Willdan Group, Inc.

Ladies and gentlemen, welcome to the Wilden Group First Quarter 2022 Earnings Conference Call. Our host for today is Al Kashchok, VP of Investor Relations. Mr. Kashchok, please go ahead.

Thank you, Mary. Good afternoon, everyone, and welcome to Wilden Group's First Quarter Fiscal 2022 Earnings Call. Joining our call today are Tom Brisbane, Chairman of the Board and Chief Executive Officer, Kim Early, Chief Financial Officer, and Mike Bieber, President. The call today builds on our earnings release we issued after market closed today. You may find the earnings release and the Will Dan investor report that accompanies today's call in the press release and stocks information section of our investor relations website found at ir.willdan.com. Management will review prepared remarks and we will then open the call up to your questions. Statements made in the course of today's conference call including answers to your questions which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve certain risks and uncertainties, and it is important to note that the company's future results could differ materially from those in any such forward-looking statements. Factors that could cause actual results to differ materially and other risk factors are listed from time to time in the company's SEC reports, including but not limited to the annual report on Form 10-K for the year ended December 31, 2021. The company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call, will then disclaim any obligation, and does not undertake to update or revise any forward-looking statements made today. In addition to GAAP results, we'll then also provide non-GAAP financial measures that we believe enhance investors' ability to analyze the business trends and performance. Our non-GAAP measures include net revenue, adjusted EBITDA, and adjusted EPS. Tom, I'll turn the call over to you.

Thanks, Al, and good day, everyone. We spoke just 60 days ago, and the burning question then was, when do we return to pre-COVID results? First quarter is on our plan. reflects lower profitability, but it is what we projected. We ramped up heavily for the California programs, and our revenue in those programs is not covering our costs yet. We reaffirmed our guidance in both our press release and Kim's financial script that you'll hear soon. We expect the second half to accelerate and get us at pre-COVID results. California programs are new for our customers and us. This outsourcing of their programs is taking extensive resources because processes and procedures are changing. The two programs with Pacific Gas and Electric, three with Southern California Edison, one with Southern California Gas Company, and one with San Diego Gas and Electric, and one with Los Angeles Department of Water and Power, are all at different states of either new ramp-ups or post-COVID restarts. It is a challenge, but our team is experienced, capable, and up to the challenge. We all know we must accelerate each week with sales, engineering submissions, and getting projects to the point of revenue recognition. These are five-year programs, and individual projects take time. Revenue recognition has contractually changed a bit from milestone payments to project completion. Thus, we are investing extensively in the startup phase. We are confident in sticking with our forecast for the year. Beyond the California IOUs, we see a nice ramp up in the Los Angeles Department of Water and Power program. We are awaiting new measures such as refrigeration to put in the program. This would give our salespeople much more to sell rather than just lighting. We also see our software business with Integral Analytics doing well both in delivery and pipeline. Our New York City Housing Authority Nitro Project, Performance Engineering, and our Policy Consulting Group are all doing well. New business includes a win-I-recompete for multifamily in New York, and an Ohio utility for IA software. Our Performance Engineering Group has won two new jobs with California City. We always thought will then long history with California cities would be synergistic with a clean energy economy. That day is here, and we will grow with time. On that note, our civil engineering business is doing very well. It is one of those times when building is booming. Maybe everyone wants to get their projects done before significant headwinds occur, and that's just speculation only. The limitation for civil engineering today is growing faster excuse me, the limitation for civil engineering growing faster is qualified people. Same for our policy group, E3. Our programs have not been immune to the disruption in the supply chain and overall cost inflation. In terms of supply chain, the biggest challenge remains the delivery of materials and equipment at job sites where there's more complex equipment. While delivery schedule headwinds remain, cost escalation has not been as significant. We continue to collaborate with our customers and work with our suppliers to manage this environment. From a labor perspective, we are essentially at full strength to execute the work for 2022 growth. This includes the 150 people we are caring to operate the California utility programs. In closing, our focus now is on execution. We have the work. The market is good. Now we need to grow or ramp our revenue to cover the cost we have invested in the startup of new contracts and restarting due to the COVID impacts. We are confident the second half of this year will show our return to pre-COVID profitability. Kim?