Willdan Group, Inc. Q2 FY2025 earnings call

• Had a strong quarter with net revenue growing 31% y/y, exceeding Street expectations, driven by 23% organic growth and 8% acquisitive growth.
• Energy segment (~85% revenue) benefits from utility contracts (41% revenue, 3-5 year durations, recurring revenue) and state/local govt work (44% revenue, growing organically at double-digit pace).
• Upfront policy and data analytics work up ~50% organically, with demand for integrated resource planning and asset valuation for data centers. APG acquisition in March provides deeper solutions.
• Rolled out new proprietary software for data center siting, providing differentiator with minimized costs and faster speed to market.
• Strong pipeline of opportunities, including $36M data center project, $20M NYPA contracts, $17M Sunnyvale substation project, etc.

In the second quarter of 2025, Willdan Group's contract revenue increased 23% year-over-year to $174 million. Net revenue grew 31% to $95 million. The Energy segment makes up about 85% of revenue and rose 25%, led by utility programs and planning/construction management. The Legacy Engineering and Consulting segment, making up about 15% of revenue, increased 16% due to municipal demand, geographic expansion, and new contract wins. Gross profit grew 40%, with gross margin improving to 39.4% from 34.6% the previous year, driven by favorable revenue mix and solid project execution.

• Raising full year 2025 financial targets: Net revenue expected $340M-$350M, adjusted EBITDA $70M-$73M, adjusted diluted EPS $3.50-$3.65.
• Q3 adjusted EBITDA expected similar to Q2, Q4 slightly less than Q3.

• Tariff risk: Monitoring volatility, working with clients to manage potential pricing pressure via flexible contract terms and alternative suppliers.
• Recession risk: While a potential risk, core customers (utilities, public agencies) funded well, providing relative insulation.

Q: Craig Irwin asks about organic growth potential, hiring needs, and leverage from acquisitions.

A: Michael Bieber mentions 23% organic growth due to cross-selling, early stages with APG, organic growth increasing. Creighton Early talks about low risk of fixed price contracts compared to EPC contractors.

Q: Tim Moore asks about tariffs and price escalators.

A: Creighton Early says tariffs not a major threat now, but will manage risk via contract term updates. Michael Bieber mentions chasing large contracts in NY and CA RINs.

Q: Paul Strigler asks about Section 179D tax credit impact.

A: Creighton Early says tax credit elimination has minor impact on their work, focused on smaller scale projects for public entities.

Q: Unidentified Analyst asks about acquisitions and business in NC/SC/GA.

A: Michael Bieber says has M&A pipeline, business in NC/SC not harder, large Duke contract doing well. Creighton Early talks about tax rate impact if tax credit eliminated.