Willdan Group, Inc. Q3 FY2025 earnings call

• Third quarter 2025 marked double-digit organic growth, exceeding Street expectations. - Energy segment ~85% of revenue, Engineering and Consulting ~15%. - Utility business 41% of revenue, strong with recurring contracts. - Commercial work 15% related to data centers, driven by AI load growth. - State and Local Governments work 44% of revenue, growing organically. - APG acquisition collaborating effectively, expected to drive over 50% growth in 2026. - Q3 2025 saw record pretax income, adjusted EBITDA, and earnings per share.

The Energy segment makes up about 85% of revenue, while Engineering and Consulting work makes up about 15%. The Utility business constitutes about 41% of revenue, performing well with recurring revenue from 3-5 year contracts. Commercial work (15%) is centered around data center electricity usage driven by AI. State and Local Governments work makes up 44% of revenue and grows organically at double-digit pace. In Q3 2025, contract revenue increased 15% year-over-year to $182 million, net revenue grew 26% to $95 million, organic growth rate was 20%. Gross profit grew 30% to $67.1 million, pretax income up 91% to $14.3 million, net income up 87% to $13.7 million, adjusted EBITDA reached $23.1 million with margin of 24% of net revenue. For 9 months of 2025, contract revenue up 20% to $508 million, net revenue up 27% to $275 million, organic net revenue growth 21%, adjusted EBITDA up 52% to $59.5 million.

• Raising full-year financial targets for 2025: net revenue expected between $360 million and $365 million, adjusted EBITDA in range of $77 million to $78 million, adjusted diluted earnings per share projected between $4.10 and $4.20 per share.

• Need to monitor leading indicators to ensure effective delivery as growing organically at 20+%, including quality, health and safety, etc. - Larger scale projects take time to develop, but leading indicators look good currently.

Q: Could you talk about what's lifting customer demand, capacity to serve opportunities, and if you're being picky with customers?

A: Market is good with rising electricity prices and demand. Cross-selling improved with acquisitions, especially APG. Becoming selective in commercial data center work with mid-tier developers.

Q: Talk about other areas supplementing APG's capabilities and resource utilization?

A: Upfront consulting work for hyperscalers feeds into data center info, back-end energy efficiency work collaborates, civil engineering group involved in projects, helps with employee and resource utilization.

Q: How does Willdan handle workforce and growth impediments?

A: Not an impediment, seen as employer of choice, employee count over 1,800, 0 turnover in senior management team.

Q: Color on risk management with larger projects?

A: Look at leading indicators like quality, health and safety weekly, leading indicators good, larger projects developed over time, mitigated risks by working closely with clients upfront.

Q: Status of potential $100 million contract with State of New York?

A: Several large contracts in New York pursued, very optimistic to be successful on one or several, expected to drive 2026 growth.