Willdan Announces Changes to Board of Directors and Management August 5, 2021 ANAHEIM, Calif.--(BUSINESS WIRE)--Aug. 5, 2021-- Willdan Group, Inc. (Nasdaq: WLDN) announced today that the Company's Board of Directors has elected Cynthia Downes to the Board, effective August 4, 2021. Ms. Downes has also been appointed to serve on the Audit Committee and Compensation Committee. With the addition of Ms. Downes, the Board will expand to nine members total, eight of whom will be independent. Today Willdan also an ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section provides the unaudited condensed consolidated financial statements and comprehensive notes for the periods ended July 2, 2021 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity, as of July 2, 2021 | Metric | July 2, 2021 (in thousands) | January 1, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Total assets | $380,487 | $410,323 | | Total liabilities | $209,674 | $241,159 | | Total stockholders' equity | $170,813 | $169,164 | - Total assets decreased by **$29.8 million** from January 1, 2021, to July 2, 2021, primarily driven by a decrease in cash and cash equivalents and accounts receivable[18](index=18&type=chunk) - Total liabilities decreased by **$31.5 million**, mainly due to reductions in accounts payable, accrued liabilities, and notes payable[18](index=18&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's revenues, expenses, and net income (loss) for the three and six months ended July 2, 2021 | Metric | Three Months Ended July 2, 2021 (in thousands) | Three Months Ended July 3, 2020 (in thousands) | Six Months Ended July 2, 2021 (in thousands) | Six Months Ended July 3, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Contract revenue | $84,154 | $83,549 | $163,240 | $189,575 | | Income (Loss) from operations | $(7,072) | $(3,841) | $(11,261) | $(12,110) | | Net income (loss) | $(4,601) | $(4,985) | $(8,367) | $(13,139) | | Basic EPS | $(0.37) | $(0.43) | $(0.68) | $(1.13) | | Diluted EPS | $(0.37) | $(0.43) | $(0.68) | $(1.13) | - For the three months ended July 2, 2021, contract revenue was relatively flat year-over-year, while net loss improved slightly from **$(4,985) thousand** to **$(4,601) thousand**[19](index=19&type=chunk) - For the six months ended July 2, 2021, contract revenue decreased by **13.9% YoY** to **$163,240 thousand**, but net loss improved significantly from **$(13,139) thousand** to **$(8,367) thousand**[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in the company's equity components from January 1, 2021, to July 2, 2021 | Metric | January 1, 2021 (in thousands) | July 2, 2021 (in thousands) | | :-------------------------------- | :--------------------------- | :-------------------------- | | Common Stock | $122 | $127 | | Additional Paid-in Capital | $149,014 | $158,793 | | Accumulated Other Comprehensive Loss | $(488) | $(256) | | Retained Earnings | $20,516 | $12,149 | | Total Stockholders' Equity | $169,164 | $170,813 | - Total stockholders' equity increased from **$169,164 thousand** at January 1, 2021, to **$170,813 thousand** at July 2, 2021, primarily due to increases in additional paid-in capital and a reduction in accumulated other comprehensive loss, partially offset by a decrease in retained earnings[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash inflows and outflows from operating, investing, and financing activities for the six months ended July 2, 2021 | Cash Flow Activity | Six Months Ended July 2, 2021 (in thousands) | Six Months Ended July 3, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating activities | $(708) | $29,231 | | Investing activities | $(3,057) | $(2,929) | | Financing activities | $(15,226) | $(14,594) | | Net increase (decrease) in cash and cash equivalents | $(18,991) | $11,708 | | Cash and cash equivalents at end of period | $9,414 | $17,160 | - Net cash used in operating activities was **$(708) thousand** for the six months ended July 2, 2021, a significant decrease from **$29,231 thousand** provided in the prior year, primarily due to changes in revenue mix and start-up costs for new contracts[22](index=22&type=chunk)[194](index=194&type=chunk) - Net cash used in financing activities increased slightly to **$(15,226) thousand**, driven by payments for contingent consideration and debt repayments, partially offset by proceeds from stock exercises and employee stock purchase plans[22](index=22&type=chunk)[198](index=198&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Operations of the Company](index=11&type=section&id=1.%20ORGANIZATION%20AND%20OPERATIONS%20OF%20THE%20COMPANY) Willdan Group provides energy and infrastructure services through two segments, with COVID-19 impacting operations and credit facility amendments - Willdan Group, Inc. operates in two financial reporting segments: Energy and Engineering and Consulting, providing services for energy solutions and government infrastructure[24](index=24&type=chunk)[25](index=25&type=chunk) - The COVID-19 pandemic negatively impacted the company's operations, especially the direct install business in California's Energy segment, which historically accounted for **~40% of gross revenue**[29](index=29&type=chunk)[32](index=32&type=chunk) - As of August 4, 2021, the company's largest program for LADWP, which was the last suspended due to COVID-19, resumed, and no contracts have been cancelled due to the pandemic[31](index=31&type=chunk) - The company amended its credit facility for increased covenant flexibility due to **$781 million** in new California Investor Owned Utility contracts signed in December 2020[35](index=35&type=chunk) [2. Recent Accounting Pronouncements](index=15&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) The company adopted ASU 2019-12 with no material impact and is evaluating reference rate reform pronouncements - Adopted ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," effective January 2, 2021, with no material impact[42](index=42&type=chunk) - Currently evaluating ASU No. 2020-04 and ASU No. 2021-01, "Reference Rate Reform (Topic 848)," which provide optional expedients for contract modifications and hedging relationships affected by LIBOR discontinuation[43](index=43&type=chunk) [3. Revenues](index=16&type=section&id=3.%20REVENUES) Revenue is recognized under ASC Topic 606 for various contract types, with estimates and adjustments applied under specific methods - Revenue is recognized in accordance with ASC Topic 606, based on identifying performance obligations, determining transaction price, allocating it, and recognizing revenue as obligations are satisfied[45](index=45&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 | - Revenue on fixed price contracts is recognized using the percentage-of-completion method, while time-and-materials and unit-based contracts recognize revenue as work is performed[47](index=47&type=chunk)[48](index=48&type=chunk) - Adjustments to estimated profit on contracts are recognized under the cumulative catch-up method, and estimated losses are recognized immediately[59](index=59&type=chunk) [4. Supplemental Financial Statement Data](index=23&type=section&id=4.%20SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20DATA) This section details accounts receivable, equipment, goodwill, and intangible assets, noting a sale of receivables and no impairment - During the six months ended July 2, 2021, the Company sold **$8.0 million** in trade accounts receivable, incurring **$0.8 million** in discounts[71](index=71&type=chunk) | Asset Category | July 2, 2021 (in thousands) | January 1, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Equipment and leasehold improvements, net | $13,522 | $12,506 | | Goodwill | $130,124 | $130,124 | | Other intangible assets, net | $58,485 | $64,256 | - No impairment was identified for goodwill or long-lived assets, including intangible assets, as of July 2, 2021, despite potential COVID-19 impacts[36](index=36&type=chunk)[74](index=74&type=chunk) [5. Derivative Financial Instruments](index=25&type=section&id=5.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) The company uses an interest rate swap to hedge variable rate debt, with fair value changes recorded in comprehensive income - The Company uses an interest rate swap agreement to hedge variable interest rate exposure on a portion of its Term A Loan, with a notional amount of **$35.0 million** and a fixed annual interest rate of **2.47%**, expiring January 31, 2022[77](index=77&type=chunk)[79](index=79&type=chunk) | Balance Sheet Location | Fair Value of Derivative Instruments as of July 2, 2021 (in thousands) | Fair Value of Derivative Instruments as of January 1, 2021 (in thousands) | | :----------------------- | :--------------------------------------------------- | :----------------------------------------------------- | | Accrued liabilities | $(353) | $(624) | | Other noncurrent (liabilities) assets | $— | $(48) | - The effective portion of the interest rate swap agreement designated as a cash flow hedge before tax effects was **$0.4 million** as of July 2, 2021[79](index=79&type=chunk) [6. Debt Obligations](index=27&type=section&id=6.%20DEBT%20OBLIGATIONS) The company's debt includes term loans and a revolving facility, with credit agreement amendments providing covenant flexibility and compliance maintained | Debt Type | July 2, 2021 (in thousands) | January 1, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Outstanding borrowings on Term A Loan | $80,000 | $85,000 | | Outstanding borrowings on Delayed Draw Term Loan | $25,500 | $27,000 | | Total debt | $105,955 | $113,996 | | Long-term debt portion | $91,795 | $98,178 | - The company's Credit Facilities include a **$100.0 million** Term A Loan, a **$50.0 million** Delayed Draw Term Loan, and a **$50.0 million** Revolving Credit Facility, all maturing on June 26, 2024[84](index=84&type=chunk) - The Fourth Amendment (April 30, 2021) extended the covenant relief period, adjusted maximum Leverage Ratio, removed prohibitions on delayed draw term loans and permitted acquisitions, and increased the maximum earn-out payments[90](index=90&type=chunk) - As of July 2, 2021, the company was in compliance with all covenants contained in the Credit Agreement, as amended[93](index=93&type=chunk) [7. Leases](index=32&type=section&id=7.%20LEASES) The company leases office facilities and equipment, recognizing lease liabilities and right-of-use assets, with total net lease cost of $3.6 million | Lease Type | July 2, 2021 (in thousands) | January 1, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Operating leases: Right-of-use assets | $17,411 | $20,130 | | Operating leases: Total lease liabilities | $18,670 | $21,493 | | Finance leases: Total equipment and leasehold improvements, net | $858 | $544 | | Finance leases: Total finance lease obligations | $845 | $484 | | Metric | Six Months Ended July 2, 2021 (in thousands) | Six Months Ended July 3, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $3,345 | $3,508 | | Finance lease cost: Amortization of assets | $258 | $310 | | Finance lease cost: Interest on lease liabilities | $13 | $17 | | Total net lease cost | $3,616 | $3,835 | - Weighted average remaining lease term for operating leases is **4.11 years** (July 2, 2021) and for finance leases is **2.66 years** (July 2, 2021)[100](index=100&type=chunk) [8. Commitments and Variable Interest Entities](index=35&type=section&id=8.%20COMMITMENTS%20AND%20VARIABLE%20INTEREST%20ENTITIES) The company makes 401(k) matching contributions and consolidates Genesys as a Variable Interest Entity due to control and loss absorption - The company made matching contributions of **$1.3 million** to its employee benefit plans for the six months ended July 2, 2021[105](index=105&type=chunk) - Genesys, a professional corporation, is consolidated as a Variable Interest Entity (VIE) because the company manages it, directs its key activities, and absorbs its expected losses through a service fee deferral arrangement[107](index=107&type=chunk)[108](index=108&type=chunk) [9. Segment and Geographical Information](index=37&type=section&id=9.%20SEGMENT%20AND%20GEOGRAPHICAL%20INFORMATION) The company reports in Energy and Engineering & Consulting segments, with significant revenue concentration from top customers and key geographical regions | Segment | Contract Revenue (Six Months Ended July 2, 2021, in thousands) | Segment Profit (Loss) Before Income Tax Expense (Six Months Ended July 2, 2021, in thousands) | | :------------------------ | :--------------------------------------------------- | :------------------------------------------------------------------------------------ | | Energy | $128,454 | $(7,745) | | Engineering and Consulting | $34,786 | $4,834 | | Unallocated Corporate | $— | $(10,577) | | Consolidated Total | $163,240 | $(13,488) | | Client Type | Six Months Ended July 2, 2021 (in thousands) | Six Months Ended July 3, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Commercial | $15,413 | $20,296 | | Government | $59,439 | $75,162 | | Utilities | $88,388 | $94,117 | | Total | $163,240 | $189,575 | - For the six months ended July 2, 2021, the top 10 customers accounted for **46.2%** of consolidated contract revenue[116](index=116&type=chunk) - Services to clients in California accounted for **34.5%** and New York for **21.8%** of contract revenue for the six months ended July 2, 2021[119](index=119&type=chunk) [10. Income Taxes](index=41&type=section&id=10.%20INCOME%20TAXES) The company uses the asset and liability method for income taxes, recording a $5.1 million tax benefit for the six months ended July 2, 2021, and is under New York state tax examination - The company recorded an income tax benefit of **$5.1 million** for the six months ended July 2, 2021, compared to **$1.7 million** for the same period in 2020[124](index=124&type=chunk) - The tax benefit is primarily attributable to loss before income tax, state taxes, excess tax benefit on stock compensation, R&D tax credits, commercial building energy efficiency deduction, and benefits from the CARES Act and CAA 2021[124](index=124&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - The company received a **$0.8 million** tax benefit related to the net operating loss carryback provisions of the CARES Act during the three months ended July 2, 2021[127](index=127&type=chunk) - The State of New York is examining the company's 2017, 2018, and 2019 state tax returns, with the impact currently undeterminable[129](index=129&type=chunk) [11. Earnings Per Share ("EPS")](index=44&type=section&id=11.%20EARNINGS%20PER%20SHARE%20%28%22EPS%22%29) Basic and diluted EPS calculations are presented, with no dilutive effects from equity awards due to net losses for the periods | Metric | Three Months Ended July 2, 2021 | Three Months Ended July 3, 2020 | Six Months Ended July 2, 2021 | Six Months Ended July 3, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income (loss) | $(4,601) | $(4,985) | $(8,367) | $(13,139) | | Weighted-average common shares outstanding (Basic) | 12,421 | 11,682 | 12,284 | 11,593 | | Basic EPS | $(0.37) | $(0.43) | $(0.68) | $(1.13) | | Diluted EPS | $(0.37) | $(0.43) | $(0.68) | $(1.13) | - All outstanding equity awards were excluded from diluted EPS calculations for the periods presented due to net losses, making their inclusion anti-dilutive[133](index=133&type=chunk) [12. Contingencies](index=45&type=section&id=12.%20CONTINGENCIES) The company faces routine claims and lawsuits, with management believing ultimate liability will not materially affect financial statements [13. Subsequent Events](index=46&type=section&id=13.%20SUBSEQUENT%20EVENTS) No subsequent events required to be reported were identified as of August 5, 2021 [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=47&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's analysis of financial condition, operations, liquidity, and critical accounting policies, including COVID-19 impacts [Our Company](index=47&type=section&id=Our%20Company) Willdan Group, Inc. provides professional, technical, and consulting services for energy solutions and government infrastructure through two segments - Willdan Group, Inc. provides professional, technical, and consulting services for energy solutions and government infrastructure, operating through two segments: Energy and Engineering & Consulting[139](index=139&type=chunk)[140](index=140&type=chunk) - The Energy segment offers comprehensive energy solutions, including audits, program design, demand reduction, and software analytics[141](index=141&type=chunk) - The Engineering and Consulting segment provides civil engineering, construction management, building and safety, and economic/financial consulting services[142](index=142&type=chunk) [Impact of Covid-19 on Our Business](index=47&type=section&id=Impact%20of%20Covid-19%20on%20Our%20Business) COVID-19 negatively impacted the Energy segment's direct install business, while the company amended its credit facility and assessed asset impairment - COVID-19 negatively impacted operations, particularly the direct install business in California's Energy segment, which resumed in late June 2021[143](index=143&type=chunk)[144](index=144&type=chunk) - The Engineering and Consulting segment was less affected as its services were deemed "essential"[146](index=146&type=chunk) - The company amended its credit facility for increased covenant flexibility due to new California utility contracts and believes its financial position is flexible[148](index=148&type=chunk) - No goodwill or long-lived asset impairment was noted as of July 2, 2021, but future impacts of COVID-19 could cause impairment[149](index=149&type=chunk) - Clients (utilities, municipalities) may face budget shortfalls, potentially delaying funding or new contracts, and reliance on subcontractors poses risks if they face economic harm[151](index=151&type=chunk)[152](index=152&type=chunk) [Results of Operations](index=52&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, gross profit, and net income (loss), for the reported periods [Second Quarter and First Half Overview](index=52&type=section&id=Second%20Quarter%20and%20First%20Half%20Overview) Consolidated contract revenue was flat for Q2 but decreased 13.9% for the first half, with improved gross profit margins and reduced net losses | Metric | 3 Months Ended July 2, 2021 (in thousands) | 3 Months Ended July 3, 2020 (in thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------- | | Contract revenue | $84,154 | $83,549 | 0.7% | | Gross profit | $30,886 | $29,544 | 4.5% | | Gross profit margin | 36.7% | 35.4% | 1.3 pp | | Income (loss) from operations | $(7,072) | $(3,841) | 84.1% | | Net income (loss) | $(4,601) | $(4,985) | (7.7)% | | Metric | 6 Months Ended July 2, 2021 (in thousands) | 6 Months Ended July 3, 2020 (in thousands) | % Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :------- | | Contract revenue | $163,240 | $189,575 | (13.9)% | | Gross profit | $63,018 | $60,235 | 4.6% | | Gross profit margin | 38.6% | 31.8% | 6.8 pp | | Income (loss) from operations | $(11,261) | $(12,110) | (7.0)% | | Net income (loss) | $(8,367) | $(13,139) | (36.3)% | - Gross profit margin increased for both periods, driven by a shift in revenue mix towards projects with a higher percentage of labor costs and lower material/subcontracting costs[170](index=170&type=chunk)[184](index=184&type=chunk) [Three Months Ended July 2, 2021 Compared to Three Months Ended July 3, 2020](index=55&type=section&id=Three%20Months%20Ended%20July%202%2C%202021%20Compared%20to%20Three%20Months%20Ended%20July%203%2C%202020) Consolidated contract revenue remained flat, with varied segment performance, increased G&A expenses, and an improved net loss due to tax benefits - Energy segment utility contract revenues increased **$9.6 million** due to the lifting of COVID-19 business suspensions, while governmental and commercial revenues decreased due to the absence of accelerated projects seen in Q2 2020[165](index=165&type=chunk) - Engineering and Consulting segment contract revenue increased **$0.9 million (5.1%)**, primarily from incremental government revenues[166](index=166&type=chunk) - General and administrative expenses increased by **$4.6 million (13.7%)**, mainly due to restored wage reductions and increased stock-based compensation[171](index=171&type=chunk)[172](index=172&type=chunk) - Net loss improved to **$4.6 million** from **$5.0 million**, primarily driven by income tax benefits and higher margin revenues, partially offset by increased G&A[176](index=176&type=chunk) [Six Months Ended July 2, 2021 Compared to Six Months Ended July 3, 2020](index=58&type=section&id=Six%20Months%20Ended%20July%202%2C%202021%20Compared%20to%20Six%20Months%20Ended%20July%203%2C%202020) Consolidated contract revenue decreased by 13.9%, primarily in the Energy segment, while gross profit improved and net loss significantly reduced - Consolidated contract revenue decreased by **$26.3 million (13.9%)** due to decreased direct install program revenues in the Energy segment and one fewer week in Q1 2021[177](index=177&type=chunk)[178](index=178&type=chunk) - Direct costs of contract revenue decreased by **$29.1 million (22.5%)**, mainly due to lower direct install program revenues and reduced pass-through construction management costs[180](index=180&type=chunk) - General and administrative expenses increased by **$1.9 million (2.7%)**, primarily from restored wage reductions and increased stock-based compensation, partially offset by lower depreciation and facilities expenses[185](index=185&type=chunk)[186](index=186&type=chunk) - Net loss improved to **$8.4 million** from **$13.1 million**, driven by cost control, income tax benefits, and higher margin revenues[191](index=191&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, debt obligations, and cash flow activities from operating, investing, and financing | Cash Flow Activity | Six Months Ended July 2, 2021 (in thousands) | Six Months Ended July 3, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating activities | $(708) | $29,231 | | Investing activities | $(3,057) | $(2,929) | | Financing activities | $(15,226) | $(14,594) | | Net increase (decrease) in cash and cash equivalents | $(18,991) | $11,708 | - As of July 2, 2021, the company had **$9.4 million** in cash and cash equivalents, with **$80.0 million** outstanding on its Term A Loan, **$25.5 million** on its Delayed Draw Term Loan, and no outstanding borrowings on its **$50.0 million** Revolving Credit Facility (with **$4.1 million** in letters of credit issued)[192](index=192&type=chunk) - Cash flows used in operating activities were **$0.7 million** for the six months ended July 2, 2021, primarily due to changing revenue mix and start-up costs for new contracts[194](index=194&type=chunk) - Contractual obligations as of July 2, 2021, totaled **$132.5 million**, including **$105.3 million** in long-term debt, **$7.8 million** in interest payments, and **$18.7 million** in operating leases[200](index=200&type=chunk) - The company is obligated to pay up to **$12.0 million** in contingent consideration for the E3, Inc. acquisition and up to **$12.0 million** for Integral Analytics, with **$9.5 million** payable as of July 2, 2021[202](index=202&type=chunk)[203](index=203&type=chunk) [Components of Revenue and Expense](index=66&type=section&id=Components%20of%20Revenue%20and%20Expense) This section outlines the types of contracts, revenue recognition methods, and primary components of direct and general and administrative expenses - Services are provided under time-and-materials (**26% of contracts**), unit-based (**53% of contracts**), and fixed price contracts, with revenue recognized based on work performed or percentage-of-completion[210](index=210&type=chunk)[211](index=211&type=chunk) - Direct costs of contract revenue primarily include salaries, material costs, subcontractor services, and equipment expenses for revenue-producing projects[217](index=217&type=chunk) - General and administrative expenses cover marketing, support staff, management, payroll taxes, benefits, facility costs, depreciation, amortization, and professional services[219](index=219&type=chunk) [Critical Accounting Policies](index=68&type=section&id=Critical%20Accounting%20Policies) This section affirms the use of U.S. GAAP and the consistency of critical accounting policies and estimates - The company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that affect reported amounts[220](index=220&type=chunk) - There have been no material changes in critical accounting policies and estimates from those disclosed in the Annual Report on Form 10-K for the fiscal year ended January 1, 2021[222](index=222&type=chunk) [Recent Accounting Standards](index=70&type=section&id=Recent%20Accounting%20Standards) This section refers to Note 2 for details on recently issued and adopted accounting pronouncements - For a description of recently issued and adopted accounting pronouncements, refer to Part I, Item 1, Note 2 of this Quarterly Report on Form 10-Q[223](index=223&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from variable-rate debt and potential LIBOR discontinuation, which could increase annual interest expense - The company is subject to interest rate risk on its variable-rate Term A Loan (**$80.0 million** outstanding), Delayed Draw Term Loan (**$25.5 million** outstanding), and Revolving Credit Facility (no borrowed amounts outstanding, **$4.1 million** in letters of credit issued) as of July 2, 2021[228](index=228&type=chunk) - A one percentage point increase in the effective interest rate would increase the company's annual interest expense by approximately **$1.1 million**[232](index=232&type=chunk) - The company faces risk from the potential discontinuation of LIBOR after June 30, 2023, which could lead to conversion of loans to Base Rate Loans or the adoption of alternative reference rates, potentially increasing interest expense by **$1.1 million** annually for a **1.0%** rate increase[233](index=233&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were effective as of July 2, 2021, with no material changes to internal control over financial reporting - The company's disclosure controls and procedures were effective at a reasonable assurance level as of July 2, 2021[239](index=239&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by this report[240](index=240&type=chunk) [PART II. OTHER INFORMATION](index=75&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) The company is routinely involved in legal claims and lawsuits, with management believing ultimate liability will not materially affect financial statements - The company is subject to claims and lawsuits, including professional errors or omissions, arising in the ordinary course of business[243](index=243&type=chunk) - Liabilities are accrued for probable and reasonably estimable losses, and professional liability insurance is maintained[243](index=243&type=chunk)[244](index=244&type=chunk) - Management believes that the ultimate liability from current claims and lawsuits will not materially adversely affect the company's financial statements[245](index=245&type=chunk) [Item 1A. Risk Factors](index=76&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended January 1, 2021 - No material changes to the risk factors set forth in Part I, Item 1A of the Annual Report on Form 10-K for the year ended January 1, 2021[247](index=247&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 79,070 shares of common stock to satisfy tax withholding obligations related to restricted stock vesting - The company repurchased **79,070 shares** of common stock at an average price of **$39.26 per share** during the three months ended July 2, 2021[248](index=248&type=chunk) - These repurchases were made from employees to satisfy tax withholding obligations incurred from the vesting of restricted stock[248](index=248&type=chunk) [Item 3. Defaults upon Senior Securities](index=76&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[249](index=249&type=chunk) [Item 4. Mine Safety Disclosures](index=76&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable[250](index=250&type=chunk) [Item 5. Other Information](index=76&type=section&id=Item%205.%20Other%20Information) No other information was required to be reported under this item - No other information was reported[251](index=251&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The exhibits include Stock Purchase Agreements, amendments to the Credit Agreement, corporate organizational documents, and certifications from the CEO and CFO[253](index=253&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are also filed[253](index=253&type=chunk)[255](index=255&type=chunk)

Willdan Group, Inc. (NASDAQ:WLDN) Q1 2021 Earnings Conference Call May 6, 2021 5:30 PM ET Company Participants Al Kaschalk - Investor Relations Tom Brisbin - Chief Executive Officer Creighton Early - Chief Financial Officer Mike Bieber - President Conference Call Participants Craig Irwin - ROTH Capital Partners Moshe Katri - Wedbush Securities Marc Riddick - Sidoti & Company Operator Good day, ladies and gentlemen, and welcome to the Willdan Group First Quarter Fiscal Year 2021 Conference Call. Today's conf ...

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 2, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Exact Name of Registrant as Specified in Its Charter) (IRS Employer Identification No.) Delaware 14-1951112 (State or Other Jurisdiction of Incorporation or Organization) 2401 East K ...

Willdan Group, Inc. (NASDAQ:WLDN) Q4 2020 Results Conference Call March 11, 2021 5:30 PM ET Company Participants Al Kaschalk - Investor Relations Tom Brisbin - Chief Executive Officer Stacy McLaughlin - Chief Financial Officer Mike Bieber - President Conference Call Participants Moshe Katri - Wedbush Securities Craig Irwin - ROTH Capital Partners Marc Riddick - Sidoti Operator Good day, everyone, and welcome to the Willdan Group Fourth Quarter and Fiscal Year 2020 Conference Call. Today's conference is bein ...

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 October 2, 2020 For the transition period from to Commission file number 001-33076 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 WILLDAN GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorpo ...

Financial Data and Key Metrics Changes - Total contract revenue for Q2 2020 decreased by 20% to $83.5 million from $104.4 million in Q2 2019, primarily due to decreased contract revenue from direct install programs in the energy segment and engineering and consulting segment [9] - Net revenue was $43.2 million, a decrease of 7.7% from $46.8 million in the same quarter last year [10] - The company reported an operating loss of $3.8 million for Q2 2020 compared to operating income of $2.8 million in Q2 2019 [15] - Net loss for Q2 2020 was $5.0 million, or $0.43 per diluted share, compared to net income of $1.6 million, or $0.14 per diluted share, in the same period last year [17] - Adjusted EBITDA was $7.2 million for Q2 2020, down from $7.6 million in Q2 2019, with adjusted EBITDA as a percentage of net revenue at 16.7% compared to 16.2% in the prior year [15] Business Line Data and Key Metrics Changes - Within the energy segment, net revenue decreased by 10.2%, while the engineering and consulting segment saw a 1.8% decrease in net revenue [10][11] - Direct costs of contract revenue were 65% of total contract revenue in Q2 2020, down from 71% in Q1 2020 and 70% in the same period last year [12] Market Data and Key Metrics Changes - The company experienced a significant slowdown in business, with about 40% of operations halted due to COVID-19 lockdowns, primarily affecting utility direct install business [24] - Despite the challenges, 60% of the company's work was not affected, allowing employees to work from home [25] Company Strategy and Development Direction - The company is focusing on cash collection and has successfully generated $12.8 million in cash flow from operations in Q2 2020, an increase of 536% from the same period last year [19] - Management has taken measures to align costs with declining revenues, including furloughs and salary reductions, while maintaining health benefits for laid-off employees [26] - The company anticipates growth and plans to borrow additional amounts under its credit facility to support working capital needs as COVID-19 restrictions ease [21] Management's Comments on Operating Environment and Future Outlook - Management noted that all contracts, except for those with LADWP, have restarted, and no contracts have been canceled, only delayed [31] - The company expects to ramp up operations as schools and other facilities reopen, with a focus on energy efficiency programs [35] - Management expressed optimism about the future, stating that performance is expected to improve in the second half of the year [38] Other Important Information - The company amended its credit agreement to provide increased flexibility under debt covenants through Q2 2021 [20] - The company is actively engaged in legislation that will provide energy efficiency stimulus to small business utility programs across the country [35] Q&A Session Summary Question: What is the current impact of lockdowns on business? - Management indicated that LADWP is the only closed utility contract, with all other utility contracts across the nation open and running [41] Question: How quickly can the company ramp up hiring after furloughs? - Approximately 50 out of 350 furloughed employees remain on furlough, and the company has been able to bring back employees quickly [45] Question: What is the outlook for Q3 and Q4? - Management expects increased revenue in Q3, with margins improving slightly, while Q4 may remain flat depending on the pace of reopening [52] Question: How is the integrated analytics software business performing? - The pipeline looks good, with several small wins in Q2 and ongoing negotiations for larger projects [56] Question: What are the long-term acquisition goals of the company? - The acquisition pipeline has improved due to recessionary pressures, and the company is cautiously re-engaging with potential targets [85]

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 July 3, 2020 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) (State or Other Jurisdiction of Incorporat ...

Willdan Group, Inc. (NASDAQ:WLDN) Q1 2020 Results Conference Call May 7, 2020 5:30 PM ET Company Participants Tony Rossi - Financial Profiles, Inc. Thomas Brisbin - Chairman and Chief Executive Officer Stacy McLaughlin - Chief Financial Officer Mike Bieber - President Conference Call Participants Craig Irwin - ROTH Capital Partners Jed Dorsheimer - Canaccord Genuity Operator Good day, and welcome to the Willdan Group First Quarter 2020 Conference Call. Today's conference is being recorded. At this time, I w ...

Financial Performance - Total contract revenue for the three months ended April 3, 2020, was $106,026,000, representing an increase of 15.5% compared to $91,793,000 for the same period in 2019[18]. - Net loss for the three months ended April 3, 2020, was $8,154,000, compared to a net loss of $417,000 for the same period in 2019, indicating a significant increase in losses[18]. - The company reported a comprehensive loss of $8,603,000 for the three months ended April 3, 2020, compared to a comprehensive loss of $636,000 for the same period in 2019, indicating worsening financial performance[18]. - Segment profit (loss) before income tax expense for the Energy segment was a loss of $6.406 million, while the Engineering and Consulting segment reported a profit of $2.004 million[106]. - The company experienced a net loss of $8.2 million for the three months ended April 3, 2020, compared to a net loss of $0.4 million in the same period last year[177]. Cash Flow and Liquidity - Cash and cash equivalents increased to $12,304,000 as of April 3, 2020, from $5,452,000 at the end of December 27, 2019, reflecting a positive cash flow trend[16]. - The company reported a net cash provided by operating activities of $16,455,000 for the three months ended April 3, 2020, compared to $10,487,000 for the same period in 2019, indicating improved operational efficiency[22]. - Cash flows from operating activities were $16.5 million for the three months ended April 3, 2020, compared to $10.5 million for the same period in 2019, driven by acquisitions and reduced working capital requirements[193]. - Cash flows used in investing activities decreased to $2.1 million for the three months ended April 3, 2020, from $23.7 million for the same period in 2019, primarily due to cash paid for equipment and leasehold improvements[194]. - Cash flows used in financing activities were $7.4 million for the three months ended April 3, 2020, compared to cash flows provided of $9.0 million for the same period in 2019, mainly due to repayments under term loan and revolving credit[195]. Assets and Liabilities - Total current assets decreased to $146,334,000 as of April 3, 2020, down from $175,473,000 at December 27, 2019, indicating a reduction in liquidity[16]. - Total liabilities decreased to $251,066,000 as of April 3, 2020, from $272,635,000 at December 27, 2019, showing a reduction in financial obligations[16]. - Total accrued liabilities decreased from $67.6 million in December 2019 to $39.9 million in April 2020[73]. - Total debt as of April 3, 2020, is $126.659 million, a decrease from $131.060 million as of December 27, 2019[82]. - The company has outstanding borrowings on Term A Loan of $92.5 million as of April 3, 2020, down from $95 million on December 27, 2019[82]. Acquisitions - The Company acquired E3, Inc. for up to $44.0 million, which includes $27.0 million in cash and potential earn-out payments of up to $12.0 million based on financial targets[126][127]. - E3, Inc. contributed $5.0 million in revenue and $0.9 million of income from operations during the three months ended April 3, 2020[133]. - The acquisition of Onsite Energy Corporation had a total consideration of $24.905 million, with cash paid amounting to $24.411 million[137]. - Onsite Energy contributed $2.2 million in revenue during the three months ended April 3, 2020, with no income from operations reported[139]. - The acquisition of The Weidt Group had a cash purchase price of $22.136 million, with no working capital adjustments[142]. Operational Impact of Covid-19 - In fiscal 2019, approximately 40% of the gross Energy segment revenue was derived from direct install programs serving small businesses, which are currently suspended due to Covid-19 restrictions[32]. - The Company executed a reduction in workforce impacting approximately 300 staff members due to government-mandated work restrictions[33]. - The Company enhanced liquidity in the first quarter of fiscal year 2020 by minimizing working capital and improving cash collections, and amended its credit facilities in May 2020 for increased financial flexibility[35]. - The Company expects significant budget shortfalls for many governmental and public agencies in 2020, potentially leading to delayed funding for existing contracts[38]. - The Company has implemented a temporary freeze on all non-critical spending, including travel and capital expenditures[39]. Revenue Recognition and Contracts - The Company recognizes revenue for time-and-materials contracts based on actual hours incurred at contractually agreed rates, including all reimbursable costs[48]. - Approximately 2.0% to 3.0% of the Company's consolidated contract revenue may comprise segmented contracts, which could result in different rates of profitability[51]. - The Company has retainage of approximately $4.4 million and $5.4 million included in contract assets as of April 3, 2020, and December 27, 2019, respectively[67]. - The Company recognizes software license revenue at a point in time when control is transferred to the client[69]. - The Company performs regular reviews of contract-related estimates through a disciplined project review process[56]. Customer Concentration - The Company derived 29.2% of its consolidated contract revenue from two customers, LADWP and DASNY, for the three months ended April 3, 2020[111]. - The top 10 customers accounted for 58.1% of the Company's consolidated contract revenue for the three months ended April 3, 2020, compared to 55.0% for the same period in 2019[111]. Goodwill and Intangible Assets - Goodwill increased from $127.6 million in December 2019 to $130.0 million in April 2020, with an addition of $2.4 million[74]. - Total intangible assets as of April 3, 2020, amounted to $98.158 million, with accumulated amortization of $24.578 million[76]. - Customer relationships represent the largest component of intangible assets at $60.733 million, with accumulated amortization of $9.688 million[76]. - The company recorded $21.5 million of goodwill from the acquisition of E3, Inc., which is expected to be tax deductible[130]. - The company recorded $9.0 million of goodwill from the acquisition of Onsite Energy, also expected to be tax deductible[136]. Debt and Financial Agreements - The Company entered into an interest rate swap agreement with a notional amount of $35 million, fixing the interest rate at 2.47% until January 31, 2022[79]. - The fair value of the interest rate swap agreement liabilities was $(624,000) as of April 3, 2020, compared to $(241,000) on December 27, 2019[80]. - The Company was in compliance with all covenants contained in the credit agreement as of April 3, 2020[86]. - The Company expects to borrow additional amounts under its existing credit facility during the second half of fiscal year 2020[35]. Cost Management - General and administrative expenses surged by $12.8 million, or 48.9%, totaling $39.0 million, largely due to increased salaries and costs from acquisitions[184]. - The company has implemented cost-saving measures in response to the impact of Covid-19, aiming to manage expenses effectively[186]. - Salaries and wages within direct costs increased to 17.8% of contract revenue, up from 16.2% in the previous year, while subcontractor services decreased to 53.2%[183].