Willdan Group, Inc. (NASDAQ:WLDN) Q4 2022 Earnings Conference Call March 9, 2023 5:30 PM ET Company Participants Al Kaschalk - VP of IR Thomas Brisbin - Chairman & CEO Creighton Early - CFO & VP Michael Bieber - President Conference Call Participants Chip Moore - EF Hutton Marc Riddick - Sidoti & Company Operator Greetings, and welcome to the Willdan Group Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Al Kaschalk o ...

Table of Contents If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | "C/l UNITED STATES | | | --- | --- | | SECURITIES AND EXCHANGE COMMISSION | | | Washington, D.C. 20549 | | | FORM | 10-K | | (Mark One) | | | ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | | | EXCHANGE ACT OF 1934 | | ...

Financial Data and Key Metrics Changes - Gross revenue for Q3 2022 increased by 23.5% year-over-year to $121.4 million, while net revenue rose 8.2% to $58.9 million [23] - EBITDA margin for Q3 2022 was 13.5%, with adjusted EBITDA at $8.0 million compared to $10.1 million in Q3 2021 [10][27] - The net profit for Q3 2022 was $76,000, down from $840,000 in Q3 2021, reflecting a loss before income taxes of $1.5 million [26] Business Line Data and Key Metrics Changes - The Energy segment showed strong performance, with energy consulting and engineering contributing significantly to revenue growth [11] - Construction management revenues increased, but lower software revenues impacted gross profit margins, which fell to 30.9% from 38.8% year-over-year [24] - The Engineering segment continued to grow, with new assignments in Florida and Texas, indicating expansion beyond California [18] Market Data and Key Metrics Changes - The company is actively engaging with California IOUs, with significant contracts in place, including those with Los Angeles Department of Water and Power and Con Edison [13][14] - The Inflation Reduction Act has created opportunities for the company to assist cities with energy and climate tax incentives [19] Company Strategy and Development Direction - The company is focusing on electrification and clean energy transition, leveraging its expertise in performance contracting and municipal engineering [11][40] - Willdan aims to create synergies with cities and engineering practices to support decarbonization efforts [12] Management's Comments on Operating Environment and Future Outlook - Management affirmed guidance for 2022, expecting net revenue growth greater than 10% and an EBITDA margin exceeding 10% [9][33] - The company has resolved major issues with three of the four California IOUs, indicating a positive outlook for future operations [20] Other Important Information - Cash flows from operations improved, with positive cash flow of $8.1 million for Q3 2022, compared to cash used in 2021 [29] - The credit agreement has been amended to adjust the minimum adjusted EBITDA threshold and leverage ratio, extending through March 31, 2023 [31][32] Q&A Session Summary Question: Electrification opportunity and IRA drivers - Management discussed the importance of electrification for IOUs and how Willdan is positioned to capitalize on this trend, particularly in California and New York [37][40] Question: General outlook on the company's position - Management expressed optimism about the company's ability to pivot towards electrification and energy savings, highlighting ongoing projects and contracts [41][44]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited interim financial statements and management's analysis of performance [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Presents unaudited condensed consolidated financial statements and accompanying notes for the period Condensed Consolidated Balance Sheets | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Total Assets | $395,111 | $394,422 | $689 | | Cash and cash equivalents | $8,818 | $11,221 | $(2,403) | | Accounts receivable, net | $60,376 | $67,211 | $(6,835) | | Contract assets | $74,924 | $59,288 | $15,636 | | Total Current Assets | $154,121 | $148,959 | $5,162 | | Total Liabilities | $214,900 | $215,201 | $(301) | | Total Stockholders' Equity | $180,211 | $179,221 | $990 | Condensed Consolidated Statements of Comprehensive Income | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Oct 1, 2021 | % Change | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Contract revenue | $121,399 | $98,297 | 23.5% | $315,882 | $261,537 | 20.8% | | Gross profit | $37,522 | $38,127 | (1.6)% | $100,472 | $101,145 | (0.7)% | | Income (Loss) from operations | $(755) | $1,443 | (152.3)% | $(11,661) | $(9,818) | 18.8% | | Net income (loss) | $76 | $840 | (91.0)% | $(8,023) | $(7,527) | 6.6% | | Basic EPS | $0.01 | $0.07 | (85.7)% | $(0.62) | $(0.61) | 1.6% | | Diluted EPS | $0.01 | $0.06 | (83.3)% | $(0.62) | $(0.61) | 1.6% | Condensed Consolidated Statements of Stockholders' Equity | Metric (in thousands) | Balance at Dec 31, 2021 | Balance at Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Common Stock Shares | 12,804 | 13,297 | 493 | | Common Stock Amount | $128 | $133 | $5 | | Additional Paid-in Capital | $167,032 | $176,002 | $8,970 | | Retained Earnings | $12,099 | $4,076 | $(8,023) | | Total Stockholders' Equity | $179,221 | $180,211 | $990 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $4,503 | $(1,710) | $6,213 | | Net cash (used in) provided by investing activities | $(6,894) | $(4,852) | $(2,042) | | Net cash (used in) provided by financing activities | $(12) | $(17,038) | $17,026 | | Net increase (decrease) in cash and cash equivalents | $(2,403) | $(23,600) | $21,197 | | Cash and cash equivalents at end of period | $8,818 | $4,805 | $4,013 | Notes to Condensed Consolidated Financial Statements 1. Organization and Operations of the Company - Willdan Group, Inc. provides professional, technical, and consulting services for energy solutions and government infrastructure, operating through **Energy** and **Engineering & Consulting** segments[25](index=25&type=chunk)[26](index=26&type=chunk) - The COVID-19 pandemic continued to impact operations in fiscal year 2022, particularly small business customers, but **no contracts were cancelled** as of November 2, 2022[30](index=30&type=chunk)[31](index=31&type=chunk) 2. Recent Accounting Pronouncements - Adopted ASU No. 2020-04 and ASU No. 2021-01 (Reference Rate Reform) effective March 8, 2022, which **did not materially impact** financial statements[36](index=36&type=chunk) 3. Revenues - Revenue is recognized over time for most contracts, which include fixed price (percentage-of-completion), time-and-materials, and unit-based provisions[38](index=38&type=chunk)[40](index=40&type=chunk) | Segment | Contract Type | Revenue Recognition Method | | :--- | :--- | :--- | | Energy | Time-and-materials | Time-and-materials | | | Unit-based | Unit-based | | | Software license | Unit-based | | | Fixed price | Percentage-of-completion | | Engineering and Consulting | Time-and-materials | Time-and-materials | | | Unit-based | Unit-based | | | Fixed price | Percentage-of-completion | - Adjustments to contract cost estimates are recognized under the cumulative catch-up method, with **estimated losses recognized immediately**[49](index=49&type=chunk)[50](index=50&type=chunk) 4. Supplemental Financial Statement Data | Asset Category (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Equipment and leasehold improvements, net | $21,147 | $16,757 | $4,390 | | Goodwill | $130,124 | $130,124 | $0 | | Other intangible assets, net | $44,182 | $52,713 | $(8,531) | | Accrued Liabilities (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Accrued subcontractor costs | $34,624 | $19,727 | $14,897 | | Accrued bonuses | $3,606 | $7,767 | $(4,161) | | Total accrued liabilities | $50,996 | $35,680 | $15,316 | - **No goodwill impairment** was identified as of September 30, 2022, despite fluctuations in market capitalization below book value, as the indicative fair value exceeded book value[64](index=64&type=chunk) 5. Derivative Financial Instruments - The company uses interest rate derivative contracts for **hedging variable rate debt**, not for trading or speculation[68](index=68&type=chunk) - An interest rate swap agreement for **$35.0 million at 2.47% fixed rate** expired on January 31, 2022[70](index=70&type=chunk) - As of September 30, 2022, the company had **no derivative financial instruments**[73](index=73&type=chunk) 6. Debt Obligations | Debt Category (in thousands) | Sep 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Outstanding borrowings on Term A Loan | $67,500 | $75,000 | $(7,500) | | Outstanding borrowings on Delayed Draw Term Loan | $41,750 | $24,000 | $17,750 | | Total debt | $109,833 | $101,161 | $8,672 | - The Fifth Amendment (March 8, 2022) extended the covenant relief period, amended Adjusted EBITDA thresholds, increased the maximum Total Leverage Ratio, funded the remaining **$20.0 million** from the Delayed Draw Term Loan, and transitioned the reference rate from **LIBOR to SOFR**[81](index=81&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - The Sixth Amendment (August 2, 2022) increased the permissible limit for purchase money indebtedness and Capitalized Lease Obligations from **$1.5 million to $4.0 million**[87](index=87&type=chunk) - As of September 30, 2022, the company was **non-compliant with minimum Adjusted EBITDA thresholds**, which was subsequently waived by the Seventh Amendment (November 1, 2022)[88](index=88&type=chunk)[132](index=132&type=chunk) 7. Leases | Lease Metric (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | | :--- | :--- | :--- | | Operating lease cost | $4,635 | $4,941 | | Finance lease cost: Amortization of assets | $799 | $397 | | Finance lease cost: Interest on lease liabilities | $51 | $22 | | Total net lease cost | $5,485 | $5,360 | | Lease Liability (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total operating lease liabilities | $13,636 | $16,343 | | Total finance lease obligations | $2,627 | $1,317 | 8. Commitments and Variable Interest Entities - Company made **$2.0 million** in matching contributions to its 401(k) plan for the nine months ended September 30, 2022[99](index=99&type=chunk) - Genesys is consolidated as a Variable Interest Entity (VIE) because the company manages its activities and absorbs its expected losses through a service fee deferral arrangement[101](index=101&type=chunk)[102](index=102&type=chunk) 9. Segment and Geographical Information | Segment (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Oct 1, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | | :--- | :--- | :--- | :--- | :--- | | Energy Contract Revenue | $102,625 | $81,523 | $262,186 | $209,977 | | Engineering & Consulting Contract Revenue | $18,774 | $16,774 | $53,696 | $51,560 | | Total Contract Revenue | $121,399 | $98,297 | $315,882 | $261,537 | | Client Type (9 Months Ended Sep 30, 2022, in thousands) | Energy | Engineering & Consulting | Total | | :--- | :--- | :--- | :--- | | Commercial | $21,638 | $4,330 | $25,968 | | Government | $96,293 | $49,139 | $145,432 | | Utilities | $144,255 | $227 | $144,482 | | Total | $262,186 | $53,696 | $315,882 | - **Top 10 customers** accounted for **57.2%** of consolidated contract revenue for the three months ended September 30, 2022, and **54.5%** for the nine months ended September 30, 2022[112](index=112&type=chunk) - **California and New York** clients accounted for **37.2% and 23.4%** of contract revenue, respectively, for the three months ended September 30, 2022[115](index=115&type=chunk) 10. Income Taxes | Income Tax Benefit (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Oct 1, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | | :--- | :--- | :--- | :--- | :--- | | Income tax (benefit) expense | $(1,526) | $(236) | $(5,588) | $(5,357) | - The income tax benefit for the period was primarily driven by the loss before income tax, state taxes, non-deductible stock and executive compensation, and research and development tax credits[122](index=122&type=chunk) - The valuation allowance for deferred tax assets was deemed appropriate as of September 30, 2022, with **no changes** during the period[119](index=119&type=chunk) 11. Earnings Per Share ("EPS") | EPS Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Oct 1, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Oct 1, 2021 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.01 | $0.07 | $(0.62) | $(0.61) | | Diluted EPS | $0.01 | $0.06 | $(0.62) | $(0.61) | - For the nine months ended September 30, 2022, all outstanding equity awards were **excluded from diluted EPS calculation** due to the net loss, making them anti-dilutive[126](index=126&type=chunk) 12. Contingencies - The company is subject to claims and lawsuits, including professional errors or omissions, and maintains professional liability insurance[128](index=128&type=chunk) - Liabilities are accrued for probable and reasonably estimable losses, and management does not expect current claims to have a **material adverse effect** on financial statements[129](index=129&type=chunk)[130](index=130&type=chunk) 13. Subsequent Events - Seventh Amendment to Credit Agreement (November 1, 2022) **waived Q3 2022 minimum Adjusted EBITDA non-compliance**[132](index=132&type=chunk) - The amendment revised maximum Total Leverage Ratio and minimum Adjusted EBITDA thresholds for the Extended Covenant Relief Period[132](index=132&type=chunk) - Borrowings under the Credit Agreement will bear interest at **SOFR plus 4.00%** during the Extended Covenant Relief Period, and Revolving Credit Facility borrowings are restricted to **$10.0 million**. Share repurchases are prohibited during this period[133](index=133&type=chunk)[132](index=132&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition, operational results, and critical accounting policies Our Company - Willdan Group, Inc. offers professional, technical, and consulting services for energy solutions and government infrastructure[136](index=136&type=chunk) - The company operates in two segments: **Energy** (specialized energy solutions, program design, construction management, software) and **Engineering & Consulting** (civil engineering, construction management, financial consulting)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) Historical and Current Impact of Covid-19 - COVID-19 continued to impact operations in fiscal year 2022, particularly small business customers, though **no contracts were cancelled**[140](index=140&type=chunk)[141](index=141&type=chunk) - Potential budget shortfalls for utility and public agency clients due to COVID-19 could result in **delayed funding, postponed new contracts, or price concessions**[145](index=145&type=chunk) - Reliance on subcontractors and material suppliers, especially in the Energy segment, poses a risk if they face economic harm, potentially **increasing costs or delaying projects**[146](index=146&type=chunk) Results of Operations - Consolidated contract revenue increased by **23.5%** for the three months and **20.8%** for the nine months ended September 30, 2022, driven by new governmental projects and resumption of suspended projects[155](index=155&type=chunk)[169](index=169&type=chunk) - Gross profit decreased by **1.6%** for the three months and **0.7%** for the nine months, with gross margin declining from **38.8% to 30.9%** (3 months) and **38.7% to 31.8%** (9 months), primarily due to higher project startup costs and changes in revenue mix[161](index=161&type=chunk)[175](index=175&type=chunk) - Operating income shifted to a loss of **$0.8 million** for the three months (from $1.4 million income) and the operating loss increased to **$11.7 million** for the nine months (from $9.8 million loss). Net income decreased significantly for the three months, and net loss increased for the nine months[164](index=164&type=chunk)[168](index=168&type=chunk)[179](index=179&type=chunk)[182](index=182&type=chunk) Three Months Ended September 30, 2022 Compared to Three Months Ended October 1, 2021 | Metric (in thousands) | Sep 30, 2022 | Oct 1, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Contract revenue | $121,399 | $98,297 | $23,102 | 23.5% | | Direct costs of contract revenue | $83,877 | $60,170 | $23,707 | 39.4% | | Gross profit | $37,522 | $38,127 | $(605) | (1.6)% | | General and administrative expenses | $38,277 | $36,684 | $1,593 | 4.3% | | Income (loss) from operations | $(755) | $1,443 | $(2,198) | (152.3)% | | Net income (loss) | $76 | $840 | $(764) | (91.0)% | - Energy segment revenue increased by **25.9%** due to new governmental projects, partially offset by decreased utility program revenues and non-recurring software licensing sales. Engineering and Consulting segment revenue increased by **11.9%** from governmental clients[156](index=156&type=chunk)[157](index=157&type=chunk) - Gross margin decreased from **38.8% to 30.9%** due to changes in revenue mix towards projects with higher material/subcontracting costs and higher project startup costs[161](index=161&type=chunk) Nine Months Ended September 30, 2022 Compared to Nine Months Ended October 1, 2021 | Metric (in thousands) | Sep 30, 2022 | Oct 1, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Contract revenue | $315,882 | $261,537 | $54,345 | 20.8% | | Direct costs of contract revenue | $215,410 | $160,392 | $55,018 | 34.3% | | Gross profit | $100,472 | $101,145 | $(673) | (0.7)% | | General and administrative expenses | $112,133 | $110,963 | $1,170 | 1.1% | | Income (loss) from operations | $(11,661) | $(9,818) | $(1,843) | 18.8% | | Net income (loss) | $(8,023) | $(7,527) | $(496) | 6.6% | - Energy segment revenue increased by **24.9%** due to new governmental projects and resumed COVID-19 suspended projects, partially offset by non-recurring software licensing sales. Engineering and Consulting segment revenue increased by **4.1%** from governmental clients[170](index=170&type=chunk)[171](index=171&type=chunk) - Gross margin decreased from **38.7% to 31.8%** due to changes in revenue mix, reduction in software licensing revenues, and higher project startup costs[175](index=175&type=chunk) Liquidity and Capital Resources - Primary liquidity sources are cash from operations and borrowings under the Revolving Credit Facility[184](index=184&type=chunk) | Debt Outstanding (in thousands) | Sep 30, 2022 | | :--- | :--- | | Term A Loan | $67,500 | | Delayed Draw Term Loan | $41,750 | | Revolving Credit Facility (letters of credit) | $4,100 | | Cash and cash equivalents | $8,818 | - The Seventh Amendment (November 1, 2022) restricted Revolving Credit Facility borrowing capacity to **$10.0 million** and conditioned accordion feature access, which may impact liquidity if higher-than-expected costs persist[186](index=186&type=chunk)[184](index=184&type=chunk) - Cash flows from operating activities improved to **$4.5 million** for the nine months ended September 30, 2022, from a **$1.7 million use** in the prior year, favorably impacted by lower working capital requirements[189](index=189&type=chunk) - Contractual obligations as of September 30, 2022, totaled **$133.5 million**, with **$26.0 million** due within one year, primarily for long-term debt, interest payments, and operating/finance leases[196](index=196&type=chunk) - The company has **no off-balance sheet financing arrangements**, futures, or forward contracts, but consolidates Genesys as a variable interest entity[193](index=193&type=chunk) Components of Revenue and Expense - Contract revenue is generated from time-and-materials (**20%**), unit-based (**44%**), and fixed price (**36%**) contracts as of September 30, 2022[202](index=202&type=chunk) - Direct costs of contract revenue include salaries, materials, and subcontractor services for revenue-producing projects, while G&A expenses cover marketing, administrative, and unallocated personnel costs[207](index=207&type=chunk)[209](index=209&type=chunk) - Contract renewals, terminations, or modifications, especially with major clients like Consolidated Edison, DASNY, LADWP, and Duke Energy Corp., could **materially affect** consolidated operations[205](index=205&type=chunk) Critical Accounting Policies - Financial statements are prepared in accordance with GAAP, relying on estimates and assumptions[210](index=210&type=chunk) - **No material changes** to critical accounting policies and estimates from the Annual Report on Form 10-K for fiscal year ended December 31, 2021[211](index=211&type=chunk) Recent Accounting Standards - Refer to Note 2, "Recent Accounting Pronouncements," for details on recently issued and adopted accounting standards[212](index=212&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to market risks, primarily interest rate fluctuations on variable-rate debt Interest Rate Risk - The company is subject to interest rate risk from variable-rate Term A Loan (**$67.5 million** outstanding) and Delayed Draw Term Loan (**$41.75 million** outstanding)[215](index=215&type=chunk) - A **one percentage point increase** in the effective interest rate would increase annual interest expense by approximately **$1.1 million** in 2022[216](index=216&type=chunk) - The Fifth Amendment transitioned the reference rate from **LIBOR to SOFR** and adjusted applicable margins for borrowings under the Credit Agreement[216](index=216&type=chunk) [Item 4. Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - Disclosure controls and procedures were **effective** as of September 30, 2022, based on management's evaluation[219](index=219&type=chunk) - **No material changes** in internal control over financial reporting occurred during the period[220](index=220&type=chunk) [PART II. OTHER INFORMATION](index=68&type=section&id=PART%20II.%20OTHER%20INFORMATION) Details legal proceedings, risk factors, equity sales, and other required corporate disclosures [Item 1. Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) Discloses routine claims and lawsuits, for which management expects no material adverse financial impact - The company faces routine claims and lawsuits, including professional errors or omissions, and carries professional liability insurance[223](index=223&type=chunk) - Management believes the ultimate liability from current legal proceedings will **not materially adversely affect** the financial statements[225](index=225&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) States no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - **No material changes** to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2021[227](index=227&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports common stock repurchases from employees to satisfy tax withholding obligations on vested stock | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2, 2022 – July 29, 2022 | — | — | | July 30, 2022 – August 26, 2022 | 175 | $27.65 | | August 27, 2022 – September 30, 2022 | — | — | | TOTAL | 175 | $27.65 | [Item 3. Defaults upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) Reports no defaults upon senior securities during the period - **No defaults** upon senior securities were reported[229](index=229&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Confirms that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are **not applicable**[230](index=230&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) Details the Seventh Amendment to the Credit Agreement, which waived a covenant breach and revised terms - Seventh Amendment to Credit Agreement (November 1, 2022) **waived Q3 2022 minimum Adjusted EBITDA non-compliance**[231](index=231&type=chunk) - The amendment revised maximum Total Leverage Ratio and minimum Adjusted EBITDA thresholds for the Extended Covenant Relief Period[231](index=231&type=chunk) - Borrowings under the Credit Agreement will bear interest at **SOFR plus 4.00%** during the Extended Covenant Relief Period, and Revolving Credit Facility borrowings are restricted to **$10.0 million**. Share repurchases are prohibited during this period[233](index=233&type=chunk)[231](index=231&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including credit agreements and officer certifications - Exhibits include the Seventh Amendment to the Amended and Restated Credit Agreement, CEO and CFO certifications, and Inline XBRL documents[237](index=237&type=chunk)

August 2022 Safe Harbor Statement – Statements in this presentation that are not purely historical, are forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Willdan's actual results could differ materially from those in any such forward-looking statements. 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 limit ...

Willdan Group, Inc. (NASDAQ:WLDN) Q2 2022 Earnings Conference Call August 4, 2022 5:30 PM ET Company Participants Al Kaschalk – Vice President-Investor Relations Tom Brisbin – Chairman and Chief Executive Officer Kim Early – Chief Financial Officer Mike Bieber – President Conference Call Participants Chip Moore – EF Hutton Marc Riddick – Sidoti Operator Good day, and welcome to the Willdan Group Second Quarter Fiscal Year 2022 Conference Call. Today’s conference is being recorded. At this time, I would like ...

Financial Position - As of July 1, 2022, the company had cash and cash equivalents of $5.8 million[211] - The company had $70.0 million outstanding under its Term A Loan and $42.5 million under its delayed draw term loan as of July 1, 2022[212] Contract Types - 22% of the company's contracts are time-and-materials contracts, 47% are unit-based contracts, and 31% are fixed price contracts as of July 1, 2022[196] Interest Rate Risk - A one percentage point increase in the effective interest rate would change the company's annual interest expense by approximately $1.1 million in 2022[213] - The Term A Loan amortizes quarterly in installments of $2.5 million, with a final payment due on June 26, 2024[214] - The company is subject to interest rate risk due to its variable rate debt, including the Term A Loan and revolving credit facility[212] Economic Impact - Inflationary pressures may impact the customers of the company's utility clients, potentially affecting future revenues[195] Performance Guarantees - The company has not experienced significant costs under performance guarantees related to its contracts[200] Internal Controls - The company maintains effective disclosure controls and procedures as of July 1, 2022[216] - No material changes in internal control over financial reporting occurred during the reporting period[217]

Willdan Group, Inc. (NASDAQ:WLDN) Q1 2022 Earnings Conference Call May 5, 2022 5:30 PM ET Company Participants Al Kaschalk – Vice President-Investor Relations Tom Brisbin – Chairman and Chief Executive Officer Kim Early – Chief Financial Officer Conference Call Participants Craig Irwin – Roth Capital Partners Marc Riddick – Sidoti and Company, LLC Operator Ladies and gentlemen, welcome to the Willdan Group First Quarter 2022 Earnings Conference Call. Our host for today is Al Kaschalk, VP of Investor Relatio ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33076 WILLDAN GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) (IRS Employer Identification No.) Delawar ...

Financial Data and Key Metrics Changes - In Q4 2021, gross revenue declined by 4.8% to $92.2 million, while net revenue increased by 2.1% to $51.8 million compared to Q4 2020 [22][26] - For the full year 2021, gross revenue decreased by 9.5% to $354 million, but net revenue increased by 3.6% to $202 million [26][28] - Adjusted EBITDA for Q4 2021 rose by 9.7% to $9.4 million, representing 18.2% of net revenue, compared to $8.6 million or 16.9% a year ago [26] - The company reported a net loss of $900,000 for Q4 2021, an improvement from a loss of $4.0 million in Q4 2020 [25] Business Line Data and Key Metrics Changes - The increase in net revenue was driven by higher revenue from the Los Angeles Department of Water and Power (LADWP), which offset a decline in construction management revenue due to project completions [22][23] - Construction management revenue is expected to double in 2022, increasing from approximately $70 million to $150 million [17] Market Data and Key Metrics Changes - The company has a record backlog of approximately $1.5 billion, equating to three years of work [10] - The market for reducing carbon and electrification is growing, with significant contracts awarded in New York City and Pueblo County [15][16] Company Strategy and Development Direction - The company aims for about 20% organic growth in 2022, focusing on ramping up California IOU contracts and expanding construction management activities [14][33] - Willdan is well-positioned in the clean energy space, with strong market presence in New York and California [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in emerging stronger post-COVID, with all contracts restarted and customer access open [8][19] - The company anticipates a slow start in Q1 2022, with a ramp-up in subsequent quarters as new utility programs begin [33] Other Important Information - The company amended its credit agreement to better align with expected cash flows and growth-related working capital needs in 2022 [30][31] - There is potential upside from over $100 million of unspent funds from LADWP, which is not included in the guidance [64] Q&A Session Summary Question: Confirmation of a back-end loaded year and cost impacts - Management confirmed that costs associated with ramping new contracts have been factored into the P&L, with no future cost risk anticipated [38][41] Question: Revenue expectations from California IOU contracts - Expected gross revenue from California IOU contracts in 2022 is approximately $50 million [46] Question: Confidence in tapering higher costs - Management indicated that labor costs are defined, and while equipment and materials costs have risen, they have been able to pass these costs onto customers without margin erosion [48][59] Question: Future revenue expectations from California - Revenue from California IOU contracts is projected to be between $150 million and $200 million in 2023 [63] Question: Potential upside from unused LADWP funds - Management acknowledged over $100 million of additional unspent money from LADWP, which could provide upside [64] Question: Impacts from Omicron and supply chain constraints - Supply chain delays have affected certain projects, but overall, the company is ahead of schedule on average [69]