Investment Community Conference Call Today
at 5:30 p.m. Eastern Time
Willdan Group, Inc. (“Willdan”) (NASDAQ: WLDN), a provider of
professional technical and consulting services, today reported
financial results for its first quarter ended March 31, 2017, and
increased guidance for fiscal year 2017.
First Quarter 2017 Highlights
- Total contract revenue of $68.4
million, an increase of 102% over prior year
- Net income of $2.6 million, an increase
of 145% over prior year
- Diluted earnings per share of $0.30, an
increase of 131% over prior year
For the first quarter of 2017, Willdan reported total contract
revenue of $68.4 million and net income of $2.6 million, or $0.30
per diluted share. This compares with total contract revenue of
$33.9 million and net income of $1.1 million, or $0.13 per diluted
share, for the first quarter of 2016. The increase in earnings per
share in the first quarter of 2017 was primarily driven by higher
total contract revenue, resulting from both organic growth and
incremental revenue contributed by substantially all of the assets
of Genesys Engineering P.C. (“Genesys”) acquired in March 2016, as
well as the recognition of a tax benefit.
“This is a good start to 2017,” said Tom Brisbin, Willdan’s
Chairman and Chief Executive Officer. “Distributed energy
resources, which include energy efficiency, renewables, storage,
and distributed generation, are disruptive to traditional energy
generation, transmission and distribution. This change is creating
the market opportunity that drove our 60% organic revenue growth in
the first quarter. Willdan is well positioned to enhance its
financial performance this year, while also investing for this
rapidly evolving market. We are diligently pursuing new
opportunities that we believe will position us for continued
profitable growth.”
First Quarter 2017 Financial Highlights
Total contract revenue for the first quarter of 2017 was $68.4
million, an increase of 101.5% from $33.9 million for the first
quarter of 2016. The increase was primarily due to higher contract
revenue from the Energy Efficiency Services segment, which
increased $31.1 million, or 164.0%, from the first quarter of 2016.
Total contract revenue for the first quarter of 2017 included $22.0
million of revenue generated by substantially all of the assets of
Genesys, which were acquired in March 2016. Contract revenue for
the Energy Efficiency Services, Engineering Services, Public
Finance Services, and Homeland Security Services segments was $50.1
million, $14.4 million, $3.2 million and $0.6 million,
respectively, in the first quarter of 2017.
Direct costs of contract revenue were $50.7 million for the
first quarter of 2017, an increase of $30.4 million, or 150.1%,
from $20.3 million for the first quarter of 2016. Included in the
increase of direct costs of contract revenue was incremental direct
costs of contract revenue of $16.1 million attributable to
substantially all of the assets of Genesys. Excluding the increase
of direct costs of contract revenue attributable to substantially
all of the assets of Genesys, direct costs of contract revenue
increased by $14.3 million, primarily due to higher use of
subcontractor services and increases in salaries and wages in the
Energy Efficiency Services segment.
Revenue, net of subcontractor services and other direct costs
(see “Use of Non-GAAP Financial Measures” below), for the first
quarter of 2017 was $28.5 million, an increase of 28.3% from $22.2
million for the first quarter of 2016.
Total general and administrative expenses for the first quarter
of 2017 were $15.7 million, an increase of 32.9% from $11.8 million
for the prior year period, due primarily to an increase in general
and administrative expenses to support the growth of the Energy
Efficiency Services and Engineering Services segments.
The Company recorded an income tax benefit of $0.7 million for
the first quarter of 2017, as compared to income tax expense of
$0.7 million for the first quarter of 2016. The income tax benefit
recorded in the first quarter of 2017 was primarily due to tax
deductions related to stock option exercises, pursuant to the
adoption of ASU 2016-09, Compensation-Stock Compensation (Topic
718): Improvements to Employee Share-Based Accounting, which
Willdan elected to early adopt on a prospective basis in 2016.
Net income for the first quarter of 2017 was $2.6 million, or
$0.30 per diluted share, as compared to net income of $1.1 million,
or $0.13 per diluted share, for the first quarter of 2016.
EBITDA (see “Use of Non-GAAP Financial Measures” below) was $3.1
million for the first quarter of 2017, as compared to $2.4 million
for the first quarter of 2016.
Liquidity and Capital Resources
Willdan reported $19.4 million in cash and cash equivalents at
March 31, 2017, as compared to $22.7 million at December 30, 2016.
The decline in cash and cash equivalents was primarily due to cash
used in operations of $1.4 million and payments of $2.8 million for
contingent consideration and on notes payable related to our
acquisitions, offset by $1.3 million proceeds from stock option
exercises.
Outlook
Willdan provided the following updated financial targets for
fiscal year 2017:
- Total contract revenue of $240 - $250
million
- Diluted earnings per share of $1.08 -
$1.21
- Effective tax rate of approximately 42%
for the remaining three quarters
- Diluted share count of 9.0 million
shares
- Depreciation of $1.6 million
- Amortization of $2.1 million
Over the long-term, Willdan continues to target both organic and
acquisitive revenue growth of greater than 10%, resulting in total
revenue growth of greater than 20% per year.
Conference Call Details
Chief Executive Officer Thomas Brisbin and Chief Financial
Officer Stacy McLaughlin will host a conference call today, May 4,
2017, at 5:30 p.m. Eastern/2:30 p.m. Pacific to discuss Willdan’s
financial results and provide a business update.
Interested parties may participate in the conference call by
dialing 800-344-6698 (785-830-7979 for international callers) and
providing conference ID 6166602. The conference call will be
webcast simultaneously on Willdan’s website at www.willdan.com
under Investors: Events and the replay will be archived for at
least 12 months.
The telephonic replay of the conference call may be accessed
following the call by dialing 888-203-1112 and entering the
passcode 6166602. The replay will be available through May 18,
2017.
About Willdan Group, Inc.
Willdan provides professional technical and consulting
services to utilities, public agencies and private industry
throughout the United States. Willdan’s service offerings span
a broad set of complementary disciplines that include energy
efficiency and sustainability, engineering and planning, financial
and economic consulting, and national
preparedness. Willdan provides integrated technical
solutions to extend the reach and resources of its clients, and
provides all services through its subsidiaries specialized in each
segment. For additional information,
visit Willdan's website at www.willdan.com.
Use of Non-GAAP Financial Measures
“Revenue, net of subcontractor services and other direct costs,”
a non-GAAP financial measure, is a supplemental measure
that Willdan believes enhances investors' ability to
analyze our business trend and performance because it substantially
measures the work performed by our employees. In the course of
providing services, Willdan routinely subcontracts various
services. Generally, these subcontractor services and other direct
costs are passed through to our clients and, in accordance with
Generally Accepted Accounting Principles (“GAAP”) and industry
practice, are included in our revenue when it is our contractual
responsibility to procure or manage these 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 our business
trends. Accordingly, Willdan segregates costs from revenue to
promote a better understanding of our business by evaluating
revenue exclusive of costs associated with external service
providers. A reconciliation of contract revenue as reported in
accordance with GAAP to revenue, net of subcontractor services and
other direct costs is provided at the end of this news release.
EBITDA is a supplemental measure used by Willdan’s management to
measure its operating performance. Willdan defines EBITDA as net
income (loss) plus interest expense (income), income tax expense
(benefit), interest accretion and depreciation and amortization.
EBITDA is not a measure of net income (loss) determined in
accordance with U.S. generally accepted accounting principles, or
GAAP. Willdan believes 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 EBITDA to evaluate its
performance for, among other things, budgeting, forecasting and
incentive compensation purposes.
EBITDA has limitations as an analytical tool and should not be
considered as an alternative to, or more meaningful than, net
income (loss) as determined in accordance with GAAP. Certain items
excluded from EBITDA are significant components in understanding
and assessing a company’s financial performance, such as a
company’s costs of capital, as well as the historical costs of
depreciable assets. Willdan’s definition of EBITDA may also differ
from those of many companies reporting similarly named measures.
Willdan believes EBITDA is useful to investors, research
analysts, investment bankers and lenders because it removes the
impact of certain non-operational items from its operational
results, which may facilitate comparison of its results from period
to period. A reconciliation of net income as reported in accordance
with GAAP to EBITDA is provided at the end of this news
release.
Willdan's definition of Revenue, net of subcontractor services
and other direct costs, and EBITDA may differ from other companies
reporting similarly named measures. 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 and net income.
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. The forward-looking statements involve risks
and uncertainties including, but not limited to, the risk
that Willdan will not be able to expand its services or
meet the needs of customers in markets in which it operates. It is
important to note that Willdan's actual results could
differ materially from those in any such forward-looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to, Willdan’s failure to
execute on existing projects, inability to integrate recent
acquisitions, including its acquisition of substantially all of the
assets of Genesys, a slowdown in the local and regional economies
of the states where Willdan conducts business, Willdan’s
inability to successfully implement its tax strategy and the loss
of or inability to hire additional qualified
professionals. Willdan's business could be affected by a
number of other factors, including the risk factors listed from
time to time in Willdan's SEC reports including, but
not limited to, the Annual Report on Form 10-K filed for the year
ended December 30, 2016. 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.
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
March 31, December 30, 2017
2016 Assets Current assets: Cash and cash equivalents
$ 19,440,000 $ 22,668,000 Accounts receivable, net of allowance for
doubtful accounts of $793,000 and $785,000 at March 31, 2017 and
December 30, 2016, respectively 31,240,000 30,285,000 Costs and
estimated earnings in excess of billings on uncompleted contracts
29,179,000 18,988,000 Other receivables 228,000 699,000 Prepaid
expenses and other current assets 3,160,000 2,601,000
Total current assets 83,247,000 75,241,000 Equipment and leasehold
improvements, net 4,755,000 4,511,000 Goodwill 21,947,000
21,947,000 Other intangible assets, net 5,393,000 5,941,000 Other
assets 682,000 707,000 Total assets $ 116,024,000 $
108,347,000
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable $ 19,870,000 $ 17,395,000 Accrued
liabilities 22,426,000 19,049,000 Contingent consideration payable
1,375,000 1,925,000 Billings in excess of costs and estimated
earnings on uncompleted contracts 8,121,000 8,377,000 Notes payable
3,275,000 3,972,000 Capital lease obligations 293,000
334,000 Total current liabilities 55,360,000 51,052,000 Contingent
consideration payable 1,745,000 2,537,000 Notes payable 1,500,000
2,074,000 Capital lease obligations, less current portion 162,000
210,000 Deferred lease obligations 708,000 714,000 Deferred income
taxes, net 1,870,000 1,842,000 Total liabilities
61,345,000 58,429,000 Commitments and
contingencies Stockholders’ equity: Preferred stock, $0.01
par value, 10,000,000 shares authorized, no shares issued and
outstanding — — Common stock, $0.01 par value, 40,000,000 shares
authorized; 8,559,000 and 8,348,000 shares issued and outstanding
at March 31, 2017 and December 30, 2016, respectively 86,000 83,000
Additional paid-in capital 44,493,000 42,376,000 Retained earnings
10,100,000 7,459,000 Total stockholders’ equity
54,679,000 49,918,000 Total liabilities and
stockholders’ equity $ 116,024,000 $ 108,347,000
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended March 31,
April 1, 2017 2016
Contract revenue $ 68,351,000 $ 33,915,000
Direct costs of contract revenue (exclusive of depreciation and
amortization shown separately below): Salaries and wages 10,801,000
8,534,000 Subcontractor services and other direct costs 39,895,000
11,733,000 Total direct costs of contract revenue
50,696,000 20,267,000 General and
administrative expenses: Salaries and wages, payroll taxes and
employee benefits 9,315,000 6,761,000 Facilities and facility
related 1,124,000 1,110,000 Stock-based compensation 476,000
207,000 Depreciation and amortization 909,000 610,000 Other
3,867,000 3,122,000 Total general and administrative
expenses 15,691,000 11,810,000 Income from operations
1,964,000 1,838,000 Other income (expense):
Interest expense (33,000 ) (50,000 ) Other, net 37,000 1,000
Total other income (expense), net 4,000 (49,000 )
Income before income taxes 1,968,000 1,789,000 Income tax
(benefit) expense (673,000 ) 711,000 Net income $
2,641,000 $ 1,078,000 Earnings per share:
Basic $ 0.32 $ 0.13 Diluted $ 0.30 $ 0.13
Weighted-average shares outstanding: Basic 8,281,000
7,996,000 Diluted 8,854,000 8,244,000
WILLDAN GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Three Months Ended March 31, April
1, 2017 2016 Cash flows from
operating activities: Net income $ 2,641,000 $ 1,078,000
Adjustments to reconcile net income to net cash used in operating
activities: Depreciation and amortization 919,000 610,000 Deferred
income taxes, net 28,000 269,000 Provision for doubtful accounts
8,000 31,000 Stock-based compensation 476,000 207,000 Accretion and
fair value adjustments of contingent consideration 167,000 (28,000
) Changes in operating assets and liabilities, net of effects from
business acquisitions: Accounts receivable (963,000 ) (2,259,000 )
Costs and estimated earnings in excess of billings on uncompleted
contracts (10,191,000 ) (2,231,000 ) Other receivables 471,000
(20,000 ) Prepaid expenses and other current assets (559,000 )
(236,000 ) Other assets 25,000 10,000 Accounts payable 2,475,000
(636,000 ) Accrued liabilities 3,377,000 (864,000 ) Billings in
excess of costs and estimated earnings on uncompleted contracts
(256,000 ) 2,410,000 Deferred lease obligations (6,000 )
32,000 Net cash used in operating activities
(1,388,000 ) (1,627,000 ) Cash flows from investing
activities: Purchase of equipment and leasehold improvements
(583,000 ) (257,000 ) Cash paid for acquisitions, net of cash
acquired — (8,857,000 ) Net cash used in
investing activities (583,000 ) (9,114,000 ) Cash
flows from financing activities: Payments on contingent
consideration (1,508,000 ) — Payments on notes payable (1,272,000 )
(939,000 ) Principal payments on capital lease obligations (121,000
) (128,000 ) Proceeds from stock option exercise 1,300,000 47,000
Proceeds from sales of common stock under employee stock purchase
plan 344,000 113,000 Net cash used in
financing activities (1,257,000 ) (907,000 ) Net
decrease in cash and cash equivalents (3,228,000 ) (11,648,000 )
Cash and cash equivalents at beginning of period 22,668,000
16,487,000 Cash and cash equivalents at end of
period $ 19,440,000 $ 4,839,000 Supplemental
disclosures of cash flow information: Cash paid during the period
for: Interest $ 33,000 $ 49,000 Income taxes 249,000 686,000
Supplemental disclosures of noncash investing and financing
activities: Issuance of notes payable related to business
acquisitions $ — 4,569,000 Issuance of common stock related to
business acquisitions — 2,230,000 Equipment acquired under capital
leases 32,000 884,000
Willdan Group, Inc. and
Subsidiaries
Reconciliation of GAAP Revenue and
“Revenue, Net of Subcontractor Services and Other Direct
Costs”
(Non-GAAP Measure)
Three Months Ended March 31, April
1, 2017 2016 Contract revenue $ 68,351,000 $
33,915,000 Subcontractor services and other direct costs
39,895,000 11,733,000 Revenue, net of subcontractor services
and other direct costs $ 28,456,000 $ 22,182,000
Willdan Group, Inc. and
Subsidiaries
Reconciliation of GAAP Net Income to
EBITDA
(Non-GAAP Measure)
Three Months Ended March 31, April
1, 2017 2016 Net income $ 2,641,000
$ 1,078,000 Interest expense 33,000 50,000 Income tax (benefit)
expense (673,000 ) 711,000 Interest accretion(1) 167,000 (28,000 )
Depreciation and amortization 909,000 610,000
EBITDA $ 3,077,000 $ 2,421,000
(1) Interest accretion represents the imputed interest on the
earn-out payments to be paid by us in connection with our
acquisition of Abacus and the acquisition of substantially all of
the assets of 360 Energy in January 2015.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504006702/en/
Willdan Group, Inc.Stacy McLaughlinChief Financial
OfficerTel: 714-940-6300smclaughlin@willdan.comorInvestor/Media
ContactFinancial Profiles, Inc.Tony RossiTel:
310-622-8221trossi@finprofiles.com
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