UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  March 5, 2020

WILLDAN GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

2401 East Katella Avenue, Suite 300, Anaheim, California 92806

(Address of Principal Executive Offices)

 

Registrant’s telephone number, including area code: (800) 424-9144

 

Not Applicable

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

Item 2.02             Results of Operations and Financial Condition

 

Willdan Group, Inc. (“Willdan”) issued a press release on March 5, 2020.  The press release announced Willdan’s financial results for the fourth quarter and fiscal year ended December  27, 2019.  A copy of the press release is attached as Exhibit 99.1 hereto and is hereby incorporated herein by reference in its entirety.  The information in this Item 2.02 and the attached Exhibit 99.1 to this Current Report on Form 8-K is being furnished (not filed) pursuant to Item 2.02 of Form 8-K.

 

Item 9.01             Financial Statements and Exhibits

 

(d)          Exhibits.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

Exhibit 99.1

 

 

Willdan Group Reports

Fourth Quarter and Fiscal Year 2019 Results

 

Investment Community Conference Call Today at 5:30 p.m. Eastern Time

 

 

ANAHEIM, Calif. –March 5, 2020 – Willdan Group, Inc. (“Willdan”) (Nasdaq: WLDN), a provider of professional technical and consulting services, today reported financial results for its fourth quarter and fiscal year ended December 27, 2019 and provided its financial targets for fiscal 2020.

 

Fourth Quarter 2019 Summary

 

 

Fiscal Year 2019 Summary

 

 

For the fourth quarter of 2019, Willdan reported consolidated contract revenue of  $129.4 million and net income of $3.2 million, or  $0.27 per diluted share. This compares with consolidated contract revenue of $86.4 million and net income of $1.2 million, or $0.11 per diluted share, for the fourth quarter of 2018. For the fourth quarter of 2019, Net Revenue, defined as revenue, net of subcontractor services and other direct costs (see “Use of Non-GAAP Financial Measures” below), was $61.0 million, an increase of 51.8% compared to the same period in fiscal year 2018.  

 

“This quarter was by far the strongest performance in Willdan’s history,” said Tom Brisbin, Willdan’s Chairman and Chief Executive Officer. “We continued to ramp up our business in Q4 and completed 2019 with 62.8% revenue growth over last year. As we execute on large market opportunities in California and New York, utilize the synergies we’ve created through our recent acquisitions, and leverage our expanded geographic presence and breadth of services, we believe we are well positioned for continued growth through fiscal 2020 and beyond.” 

 

Fourth Quarter 2019 Financial Highlights

 

Consolidated contract revenue for the fourth quarter of 2019 was  $129.4 million, an increase of 49.7% from $86.4 million for the fourth quarter of 2018. Consolidated contract revenue for the Energy segment was $112.8 million for the fourth quarter of 2019,  an increase of 66.7% from the fourth quarter of 2018, which was primarily due to incremental revenue from the acquisitions of Lime Energy Co. (“Lime Energy”), The Weidt Group Inc. (“The Weidt Group”), Onsite Energy Corporation (“Onsite Energy”), and Energy and Environmental Economics, Inc. (“E3, Inc.”), collectively referred to as “the acquisitions”. Contract revenue for the Engineering and Consulting segment was $16.6 million, a decrease of 11.4% from the fourth quarter of 2018, primarily due to lower subcontracted revenue.

 

Net Revenue for the fourth quarter of 2019 was $61.0 million, an increase of 51.8% from $40.2 million for the fourth quarter of 2018. The increase was primarily due to incremental revenue from the acquisitions. Net Revenue in the Energy segment was $47.1 million for the fourth quarter of 2019,  an increase of 84.5% over the same period last year.  Net Revenue in the Engineering and Consulting segment was $13.9 million for the fourth quarter of 2019, a decrease of 5.2% over the same period last year.

 

Direct costs of contract revenue were $86.2 million for the fourth quarter of 2019,  an increase of 44.9%, from $59.5 million for the fourth quarter of 2018. The increase was primarily related to incremental direct costs from the acquisitions.

 

Total general and administrative expenses for the fourth quarter of 2019 was $37.7 million, an increase of 49.0% from $25.3 million for the fourth quarter of 2018, driven primarily by increased costs related to personnel, facilities, and amortization expenses as a result of our recent acquisitions. 

 

Interest expense was $1.3 million for the fourth quarter of 2019, compared to $0.6 million for the fourth quarter of 2018.  The increase in interest expense was primarily attributable to debt incurred to finance the acquisitions.

 

We recorded an income tax expense of $1.2 million in the fourth quarter of 2019, compared to income tax benefit of $0.1 million for the prior year period. The income tax expense recorded for the fourth quarter of 2019 was primarily attributable to incremental income before taxes from our operations.

 

Net income for the fourth quarter of 2019 was $3.2 million, or $0.27 per diluted share, as compared to net income of $1.2 million, or $0.11 per diluted share, for the fourth quarter of 2018.  The increase in operating performance was primarily driven by lower direct costs of contract revenue, measured as a percentage of contract revenue.  Adjusted Net Income (see “Use of Non-GAAP Financial Measures” below) for the fourth quarter of 2019 was $11.5 million, or $0.97 per diluted share, as compared to Adjusted Net Income of $6.7 million, or $0.61 per diluted share, for the fourth quarter of 2018. 

 

Adjusted EBITDA (see “Use of Non-GAAP Financial Measures” below) was $13.8 million for the fourth quarter of 2019,  an increase of 110.4% from $6.6 million for the fourth quarter of 2018.

 

Fiscal Year 2019 Financial Highlights

 

Consolidated contract revenue for fiscal year 2019 was $443.1 million, an increase of 62.8% from $272.3 million for fiscal year 2018. Consolidated contract revenue for the Energy segment was $370.7 million for fiscal 2019,  an increase of 88.3%, which was primarily due to incremental revenue from the acquisitions. Consolidated contract revenue for the Engineering and Consulting segment was $72.4 million, a decrease of 4.0% from fiscal 2018, primarily due to lower subcontracted revenue.

 

Net Revenue for fiscal 2019 was $199.5 million, an increase of 42.9% from $139.6 million for fiscal 2018. The increase was primarily due to incremental revenue from the acquisitions. Net Revenue in the Energy segment was $142.9 million for fiscal 2019,  an increase of 73.7% over the same period last year. Net Revenue in the Engineering and Consulting segment was $56.6 million for fiscal 2019,  which remained consistent with the same period last year.

 

Direct costs of contract revenue were $308.1 million for fiscal 2019,  an increase of 71.9%, from $179.3 million for fiscal 2018. The increase was primarily as a result of the increased use of subcontractors and higher material content in projects associated with the acquisitions.

 

Total general and administrative expenses for fiscal 2019 was $125.6 million, an increase of 56.6% from $80.2 million for fiscal 2018, driven primarily by increased costs related to personnel, facilities, and amortization expenses as a result of our recent acquisitions.    

 

Interest expense was $4.9 million for fiscal 2019, compared with $0.7 million for fiscal 2018. The increase in interest expense was primarily attributable to debt incurred to finance the acquisitions.

 

We recorded an income tax benefit of $0.2 million for fiscal 2019, compared to income tax expense of $2.1 million for the prior year period. The income tax benefit recorded for fiscal 2019 was primarily attributable to various tax deductions and tax credits. 

 

Net income for fiscal 2019 was $4.8 million, or $0.41 per diluted share, as compared to net income of $10.0 million, or $1.03 per diluted share, for fiscal 2018.  The decrease was primarily driven by higher intangible amortization. Adjusted Net Income (see “Use of Non-GAAP Financial Measures” below) for fiscal 2019 was $26.7 million, or $2.27 per diluted share, as compared to Adjusted Net Income of $20.2 million, or $2.07 per diluted share, for fiscal 2018. 

 

Adjusted EBITDA (see “Use of Non-GAAP Financial Measures” below) was $37.7 million for fiscal 2019,  compared to  $25.4 million for the fiscal 2018.

 

Balance Sheet

 

Willdan reported $57.5 million in accounts receivable, net at December 27, 2019, as compared to $61.3 million at December 28, 2018.  The reduction in accounts receivable, net was due to high conversion from accounts receivable to cash. Cash flow from operations was $11.6 million during fiscal 2019, compared with $7.6 million during fiscal 2018.

 

Financial Targets

 

Willdan provided the following financial targets for fiscal 2020:

 

 

*See “Use of Non-GAAP Financial Measures” below.

 

The financial targets above do not include the effects of any transaction(s) that have not been completed as of the date of this press release. Over the long-term, Willdan continues to target both organic and acquisitive Net Revenue growth of greater than 10%, resulting in total Net Revenue growth of greater than 20% per year.

 

Conference Call Details and Investor Report

 

Chief Executive Officer Thomas Brisbin and Chief Financial Officer Stacy McLaughlin will host a conference call today, March 5, 2020, at 5:30 p.m. Eastern/2:30 p.m. Pacific to discuss Willdan’s financial results and provide a business update.

 

Interested parties may participate in the conference call by dialing 888-204-4368 and providing conference ID 9767312.  The conference call will be webcast simultaneously on Willdan’s website at www.willdan.com under and the replay will be archived for at least 12 months.

 

The telephonic replay of the conference call may be accessed following the call by dialing 888-203-1112 and entering the passcode 9767312. The replay will be available through March  19, 2020.

 

An Investor Report containing supplemental financial information can also be accessed on the home page of Willdan’s investor relations website.

 

About Willdan Group, Inc.

 

Willdan is a nationwide provider of professional technical and consulting services to utilities, government agencies, and private industry. Willdan’s service offerings span a broad set of complementary disciplines that include electric grid solutions, energy efficiency and sustainability, engineering and planning, and municipal financial consulting. For additional information, visit Willdan's website at www.willdan.com.

 

Use of Non-GAAP Financial Measures

 

“Net Revenue,” defined as contract revenue as reported in accordance with GAAP minus subcontractor services and other direct costs, is a non-GAAP financial measure, Net Revenue is a supplemental measure that Willdan believes enhances investors’ ability to analyze Willdan’s business trends and performance because it substantially measures the work performed by Willdan’s employees. In the course of providing services, Willdan routinely subcontracts various services. Generally, these subcontractor services and other direct costs are passed through to Willdan’s clients and, in accordance with U.S. generally accepted accounting principles (“GAAP”) and industry practice, are included in Willdan’s revenue when it is Willdan’s contractual responsibility to procure or manage such subcontracted activities. Because subcontractor services and other direct costs can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of Willdan’s business trends. Accordingly, Willdan segregates subcontractor services and other direct costs from revenue to promote a better understanding of Willdan’s business by evaluating revenue exclusive of subcontract services and other direct costs associated with external service providers. A reconciliation of Willdan’s contract revenue as reported in accordance with GAAP to Net Revenue is provided at the end of this press release. A reconciliation of targeted contract revenue for 2020 as reported in accordance with GAAP to targeted Net Revenues for fiscal 2020, which is a forward-looking non-GAAP financial measure, is not provided because Willdan is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty of predicting the subcontractor services and other director costs that are subtracted from contract revenues in order to derive Net Revenues. While subcontractor costs have increased recently, subcontractor costs can vary significantly from period to period. Subcontractor costs and other direct costs have been 52.8% and 55.0% of contract revenue for the quarter ended December 27, 2019 and fiscal year 2019 and 53.5% and 48.7% for the quarter ended December 28, 2018 and fiscal year 2018, respectively.

 

“Adjusted EBITDA,” defined as net income plus interest expense, income tax expense, stock-based compensation, interest accretion, depreciation and amortization, transaction costs and gain on sale of equipment, is a non-GAAP financial measure. Adjusted EBITDA is a supplemental measure used by Willdan’s management to measure Willdan’s operating performance. Willdan believes Adjusted EBITDA is useful because it allows Willdan’s management to evaluate its operating performance and compare the results of its operations from period to period and against its peers without regard to its financing methods, capital structure and non-operating expenses. Willdan uses Adjusted EBITDA to evaluate its performance for, among other things, budgeting, forecasting and incentive compensation purposes. 

 

Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s costs of capital, stock-based compensation, as well as the historical costs of depreciable assets. A reconciliation of net income as reported in accordance with GAAP to Adjusted EBITDA is provided at the end of this press release.

 

“Adjusted Net Income,” defined as net income plus stock-based compensation, intangible amortization and transaction costs, each net of tax, is a non-GAAP financial measure. 

 

“Adjusted Diluted EPS,” defined as net income plus stock-based compensation, intangible amortization and transaction costs, each net of tax, all divided by the diluted weighted-average shares outstanding, is a non-GAAP financial measure. Adjusted Net Income and Adjusted Diluted EPS are supplemental measures used by Willdan’s management to measure its operating performance. Willdan believes Adjusted Net Income and Adjusted Diluted EPS are useful because they allow Willdan’s management to more closely evaluate and explain the operating results of Willdan’s business by removing certain non-operating expenses. Reconciliations of net income as reported in accordance with GAAP to Adjusted Net Income and diluted EPS as reported in accordance with GAAP to Adjusted Diluted EPS are provided at the end of this press release.

 

Willdan’s definitions of Net Revenue, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS have limitations as analytical tools and may differ from other companies reporting similarly named measures or from similarly named measures Willdan has reported in prior periods. 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 GAAP, such as contract revenue, net income and diluted EPS.

 

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, as amended, including statements regarding Willdan’s targets for fiscal year 2020, Willdan’s ability to capitalize on increased energy efficiency spending in large markets and expected benefits from the acquisitions.  All statements other than statements of historical fact included in this press release are forward-looking statements. These 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. Important factors that could cause actual results to differ materially from its expectations include, but are not limited to,  Willdan’s ability to adequately complete projects in a timely manner, Willdan’s ability to compete successfully in the highly competitive energy services market, changes in state, local and regional economies and government budgets, Willdan’s ability to win new contracts, to renew existing contracts and to compete effectively for contracts awarded through bidding processes, Willdan’s ability to successfully integrate its acquisitions, including its acquisitions of Lime Energy,  The Weidt Group, Onsite Energy, and E3, Inc.,  and execute on its growth strategy, Willdan’s ability to make principal and interest payments as they come due and comply with financial and other covenants in its credit agreement, and Willdan’s ability to obtain financing and to refinance its outstanding debt as it matures. 

 

The above is not a complete list of factors or events that could cause actual results to differ from Willdan’s expectations, and Willdan cannot predict all of them. All written and oral forward-looking statements attributable to Willdan, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements and risk factors disclosed from time to time in Willdan’s reports filed with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K filed for the year ended December 27, 2019, as such disclosures may be amended, supplemented or superseded from time to time by other reports Willdan files with the Securities and Exchange Commission, including subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

 

 

 

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

 

 

 

 

 

WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Revenue to Net Revenue

(in thousands)

(Non-GAAP Measure)

 

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted EBITDA

(in thousands)

(Non-GAAP Measure)

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted Net Income and Adjusted Diluted EPS

(in thousands, except per share amounts)

(Non-GAAP Measure)

 

 

 

 

 

 

 

 

Willdan Group, Inc. and Subsidiaries

Reconciliation of Diluted EPS to Adjusted Diluted EPS Target

(in thousands, except per share amounts)

(Non-GAAP Measure)

 

 

 

 

Contact:

 

Willdan Group, Inc.

Stacy McLaughlin

Chief Financial Officer

Tel: 714-940-6300

smclaughlin@willdan.com 

 

Or

 

Investor/Media Contact

Financial Profiles, Inc.

Tony Rossi

Tel: 310-622-8221

trossi@finprofiles.com