Willdan Group, Inc. (WLDN) has been immensely benefiting from its consistent contract wins, which, in turn, are aiding its growth prospects. The company has recently secured a contract from the Clark County School District ("CCSD") for energy-saving modification projects in 204 campuses. The contract, valued at $102 million, will reduce energy consumption and is expected to save the CCSD $170 million in lifetime energy savings, along with an anticipated $700,000 reduction in annual operations and maintenanc ...

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying the right ones can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Willdan Group (WLDN) is identified as a promising growth stock with a favorable Growth Score and a top Zacks Rank [2] - The company operates in the energy efficiency and sustainability consulting sector, which is currently positioned for growth [3] Group 2: Earnings Growth - Willdan's historical EPS growth rate stands at 16.7%, with projected EPS growth of 12.6% for the current year, significantly outperforming the industry average of 6.2% [4] Group 3: Cash Flow Growth - The year-over-year cash flow growth for Willdan is reported at 44.2%, well above the industry average of 9% [5] - Over the past 3-5 years, Willdan's annualized cash flow growth rate has been 12.7%, compared to the industry average of 7.7% [6] Group 4: Earnings Estimate Revisions - The current-year earnings estimates for Willdan have been revised upward, with a 5.5% increase in the Zacks Consensus Estimate over the past month [7] Group 5: Investment Positioning - Willdan has achieved a Zacks Rank 1 (Strong Buy) and a Growth Score of B, indicating strong potential for outperformance in the growth stock category [8]

Willdan Group (WLDN) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving. Analysts' growing optimism on the earnings prospects of this energy efficiency and sustainability consultant is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings est ...

Core Viewpoint - Willdan Group (WLDN) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system tracks the Zacks Consensus Estimate, which reflects EPS estimates from sell-side analysts for the current and following years, highlighting the importance of earnings revisions in stock price movements [1][4]. - Willdan is expected to earn $1.97 per share for the fiscal year ending December 2024, representing a year-over-year change of 12.6% [8]. Impact of Institutional Investors - Institutional investors utilize earnings estimates to determine the fair value of a company's shares, leading to stock price movements based on their buying or selling actions [4]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Willdan to Zacks Rank 1 places it in the top 5% of Zacks-covered stocks, indicating a strong potential for near-term price increases [10]. Recent Trends in Earnings Estimates - Over the past three months, the Zacks Consensus Estimate for Willdan has increased by 5.5%, reflecting a positive trend in earnings estimates [8].

Most of us have heard the dictum "the trend is your friend." And this is undeniably the key to success when it comes to short-term investing or trading. But it isn't easy to ensure the sustainability of a trend and profit from it. Often, the direction of a stock's price movement reverses quickly after taking a position in it, making investors incur a short-term capital loss. So, it's important to ensure that there are enough factors -- such as sound fundamentals, positive earnings estimate revisions, etc. - ...

Momentum investing is essentially the opposite of the tried-and-tested Wall Street adage -- "buy low and sell high." Investors following this investing style typically avoid betting on cheap stocks and waiting long for them to recover. They believe instead that one could make far more money in lesser time by "buying high and selling higher." Everyone likes betting on fast-moving trending stocks, but it isn't easy to determine the right entry point. These stocks often lose momentum when their future growth p ...

Willdan Group (WLDN) came out with quarterly earnings of $0.55 per share, beating the Zacks Consensus Estimate of $0.29 per share. This compares to earnings of $0.26 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 89.66%. A quarter ago, it was expected that this energy efficiency and sustainability consultant would post earnings of $0.19 per share when it actually produced earnings of $0.40, delivering a surprise of 110.53%. ...

Financial Data and Key Metrics Changes - Revenue increased by 19% year-over-year to $123 million, marking a record for the first quarter [7][25] - Adjusted EBITDA rose by 12% year-over-year to $11 million, also a record for the first quarter [7][25] - Cash flow from operations surged by 56% year-over-year to $27 million [7][25] - Net income tripled to $2.9 million, or $0.21 per diluted share, compared to $0.9 million, or $0.07 per diluted share a year ago [25] Business Line Data and Key Metrics Changes - Contract revenue increased by 19% to $123 million, with net revenue up 12% to $69 million [23] - Energy segment revenues grew by 21%, driven by strong demand in program and construction management activities [23] - Engineering and Consulting segment revenue increased by 13%, reflecting continued strong demand [23] Market Data and Key Metrics Changes - Electricity prices increased by 18% in California and 10% in New York, which are Willdan's largest markets [20] - The Federal Energy Regulatory Commission (FERC) reported that grid planners nearly doubled the five-year load growth forecast due to investments in new industrial manufacturing and data center facilities [19] Company Strategy and Development Direction - Willdan is focusing on transitioning communities to clean energy and sustainable futures, with a strong emphasis on data analytics and engineering services [10][21] - The company is actively pursuing strategic acquisitions to enhance its capabilities in areas such as waste-to-energy and electrical engineering [29][30] - Management highlighted the rapid growth in electricity demand driven by AI and cryptocurrency processing, positioning Willdan to capitalize on this trend [18][21] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year financial targets, projecting net revenue between $270 million and $280 million and adjusted EBITDA of $48 million to $50 million [28] - The management team noted that the current operating environment is favorable, with strong demand for services and a healthy pipeline of proposals [11][21] Other Important Information - The company reduced net debt from $75 million to $50 million, resulting in a leverage ratio decrease from 1.6 times to 1.1 times [26] - Willdan ended the quarter with $47 million in cash and $50 million in unused credit lines, indicating strong liquidity [27] Q&A Session Summary Question: Deal pipeline for software and services - Management confirmed a robust pipeline for both services and software, focusing on four key areas: waste-to-energy, electrical engineering, front-end consulting, and analytical software [29] Question: Software contribution during the quarter - Management acknowledged two software sales during the quarter, contributing positively to revenue, although specific numbers were not disclosed [31] Question: Incremental deal flow from AI data processing - Management indicated that increased deal flow is already occurring due to rising electricity load from AI data processing, with utilities reporting higher load growth [32] Question: Organic growth expectations - Management noted that organic growth exceeded expectations and was broad-based across all units, but guidance remains conservative for now [36] Question: Hiring and training of new employees - Management reported ongoing hiring efforts, successfully attracting talent from various sources, including competitors and graduate schools [40] Question: Cash flow and capital expenditures - Management discussed expectations for cash flow from operations to align closely with EBITDA targets, with planned capital expenditures in the range of $10 million to $12 million for the year [44]

WILLDAN GROUP, INC. Q1 FY24 Earnings Call NASDAQ: WLDN May 2, 2024 Mike Bieber, President & CEO Kim Early, Executive Vice President & CFO 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 ...

[Cautionary Statement Regarding Forward-Looking Information](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20INFORMATION) This section outlines the forward-looking statements within the 10-Q report, highlighting inherent risks and uncertainties that could impact actual results - This 10-Q report contains forward-looking statements concerning the company's business, operations, and financial performance, which are subject to risks and uncertainties[10](index=10&type=chunk) - Key factors that could cause actual results to differ materially include the ability to complete projects timely, competition in the energy services market (**84% of 2023 revenue**), reliance on top ten clients (**53% of 2023 contract revenue**), changes in economies and government budgets, ability to win/renew contracts, debt payment and covenant compliance, supply chain/labor/inflation management, financing, acquisition integration, and talent retention[12](index=12&type=chunk) - The forward-looking statements are based on current expectations, estimates, forecasts, and projections, and are not guarantees of future performance[11](index=11&type=chunk)[14](index=14&type=chunk) [Part I. Financial Information](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Willdan Group, Inc. and its subsidiaries, including balance sheets, statements of comprehensive income, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's accounting policies, recent pronouncements, revenue recognition, supplemental data, debt, leases, commitments, segment information, income taxes, EPS, and contingencies [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 29, 2024 | December 29, 2023 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $46,925 | $23,397 | | Accounts receivable, net | $50,792 | $69,677 | | Contract assets | $82,409 | $93,885 | | Total current assets | $186,541 | $192,016 | | Total assets | $407,900 | $415,588 | | Total current liabilities | $104,068 | $114,680 | | Total liabilities | $202,385 | $215,743 | | Total stockholders' equity | $205,515 | $199,845 | [Condensed Consolidated Statements of Comprehensive Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's financial performance over a period, including revenues, expenses, and net income, along with other comprehensive income items Condensed Consolidated Statements of Comprehensive Income Highlights (Three Months Ended, in thousands, except per share amounts) | Metric | March 29, 2024 | March 31, 2023 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | :--------- | | Contract revenue | $122,489 | $102,603 | $19,886 | 19.4% | | Gross profit | $47,418 | $41,281 | $6,137 | 14.9% | | Income (Loss) from operations | $5,361 | $4,014 | $1,347 | 33.6% | | Income (Loss) before income taxes | $3,928 | $1,688 | $2,240 | 132.7% | | Net income (loss) | $2,942 | $932 | $2,010 | 215.7% | | Basic EPS | $0.22 | $0.07 | $0.15 | 214.3% | | Diluted EPS | $0.21 | $0.07 | $0.14 | 200.0% | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details changes in the company's equity accounts, reflecting net income, stock-based compensation, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | Balance at Dec 29, 2023 | Net Income (Loss) | Stock-based Compensation | Net Unrealized Gain on Derivatives | Balance at Mar 29, 2024 | | :-------------------------------- | :---------------------- | :---------------- | :----------------------- | :--------------------------------- | :---------------------- | | Total Stockholders' Equity | $199,845 | $2,942 | $1,390 | $434 | $205,515 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by the company across operating, investing, and financing activities over a specific period Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended, in thousands) | Cash Flow Activity | March 29, 2024 | March 31, 2023 | Change ($) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net cash provided by operating activities | $26,949 | $17,292 | $9,657 | | Net cash used in investing activities | $(1,952) | $(3,475) | $1,523 | | Net cash used in financing activities | $(1,469) | $(15,449) | $13,980 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $23,528 | $(1,632) | $25,160 | | Cash, cash equivalents and restricted cash at end of period | $46,925 | $17,853 | $29,072 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, clarifying accounting policies and significant transactions [1. Organization and Operations of the Company](index=11&type=section&id=1.%20ORGANIZATION%20AND%20OPERATIONS%20OF%20THE%20COMPANY) This note describes Willdan Group, Inc.'s business, its service offerings, and its operational segments, along with its fiscal year structure - Willdan Group, Inc. provides professional, technical, and consulting services to utilities, private industry, and public agencies, focusing on energy solutions and government infrastructure[23](index=23&type=chunk) - The Company operates in two financial reporting segments: Energy and Engineering and Consulting, which are integral to its strategy of delivering comprehensive solutions[24](index=24&type=chunk) - Fiscal year 2024 will comprise **52 weeks**, with all quarters consisting of **13 weeks** each, consistent with fiscal year 2023[26](index=26&type=chunk) [2. Recent Accounting Pronouncements](index=12&type=section&id=2.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note outlines recently issued accounting standards from the FASB, detailing their effective dates and impact on financial disclosures - The FASB issued ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2024, requiring enhanced disclosures for income tax rate reconciliation and payments[28](index=28&type=chunk) - ASU 2023-07 (Segment Reporting) expands segment disclosure requirements for significant expenses and other segment items, effective for fiscal years beginning after December 15, 2023[29](index=29&type=chunk) - ASU 2023-06 (Disclosure Improvements) amends U.S. GAAP to reflect SEC updates and simplifications to disclosure requirements, with varying effective dates[30](index=30&type=chunk) [3. Revenues](index=13&type=section&id=3.%20REVENUES) This note details the company's revenue recognition policies, including the methods used for different contract types and segments - The Company recognizes revenue in accordance with ASC Topic 606, identifying performance obligations, determining transaction price, allocating it, and recognizing revenue as obligations are satisfied[32](index=32&type=chunk) Revenue Recognition Methods by Segment | 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 most contracts is recognized over time due to continuous transfer of control to the customer, with fixed price contracts using the percentage-of-completion method[34](index=34&type=chunk) - Contract modifications are generally accounted for as part of the original contract due to significant integration, with adjustments recognized on a cumulative catch-up basis[45](index=45&type=chunk) [4. Supplemental Financial Statement Data](index=19&type=section&id=4.%20SUPPLEMENTAL%20FINANCIAL%20STATEMENT%20DATA) This note provides additional details on specific balance sheet accounts, including restricted cash, equipment, accrued liabilities, and goodwill Restricted Cash Reconciliation (in thousands) | Metric | March 29, 2024 | December 29, 2023 | | :-------------------------------------------------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $46,925 | $23,397 | | Restricted cash | — | — | | Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows | $46,925 | $23,397 | Equipment and Leasehold Improvements, Net (in thousands) | Category | March 29, 2024 | December 29, 2023 | | :-------------------------------- | :------------- | :---------------- | | Subtotal (Gross) | $63,886 | $61,867 | | Accumulated depreciation and amortization | $(36,347) | $(34,770) | | Equipment and leasehold improvements, net | $27,539 | $27,097 | Accrued Liabilities (in thousands) | Category | March 29, 2024 | December 29, 2023 | | :------------------------ | :------------- | :---------------- | | Accrued subcontractor costs | $22,896 | $30,196 | | Accrued bonuses | $4,542 | $14,423 | | Total accrued liabilities | $38,411 | $54,129 | - Goodwill remained at **$131.1 million** as of March 29, 2024, with no impairment believed to have occurred[58](index=58&type=chunk) [5. Derivative Financial Instruments](index=21&type=section&id=5.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note explains the company's use of interest rate derivative contracts, specifically an interest rate swap, to manage interest rate risk on its variable-rate debt - The Company uses interest rate derivative contracts, specifically an interest rate swap agreement, to hedge interest rate exposures on its variable rate debt, not for speculative purposes[60](index=60&type=chunk)[62](index=62&type=chunk) - An interest rate swap agreement with a notional amount of **$50.0 million** and a fixed annual rate of **4.77%** was entered into on November 30, 2023, expiring September 29, 2026[62](index=62&type=chunk) Fair Value of Derivative Instruments (in thousands) | Balance Sheet Location | March 29, 2024 | December 29, 2023 | | :----------------------- | :------------- | :---------------- | | Current assets | $140 | $46 | | Other noncurrent liabilities | $(431) | $(887) | [6. Debt Obligations](index=23&type=section&id=6.%20DEBT%20OBLIGATIONS) This note details the company's outstanding debt, including term loans and revolving credit facilities, and confirms compliance with financial covenants Debt Obligations (in thousands) | Metric | March 29, 2024 | December 29, 2023 | | :-------------------------------- | :------------- | :---------------- | | Outstanding borrowings on Term Loan | $96,250 | $98,125 | | Total debt | $96,424 | $98,452 | | Long-term debt portion | $86,571 | $88,979 | - As of March 29, 2024, the Company was in compliance with all financial covenants related to its Term Loan and Revolving Credit Facility[65](index=65&type=chunk) - The composite interest rate, excluding upfront fees and issuance cost amortization, was **7.7%** as of March 29, 2024[66](index=66&type=chunk) [7. Leases](index=24&type=section&id=7.%20LEASES) This note describes the company's operating and finance lease arrangements for office facilities and equipment, including associated costs and balance sheet impacts - The Company leases office facilities under long-term operating leases (expiring through **2029**) and equipment under finance leases (expiring through **2028**)[68](index=68&type=chunk) Summary of Lease Expense (Three Months Ended, in thousands) | Lease Cost Category | March 29, 2024 | March 31, 2023 | | :-------------------- | :------------- | :------------- | | Operating lease cost | $1,527 | $1,493 | | Finance lease cost | $386 | $333 | | Total net lease cost | $1,899 | $1,826 | Lease Information on Consolidated Balance Sheet (in thousands) | Metric | March 29, 2024 | December 29, 2023 | | :-------------------------------- | :------------- | :---------------- | | Operating leases: Right-of-use assets | $12,803 | $12,465 | | Operating leases: Total lease liabilities | $14,625 | $14,295 | | Finance leases: Total finance lease obligations | $2,223 | $2,370 | | Weighted average remaining lease term (Operating) | 3.32 years | 3.43 years | | Weighted average discount rate (Operating) | 6.67% | 6.09% | [8. Commitments and Variable Interest Entities](index=27&type=section&id=8.%20COMMITMENTS%20AND%20VARIABLE%20INTEREST%20ENTITIES) This note covers the company's 401(k) plan matching contributions and the consolidation of Genesys as a Variable Interest Entity - The Company's 401(k) plan includes matching contributions, which amounted to **$1.1 million** for the three months ended March 29, 2024, up from **$1.0 million** in the prior year period[76](index=76&type=chunk)[77](index=77&type=chunk) - Genesys, a professional corporation, is consolidated as a Variable Interest Entity (VIE) because Willdan manages its activities and absorbs expected losses through deferred service fees[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [9. Segment and Geographical Information](index=29&type=section&id=9.%20SEGMENT%20AND%20GEOGRAPHICAL%20INFORMATION) This note provides a breakdown of contract revenue by the company's operating segments, client types, and geographical regions Contract Revenue by Segment (Three Months Ended, in thousands) | Segment | March 29, 2024 | March 31, 2023 | Change ($) | Change (%) | | :------------------------ | :------------- | :------------- | :--------- | :--------- | | Energy | $100,746 | $83,285 | $17,461 | 21.0% | | Engineering and Consulting| $21,743 | $19,318 | $2,425 | 12.6% | | Consolidated Total | $122,489 | $102,603 | $19,886 | 19.4% | Contract Revenue by Client Type (Three Months Ended March 29, 2024, in thousands) | Client Type | Energy | Engineering and Consulting | Total | | :------------ | :----- | :------------------------- | :---- | | Commercial | $7,203 | $1,580 | $8,783| | Government | $35,820| $20,098 | $55,918| | Utilities | $57,723| $65 | $57,788| - The top 10 customers accounted for **49.2%** of consolidated contract revenue for the three months ended March 29, 2024, down from **52.2%** in the prior year[90](index=90&type=chunk) - Services to clients in California and New York accounted for **43.5%** and **27.1%** of consolidated contract revenue, respectively, for the three months ended March 29, 2024[93](index=93&type=chunk) [10. Income Taxes](index=32&type=section&id=10.%20INCOME%20TAXES) This note explains the company's income tax accounting method, effective tax rates, and the primary drivers of changes in tax expense - Income taxes are accounted for under the asset and liability method, recognizing deferred tax assets and liabilities for temporary differences[95](index=95&type=chunk) - The Company recorded an income tax expense of **$1.0 million** for Q1 2024 (**25.1% effective tax rate**), compared to **$0.8 million** for Q1 2023 (**44.8% effective tax rate**)[99](index=99&type=chunk) - The reduction in the effective tax rate for Q1 2024 was primarily due to increases in discrete items related to stock compensation deductions[129](index=129&type=chunk) [11. Earnings Per Share ("EPS")](index=34&type=section&id=11.%20EARNINGS%20PER%20SHARE%20%28%22EPS%22%29) This note presents the calculation of basic and diluted earnings per share, including net income and weighted-average common shares outstanding Earnings Per Share (Three Months Ended, in thousands, except per share amounts) | Metric | March 29, 2024 | March 31, 2023 | | :-------------------------------- | :------------- | :------------- | | Net income (loss) | $2,942 | $932 | | Weighted-average common shares outstanding (Basic) | 13,605 | 13,266 | | Weighted-average common shares outstanding (Diluted) | 13,910 | 13,470 | | Basic EPS | $0.22 | $0.07 | | Diluted EPS | $0.21 | $0.07 | [12. Contingencies](index=35&type=section&id=12.%20CONTINGENCIES) This note addresses the company's exposure to claims and lawsuits, its professional liability insurance, and management's assessment of potential financial impact - The Company is subject to claims and lawsuits, including professional errors or omissions, typical for the engineering and consulting industry[103](index=103&type=chunk) - Professional liability insurance is maintained, and liabilities are accrued when a loss is probable and estimable[103](index=103&type=chunk)[104](index=104&type=chunk) - Management, after consulting legal counsel, believes the ultimate liability from current claims and lawsuits is not expected to have a material adverse effect on the financial statements[105](index=105&type=chunk) [13. Subsequent Events](index=36&type=section&id=13.%20SUBSEQUENT%20EVENTS) This note confirms that no subsequent events requiring disclosure occurred after the reporting period up to the date of the 10-Q filing - As of May 2, 2024, there were no subsequent events required to be reported[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 29, 2024, compared to the prior year period. It covers an overview of the company, detailed analysis of revenue, costs, and profitability, liquidity and capital resources, the impact of inflation, and key accounting policies [Our Company](index=37&type=section&id=Our%20Company) This section provides an overview of Willdan Group, Inc.'s core business, its service offerings, and its two primary financial reporting segments - Willdan Group, Inc. delivers professional, technical, and consulting services for energy solutions, greenhouse gas reduction, and government infrastructure[109](index=109&type=chunk) - The company operates through two financial reporting segments: Energy and Engineering and Consulting, leveraging synergies between them[110](index=110&type=chunk) - The Energy segment provides comprehensive energy solutions, including audits, program design, construction management, and software analytics, while the Engineering and Consulting segment offers civil engineering, building and safety, city planning, and economic consulting services[111](index=111&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in contract revenue, gross profit, operating income, and net income for the reporting period First Quarter Financial Performance (in thousands, except percentages) | Metric | March 29, 2024 | March 31, 2023 | $ Change | % Change | | :-------------------------------- | :------------- | :------------- | :------- | :------- | | Contract revenue | $122,489 | $102,603 | $19,886 | 19.4% | | Direct costs of contract revenue | $75,071 | $61,322 | $13,749 | 22.4% | | Gross profit | $47,418 | $41,281 | $6,137 | 14.9% | | General and administrative expenses | $42,057 | $37,267 | $4,790 | 12.9% | | Income (loss) from operations | $5,361 | $4,014 | $1,347 | 33.6% | | Total other income (expense) | $(1,433) | $(2,326) | $893 | (38.4)% | | Income (Loss) before income tax expense | $3,928 | $1,688 | $2,240 | 132.7% | | Income tax expense (benefit) | $986 | $756 | $230 | 30.4% | | Net income (loss) | $2,942 | $932 | $2,010 | 215.7% | - Consolidated contract revenue increased by **19.4%** due to incremental revenues in both the Energy segment (up **21.0%** from construction management and utility programs) and the Engineering and Consulting segment (up **12.6%** from increased demand)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Gross profit margin decreased to **38.7%** from **40.2%** primarily due to changes in the mix of revenues, with subcontractor services and other direct costs increasing significantly (**30.9%**)[121](index=121&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Operating income increased by **33.6%** to **$5.4 million**, and net income surged by **215.7%** to **$2.9 million**, driven by increased operating income, lower net other expenses, and a reduced effective tax rate[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity, cash flow activities, and its contractual obligations, highlighting its financial flexibility Cash Flow Summary (Three Months Ended, in thousands) | Cash Flow Activity | March 29, 2024 | March 31, 2023 | | :-------------------------------- | :------------- | :------------- | | Operating activities | $26,949 | $17,292 | | Investing activities | $(1,952) | $(3,475) | | Financing activities | $(1,469) | $(15,449) | - Primary liquidity sources include cash from operations, cash and cash equivalents (**$46.9 million** as of March 29, 2024), and available borrowings under the **$50.0 million** Revolving Credit Facility (no amounts borrowed)[132](index=132&type=chunk)[133](index=133&type=chunk) - Cash flows from operating activities increased to **$26.9 million** (Q1 2024) from **$17.3 million** (Q1 2023), primarily due to increased earnings and lower working capital requirements[135](index=135&type=chunk) Contractual Obligations as of March 29, 2024 (in thousands) | Contractual Obligations | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :---------------------- | :------- | :--------------- | :---------- | :---------- | :---------------- | | Debt | $95,495 | $8,924 | $86,571 | $— | $— | | Interest payments on debt | $16,238 | $6,998 | $9,240 | $— | $— | | Operating leases | $14,625 | $4,677 | $7,585 | $2,279 | $84 | | Finance leases | $2,223 | $1,111 | $1,015 | $97 | $— | | Total | $128,581 | $21,710 | $104,411 | $2,376 | $84 | [Impact of Inflation](index=45&type=section&id=Impact%20of%20Inflation) This section assesses the historical and potential future impact of inflation on the company's operations, including mitigation strategies and risks - Historically, inflation has not materially impacted operations due to the average duration of projects and the ability to renegotiate prices[146](index=146&type=chunk) - The Company mitigates future price increases by using fixed price purchase orders and including cost escalation factors in proposals[149](index=149&type=chunk) - Despite mitigation efforts, significant price increases in equipment, supply chain disruptions, and inflationary pressures on utility clients could materially impact results[147](index=147&type=chunk)[149](index=149&type=chunk) [Components of Revenue and Expense](index=47&type=section&id=Components%20of%20Revenue%20and%20Expense) This section breaks down the company's contract types and describes the primary elements contributing to direct costs of revenue and general and administrative expenses - As of March 29, 2024, contract types were **20% time-and-materials**, **42% unit-based**, and **38% fixed price**, showing a shift towards unit-based and fixed price contracts compared to March 31, 2023[150](index=150&type=chunk) - Direct costs of contract revenue primarily include salaries and wages for revenue-producing projects, material costs, subcontractor services, and equipment expenses[156](index=156&type=chunk) - General and administrative (G&A) expenses encompass marketing, support staff, management, administrative personnel costs, payroll taxes, benefits, facility costs, depreciation, amortization, and professional services[158](index=158&type=chunk) [Critical Accounting Policies](index=49&type=section&id=Critical%20Accounting%20Policies) This section confirms that there have been no material changes to the company's critical accounting policies and estimates since its last annual report - There have been no material changes to the Company's critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 29, 2023[160](index=160&type=chunk) [Recent Accounting Standards](index=49&type=section&id=Recent%20Accounting%20Standards) This section directs readers to the detailed notes within the financial statements for information 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 the Condensed Consolidated Financial Statements[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risk, specifically interest rate risk, due to its variable-rate debt. It outlines the outstanding debt, the interest rate swap used for hedging, and the potential impact of interest rate fluctuations on annual interest expense - The Company is exposed to interest rate risk from its Term Loan (**$96.3 million** outstanding) and Revolving Credit Facility, both bearing variable interest rates[164](index=164&type=chunk) - An interest rate swap agreement for a **$50.0 million** notional amount, with a fixed rate of **4.77%** expiring September 29, 2026, is used to hedge a portion of the Term Loan's variable interest rate[167](index=167&type=chunk) - A one percentage point increase in the effective interest rate would increase the Company's annual interest expense by approximately **$0.5 million** in fiscal year 2024[168](index=168&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms management's evaluation of the effectiveness of the company's disclosure controls and procedures and states that no material changes occurred in internal control over financial reporting during the period - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of March 29, 2024[170](index=170&type=chunk) - No change in internal control over financial reporting occurred during the period that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting[171](index=171&type=chunk) [Part II. Other Information](index=53&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides additional information on legal proceedings, risk factors, equity security sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the company's involvement in legal claims and lawsuits, its professional liability insurance coverage, and its policy for accruing and disclosing loss contingencies. Management assesses that the ultimate liability from current proceedings is not expected to materially affect the financial statements - The Company is subject to claims and lawsuits, including professional errors or omissions, common in the engineering and consulting professions[174](index=174&type=chunk) - Professional liability insurance is maintained, and liabilities for probable and estimable losses are accrued[174](index=174&type=chunk)[175](index=175&type=chunk) - Management believes that the ultimate liability related to current outstanding claims and lawsuits will not have a material adverse effect on the Company's financial statements[176](index=176&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section states that there are no new material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - There are no material changes to the risk factors set forth in Part I, Item 1A, Risk Factors in the Annual Report on Form 10-K for the year ended December 29, 2023[177](index=177&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the repurchase of common stock from employees to cover tax withholding obligations related to restricted stock vesting during the first quarter of 2024 Repurchases of Common Stock for Tax Withholding (Fiscal Quarter Ended March 29, 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :----------------------------- | :--------------------------- | | February 24, 2024 – March 29, 2024 | 31,872 | $24.55 | [Item 3. Defaults upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[180](index=180&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the disclosure requirements for mine safety are not applicable to the company - Mine Safety Disclosures are not applicable to the Company[181](index=181&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report under Rule 10b5-1 - No other information is reported under Rule 10b5-1[182](index=182&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate documents, certifications, and XBRL data files - Exhibits include the First Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, Specimen Stock Certificate, Consulting Agreement, CEO and CFO Certifications (31.1, 31.2, 32.1), and Inline XBRL documents[184](index=184&type=chunk)