Willdan Group Reports Fourth Quarter and Full Year 2014 Financial Results
March 31, 2015 | 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, |
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 Year | Three Months Ended | ||||||||||||||||||
| 2014 | 2013 |
January 2, |
December 27, |
|
|||||||||||||||
| 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, |
December 27, |
$ | % | ||||||||||||
| 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, |
December 27, |
$ | % | ||||||||||||
| 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
