MRO Magazine

Willdan Group Reports Fourth Quarter and Full Year 2014 Financial Results

By Business Wire News   



ANAHEIM, Calif.

Willdan Group, Inc. (“Willdan”) (NASDAQ: WLDN), a provider of professional technical and consulting services to utilities, private industry, and public agencies at all levels of government, today reported financial results for the fourth quarter and fiscal year ended January 2, 2015, and provided a business update.

For the fourth quarter of 2014, Willdan reported total contract revenue of $30.2 million and net income of $2.0 million, or $0.27 and $0.26 per basic and diluted share, respectively.

For the fiscal year ended January 2, 2015, Willdan reported total contract revenue of $108.1 million and net income of $9.4 million, or $1.26 and $1.22 per basic and diluted share, respectively. Excluding the reversal of our valuation allowance against our deferred tax assets, for the fiscal year ended January 2, 2015, Willdan would have reported net income of $ 4.84 million, or $0.65 and $0.63 per basic and diluted share, respectively.

Management Commentary

“We are very pleased with our results for fiscal year 2014,” said Tom Brisbin, Willdan’s Chief Executive Officer. “Our revenue grew organically by 26% year-over-year primarily due to strength in our energy efficiency and engineering business.

“Fiscal 2015 is off to a great start. In January, we expanded our Energy Efficiency Services segment into new geographies with the acquisitions of 360 Energy Engineers and Abacus Resource Management Company. We also bolstered our executive leadership team with key strategic additions. With our outstanding team, ample resources, and attractive market opportunities, we are well positioned for another year of strong growth, profitability and continuing momentum in our businesses.”

Fourth Quarter 2014 Financial Highlights

Total contract revenue for the fourth quarter of 2014 increased 34.6% to $30.2 million compared with $22.5 million for the fourth quarter of 2013. Revenue growth was due primarily to a higher level of energy efficiency services in New York. Contract revenue for the Engineering Services segment for the fourth quarter of 2014 was $11.3 million, an increase of 22.8% from the prior year, due mainly to greater demand for city engineering, building and safety, construction management and geotechnical services in California. Contract revenue for the Public Finance Services and Homeland Security Services segments was $2.6 million and $1.0 million, respectively.

Revenue, net of subcontractor costs, (as defined below) for the fourth quarter of 2014 increased by 43.5% to $25.4 million compared with $17.7 million for the fourth quarter of 2013.

Direct costs of contract revenue were $17.9 million for the fourth quarter of 2014, an increase of 32.4% compared with the fourth quarter of 2013. This $4.3 million increase was primarily a result of higher direct costs within the Engineering Services segment and Energy Efficiency Services segment of $1.3 million and $3.0 million, respectively. Operating income increased to $2.4 million for the fourth quarter of 2014, compared to operating income of $0.6 million for the fourth quarter of 2013. Adjusted EBITDA (as defined below) was $2.6 million for the fourth quarter of 2014 as compared with $0.9 million for the fourth quarter of 2013.

Net income for the fourth quarter of 2014 was $2.0 million, or $0.26 per diluted share, as compared to net income of $0.7 million, or $0.09 per diluted share, for the fourth quarter of 2013.

Full Year 2014 Financial Highlights

Total contract revenue for the full year 2014 increased 26.4% to $108.1 million as compared with $85.5 million for the full year 2013. Revenue growth was due primarily to a 46.9% increase in revenue, to $52.9 million, from the Energy Efficiency Services segment, as a result of an increase in services provided in New York. Contract revenue for the Engineering Services segment for the full year 2014 increased by 15.8% to $40.8 million compared to $35.2 million for the full year 2013, due mainly to demand for city engineering services, building and safety, construction management and geotechnical services in California. For the full year 2014, revenues for the Public Finance Services segment and Homeland Security Services segment were $10.6 million and $3.7 million, respectively.

Revenue, net of subcontractor costs, for the full year 2014 was $87.2 million, as compared to revenue, net of subcontractor costs of $68.7 million for the full year 2013.

Direct costs of $63.8 million for the full year 2014 increased 30.4% compared with the full year 2013, primarily as a result of an increase in subcontractor services and other direct costs used mainly by the Energy Efficiency Services segment. Operating income increased to $8.3 million for the full year 2014, as compared to operating income of $2.6 million for the full year 2013. Adjusted EBITDA was $8.9 million as compared with $3.5 million for the full year 2013. Income tax benefit for the full year 2014 was $1.0 million compared with an income tax expense of $0.1 million for the full year 2013.

Net income for the full year 2014 was $9.4 million, or $1.22 per diluted share, compared with $2.6 million, or $0.35 per diluted share, for the full year 2013.

Liquidity and Capital Resources

Willdan reported $20.4 million in cash and cash equivalents at January 2, 2015, compared with $8.1 million at December 27, 2013. Willdan’s primary sources of liquidity are cash generated from operations and a revolving line of credit with BMO Harris Bank, N.A., which matures on March 24, 2016. Cash flows provided by operating activities increased to $12.6 million for the full year 2014, as compared to $1.5 million for the full year 2013.

Outlook

Willdan targets long-term contract revenue growth of up to 15% per year from combined organic and acquisitive growth. For 2015, Willdan expects contract revenue growth rate of more than 20% resulting primarily from acquisitions completed in January 2015, and expects a tax rate of approximately 40%. Willdan’s additional three-year financial and operational targets are as follows:

  • Gross margin of 40% to 45%
  • Adjusted EBITDA margin of 6% to 10%
  • Accounts receivable days outstanding of 70 to 75

Use of Non-GAAP Financial Measures

“Revenues, net of subcontractor costs,” a non-GAAP financial measure, is a supplemental measure that Willdan believes enhances investors’ ability to analyze our business trend and performance because it substantially measures the work performed by our employees. In the course of providing services, we routinely subcontract various services. Generally, these subcontractor costs are passed through to our clients and, in accordance with GAAP and industry practice, are included in our revenue when it is our contractual responsibility to procure or manage these activities. Because subcontractor services can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of our business trends. Accordingly, we segregate costs from revenue to promote a better understanding of our business by evaluating revenue exclusive of costs associated with external service providers. A reconciliation of contract revenue as reported in accordance with U.S. Generally Accepted Accounting Principles (GAAP) to revenues, net of subcontractor costs is provided at the end of this news release.

Adjusted EBITDA is a supplemental measure used by Willdan’s management to measure its operating performance. Willdan defines Adjusted EBITDA as net income (loss) plus interest expense (income), income tax expense (benefit), lease abandonment expense (recovery), goodwill impairment, depreciation and amortization, and loss (gain) on sale of assets. Our definition of Adjusted EBITDA may differ from those of many companies reporting similarly named measures. Willdan believes Adjusted EBITDA is useful to investors, research analysts, investment bankers and lenders because it removes the impact of certain non-recurring income and expense items from its operational results, which may facilitate comparison of its results from period to period. A reconciliation of net income (loss) as reported in accordance with U.S. GAAP to Adjusted EBITDA is provided at the end of this news release.

Willdan’s definition of Revenues, net of subcontractor costs and Adjusted EBITDA may differ from other companies reporting similarly names measures. These measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with U.S. GAAP, such as contract revenues and net income.

Conference Call Details

Chief Executive Officer Thomas Brisbin and Chief Financial Officer Stacy McLaughlin will host a conference call today, March 31, 2015, at 5:00 p.m. Eastern Time/2:00 p.m. Pacific Time, to discuss Willdan’s financial results and provide a business update.

Interested parties may participate in the conference call by dialing 888-500-6950 (719-785-1765 for international callers). When prompted, ask for the “Willdan Group, Inc., Fourth Quarter 2014 Conference Call.” The conference call will be webcast simultaneously on Willdan’s website at www.willdan.com under Investors: Events.

The telephonic replay of the conference call may be accessed approximately two hours after the call through April 14, 2015, by dialing 888-203-1112 (719-457-0820 for international callers). The replay access code is 7629975. The webcast replay will be archived for 12 months.

About Willdan Group, Inc.

Willdan provides outsourced professional technical and consulting services to utilities, private industry and public agencies throughout the United States. Willdan benefits from well-established relationships, industry-leading expertise and a solid reputation for delivering projects on time and on budget. The company’s service offerings span a broad set of complementary disciplines that include energy efficiency and sustainability, engineering and planning, financial and economic consulting, and national preparedness. Willdan has crafted this set of integrated services so that, in the face of an evolving environment—whether economic, natural, or built—Willdan can continue to extend the reach and resources of its clients. For additional information, visit Willdan’s website at www.willdan.com.

Forward Looking Statements

Statements in this press release that are not purely historical, including statements regarding Willdan’s intentions, hopes, beliefs, expectations, representations, projections, estimates, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties including, but not limited to, the risk that Willdan will not be able to expand its services or meet the needs of customers in markets in which it operates. It is important to note that Willdan’s actual results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, a slowdown in the local and regional economies of the states where Willdan conducts business and the loss of or inability to hire additional qualified professionals. Willdan’s business could be affected by a number of other factors, including the risk factors listed from time to time in Willdan’s SEC reports including, but not limited to, the Annual Report on Form 10-K to be filed for the year ended January 2, 2015. Willdan cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Willdan disclaims any obligation to, and does not undertake to, update or revise any forward-looking statements in this press release.

       
WILLDAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 

January 2,
2015

December 27,
2013
Assets    
Current assets:
Cash and cash equivalents $ 20,371,000 $ 8,134,000

Accounts receivable, net of allowance for doubtful accounts of $662,000 and $385,000 at January 2, 2015 and December 27, 2013, respectively

13,189,000 13,167,000
Costs and estimated earnings in excess of billings on uncompleted contracts 12,170,000 9,635,000
Other receivables 208,000 212,000
Prepaid expenses and other current assets 2,244,000 2,377,000
Total current assets 48,182,000 33,525,000
 
Equipment and leasehold improvements, net 1,384,000 691,000
Other assets 535,000 333,000
Deferred income taxes, net of current portion 4,558,000 3,688,000
Total assets $ 54,659,000 $ 38,237,000
 
Liabilities and Stockholders’ Equity
Current liabilities:
Excess of outstanding checks over bank balance $ 2,198,000 $ 1,473,000
Accounts payable 3,237,000 3,957,000
Accrued liabilities 10,668,000 5,808,000
Billings in excess of costs and estimated earnings on uncompleted contracts 3,863,000 2,247,000
Current portion of notes payable 355,000 517,000
Current portion of capital lease obligations 324,000 129,000
Current portion of deferred income taxes 3,131,000 3,688,000
Total current liabilities 23,776,000 17,819,000
 
Capital lease obligations, less current portion 306,000 85,000
Deferred lease obligations 164,000 120,000
Total liabilities 24,246,000 18,024,000
 
Commitments and contingencies
 
Stockholders’ equity:

Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding

Common stock, $0.01 par value, 40,000,000 shares authorized; 7,635,000 and 7,375,000 shares issued and outstanding at January 2, 2015 and December 27, 2013, respectively

76,000 74,000
Additional paid-in capital 35,436,000 34,654,000
Accumulated deficit (5,099,000 ) (14,515,000 )
Total stockholders’ equity 30,413,000 20,213,000
Total liabilities and stockholders’ equity $ 54,659,000 $ 38,237,000
 
       
WILLDAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Fiscal YearThree Months Ended
2014  2013

January 2,
2015

 

December 27,
2013

 

 
Contract revenue $ 108,080,000 $ 85,510,000 $ 30,237,000 $ 22,462,000
 
Direct costs of contract revenue (exclusive of depreciation and amortization shown separately below):
Salaries and wages 28,207,000 24,098,000 7,712,000 5,990,000
Subcontractor services and other direct costs 35,611,000 24,831,000 10,140,000 7,495,000
Total direct costs of contract revenue 63,818,000 48,929,000 17,852,000 13,485,000
 
General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits 21,394,000 20,555,000 6,018,000 5,122,000
Facilities and facility related 4,371,000 4,654,000 1,100,000 1,150,000
Stock-based compensation 258,000 150,000 84,000 26,000
Depreciation and amortization 459,000 517,000 130,000 116,000
Lease abandonment, net 9,000 30,000 9,000 17,000
Other 9,462,000 8,067,000 2,639,000 1,995,000
Total general and administrative expenses 35,953,000 33,973,000 9,980,000 8,426,000
Income from operations 8,309,000 2,608,000 2,405,000 551,000
 
Other income (expense):
Interest income 8,000 10,000 4,000 2,000
Interest expense (16,000 ) (94,000 ) (5,000 ) (8,000 )
Other, net 125,000 238,000 9,000 203,000
Total other income (expense), net 117,000 154,000 8,000 197,000
Income before income taxes 8,426,000 2,762,000 2,413,000 748,000
 
Income tax (benefit) expense (990,000 ) 132,000 366,000 47,000
Net income $ 9,416,000 $ 2,630,000 $ 2,047,000 $ 701,000
 
Earnings per share:
Basic $ 1.26 $ 0.36 $ 0.27 $ 0.10
Diluted $ 1.22 $ 0.35 $ 0.26 $ 0.09
 
Weighted-average shares outstanding:
Basic 7,488,000 7,355,000 7,618,000 7,375,000
Diluted 7,739,000 7,495,000 7,986,000 7,520,000
   
WILLDAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Fiscal Year
2014  2013
Cash flows from operating activities:
Net income $ 9,416,000 $

2,630,000

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 460,000 585,000
Deferred income taxes (1,427,000 )
Goodwill impairment
Lease abandonment expense, net 9,000 30,000
Loss (gain) on sale of equipment 11,000 (6,000 )
Provision for doubtful accounts 510,000 101,000
Stock-based compensation 258,000 150,000
Changes in operating assets and liabilities:
Accounts receivable (532,000 ) 2,216,000
Costs and estimated earnings in excess of billings on uncompleted contracts (2,535,000 ) 225,000
Other receivables 4,000 (117,000 )
Prepaid expenses and other current assets 133,000 (595,000 )
Other assets (202,000 ) (26,000 )
Accounts payable (720,000 ) (3,026,000 )
Changes in excess of outstanding checks over bank balance 725,000 285,000
Accrued liabilities 4,860,000 502,000
Billings in excess of costs and estimated earnings on uncompleted contracts 1,616,000 (1,172,000 )
Deferred lease obligations 35,000 (284,000 )
Net cash provided by operating activities 12,621,000 1,498,000
 
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (492,000 ) (306,000 )
Proceeds from sale of equipment 5,000 27,000
Net cash used in investing activities (487,000 ) (279,000 )
 
Cash flows from financing activities:
Payments on notes payable (162,000 ) (621,000 )
Proceeds from notes payable 510,000
Borrowings under line of credit
Repayments of line of credit (3,000,000 )
Principal payments on capital leases (261,000 ) (62,000 )
Proceeds from stock option exercise 450,000 9,000
Proceeds from sales of common stock under employee stock purchase plan 76,000 73,000
Net cash provided by (used in) financing activities 103,000 (3,091,000 )
 
Net increase (decrease) in cash and cash equivalents 12,237,000 (1,872,000 )
Cash and cash equivalents, at beginning of the year 8,134,000 10,006,000
Cash and cash equivalents, at end of the year $ 20,371,000 $ 8,134,000
 
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 16,000 $ 100,000
Income taxes 134,000 324,000
Supplemental disclosures of noncash investing and financing activities:
Equipment acquired under capital leases $ 677,000 $ 87,000
 
   
Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Revenue and “Revenue, Net of Subcontractor Costs”
 
Fiscal Year Ended
           Change

January 2,
2015

December 27,
2013

$    %
 
Contract revenue $ 108,080,000 $ 85,510,000 $ 22,570,000 26%
Subcontractor costs 20,844,000 16,840,000 4,004,000 24%
     
 
Revenue, net of subcontractor costs 87,236,000 68,670,000 18,566,000 27%
 
 
Three Months Ended
   Change

January 2,
2015

December 27,
2013

$%
 
Contract revenue $ 30,237,000 $ 22,462,000 $ 7,775,000 35%
Subcontractor costs 4,848,000 4,809,000 39,000 1%
     
 
Revenue, net of subcontractor costs 25,389,000 17,653,000 7,736,000 44%
 
   
Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA
 

The following is a reconciliation of net income (loss) to Adjusted EBITDA:

 
Fiscal Year
2014    2013    2012    2011    2010
Net income (loss) $ 9,416 $ 2,630 $ (17,300 ) $ 1,830 $ 2,720
Interest income (8 ) (10 ) (6 ) (5 ) (12 )
Interest expense 16 94 106 77 54
Income tax (benefit) expense (990 ) 132 (2,083 ) 1,500 344
Lease abandonment expense (recovery) 9 30 26 2 (68 )
Impairment of goodwill 15,208
Depreciation and amortization 459 585 737 944 1,053
Loss (gain) on sale of assets   11     (6 )   18     2     (17 )
Adjusted EBITDA $ 8,913   $ 3,455   $ (3,294 ) $ 4,350   $ 4,074  
 

Willdan Group, Inc.
Stacy McLaughlin
Chief Financial Officer
Tel: 714-940-6300
smclaughlin@willdan.com
or
Investor/Media Contact
Financial Profiles, Inc.
Tel: 310-478-2700
Moira Conlon: mconlon@finprofiles.com
Kristen Papke: kpapke@finprofiles.com

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