Willdan(US:WLDN)2020-05-07 22:23Financial 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].