)		(17	)		(50	)
Adjusted EBITDA	$	12,844		$	8,222		$	23,878		$	18,099

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						Six Months Ended
	June 28,			June 30,			June 28,			June 30,
	2024			2023			2024			2023
Net income (loss)	$	4,594		$	397		$	7,536		$	1,329
Adjustment for stock-based compensation		1,945			1,287			3,335			2,820
Tax effect of stock-based compensation		(344	)		(260	)		(590	)		(571	)
Adjustment for intangible amortization		1,805			2,624			3,676			5,248
Tax effect of intangible amortization		(319	)		(531	)		(650	)		(1,062	)
Adjusted Net Income (Loss)	$	7,681		$	3,517		$	13,307		$	7,764

Diluted weighted-average shares outstanding		14,074			13,487			14,001			13,481

Diluted earnings (loss) per share	$	0.33		$	0.03		$	0.54		$	0.10
Impact of adjustment:
Stock-based compensation per share		0.14			0.09			0.24			0.21
Tax effect of stock-based compensation per share		(0.03	)		(0.02	)		(0.04	)		(0.04	)
Intangible amortization per share		0.13			0.19			0.26			0.39
Tax effect of intangible amortization per share		(0.02	)		(0.03	)		(0.05	)		(0.08	)
Adjusted Diluted EPS	$	0.55		$	0.26		$	0.95		$	0.58

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Willdan Group Reports Second Quarter 2024 Results