Willdan(US:WLDN)2023-08-05 18:35Financial Data and Key Metrics Changes - Net revenue grew 17% in Q2 2023 and 20% for the first half of the year, all organic growth [7][27] - EBITDA for the trailing 12 months ended June 30 reached $37.9 million, the highest level ever for the company [7] - Adjusted EBITDA in Q2 2023 was $8.2 million compared to $1.2 million in 2022, with adjusted earnings per share at $0.26 versus a net loss of $0.06 per share a year ago [26] - Year-to-date net income was $1.3 million or $0.10 per share compared to a loss of $8.1 million or $0.63 per share in 2022 [31] Business Line Data and Key Metrics Changes - Municipal engineering and financial services grew 16% year-over-year, with expanding margins [13] - The software business is positioned for its best year, with a robust pipeline driven by demand for electric vehicles, solar, and battery solutions [17] - Gross profit increased 30% with gross margin improving to 37% in 2023 compared to 32% a year ago [28] Market Data and Key Metrics Changes - The state and local government sector is a larger percentage of work than utility contracts, indicating strong demand in this area [44] - The company is seeing significant opportunities in decarbonization projects, particularly in municipal and private sectors [52] Company Strategy and Development Direction - The company expects to resume acquisitions by late 2023 or early 2024, aiming for greater than 15% annual growth for the next three years [20] - The focus is on leveraging software capabilities alongside consulting services to enhance service offerings [18] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in finishing strong in 2023, with positive trends expected to continue into the next year [20] - The company is actively seeking additional acquisition opportunities and has a strong backlog of projects [22][33] Other Important Information - The company is in the process of refinancing its bank credit facilities, which expire in June 2024 [35] - Interest expense more than doubled to $2.2 million in Q2 2023 due to higher SOFR interest rates [24] Q&A Session Summary Question: Inquiry about gross margins and sustainability - Management identified software revenue, restructuring of California IOU contracts, and increased productivity as key factors for improved margins, which are expected to be sustainable [36][39] Question: Materiality of the LoadSEER contract - The LoadSEER contract was described as a small fish, with expectations for larger opportunities in the pipeline [41][42] Question: Market mix and drivers of growth - Management clarified that state and local work is currently a larger driver than utility contracts, with strong confidence in this customer segment [44][45] Question: Follow-on opportunities from IRA-related consulting - Current work involves consulting on how to access IRA funds, with potential follow-on infrastructure projects expected in the future [48] Question: Bid and proposal pipeline quantification - Management indicated a strong pipeline for decarbonization studies and software opportunities, with significant contracts in progress [52][54] Question: Upcoming contract renewals - Notable renewals include Con Ed and LADWP, with a typical 25% of contracts up for recompete annually [56][57] Question: Guidance for Q3 and Q4 - Management expects Q3 to be better than Q2, with a straight-line ramp anticipated from Q3 to Q4 [60]