Willdan Group, Inc.

Greetings and welcome to the Will Dan Group Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Kashchok, Vice President. Thank you, Al. You may begin.

Thank you, Paul. Good afternoon, everyone, and welcome to Will Dan Group's second quarter fiscal 2024 earnings call. Joining our call today are Mike Beaver, President and Chief Executive Officer, and Kim Early, Executive Vice President and Chief Financial Officer. This call builds on our earnings release we issued after market closed today. You can find today's earnings release in the press release section of our website, at ir.wildangroup.com. A copy of the slides that accompany today's call are located in the events and presentation section of the website. In addition, our WILDAN investor report is available under stock information section of the website. Management will review prepared remarks, and then we'll open the call up to your questions. Statements made in the course of today's conference call which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain risks and uncertainties and include non-GAAP measures. A more detailed Safe Harbor Statement is on the cover of our first slide and in our annual report on Form 10-K. I will now turn the call over to Mike Beaver, Bull Dan's President and CEO, We'll begin on slide two. Thanks, Al.

We had a record second quarter, exceeding consensus estimates and our own expectations. Contract revenue was up 18% organically, and adjusted EBITDA was up 56% year over year. GAAP and adjusted EPS were up even stronger, both more than doubling year over year. During Q2, we had unexpectedly strong revenue across engineering, We've also done a good job of converting revenue into free cash flow this year. Given our results for the first half of 2024 and our current momentum, we are raising our full-year financial targets, which Kim will expand on later. The electric load growth macro trend strengthened during the quarter, and I'll talk more about that in a few minutes. I'm proud of our team for delivering another quarter above expectations. Slide three, is a quick reminder of where WILDAN is positioned for the newer listener. WILDAN helps transition communities to clean energy and a more sustainable future. We are just under 1,700 employees, comprised mostly of scientists, engineers, and other technical professionals. We have 53 offices across North America and have helped clients avoid emissions of 7.8 million metric tons of greenhouse gases. State and local government customers comprise 49% of our revenue, while utilities are 44% and commercial customers are 7%. Demand for our services with all three customer groups is healthy. Our work for government clients is growing organically at a double-digit pace, and the outlook is positive. Our work for utilities is primarily under multi-year contracts and remains robust. Our work for commercial clients is largely related to energy usage at data centers. Luland has focused on the data center market for many years because of its energy intensiveness, but the market has recently become more covered in the media due to AI load growth. We would like to expand our percentage of commercial work both organically and through future acquisitions. On slide four, our upfront policy and data analytics work informs WLDAN's strategy. In our upfront work, we are seeing particular demand for integrated resource planning and asset valuation work that is often associated with data center electricity load. In engineering, we saw strong geographic expansion in Florida and Texas and continued demand from southwestern city customers. In program management, we performed above our plan on utility programs and building energy programs for cities. I'll note that at WLDAN, while revenue is skewed towards larger program management, our profit is delivered about equally from each of the three phases of work. The right side of this slide provides two examples of how this business model works. More than 10 years ago, we began consulting to a New England investor-owned utility. That upfront consulting work led, in part, to a new software's license sale in 2023 and then to a large energy efficiency program management contract earlier this year. The upfront work allowed us to understand the client's unique needs more thoroughly and craft more effective program management solutions. The city of Paramount went in Q2 as another example of this model in practice. this California client continuously since 1973. We developed a thorough understanding of the city's needs, and this quarter we're then awarded an $18 million program management contract to oversee the design and construction of new solar, battery, and EV charging infrastructure, all aligned with the city's vision for energy transition.