Willdan Group, Inc.

Greetings and welcome to the Will Dan Group first quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Now I'd like to turn the conference over to Al Kastrock. Thank you. You may begin.

Thank you, Matt. Good afternoon, everyone, and welcome to Will Dan Group's first quarter 2025 earnings call. Joining our call today are Mike Beaver, President and Chief Executive Officer, and Kim Early, Executive Vice President and Chief Financial Officer. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides, all of which are available on our website. Please note that year-over-year commentary on variances or on revenue, adjusted EBITDA, and adjusted EPS discussed during our prepared remarks are on an organic basis. We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. as described in our SEC filings, and actual results may differ materially due to risk and uncertainties. With that, I will hand the call over to Mike, who will begin on slide two. Thanks, Al.

We had a strong start to 2025, delivering record first quarter results for revenue, adjusted EBITDA, and EDS. We surpassed both analyst expectations and our internal forecast. Contract and net revenue each grew 24% year over year, Adjusted EBITDA rose 31%, GAAP diluted EPS increased 52%, and adjusted diluted EPS was up 58%. These comparisons were all against a strong Q1 last year. Performance was strong across all business lines, driven by consistent execution. In the quarter, we completed two more acquisitions that expanded our geography and our electrical engineering capabilities. As electric load increases, Wildan's differentiated capabilities and consistent execution position us well for long-term growth. Earlier this week, we expanded our credit facility from $150 to $200 million, a key milestone to scale our business. Turning to slide three, Wildan delivers a broad range of energy and infrastructure solutions to utilities, customers, and local governments. Topulated on a pro forma basis for 2025, our commercial customers are forecasted to comprise 15% of our revenue, double the percentage of last year. State and local government customers are forecasted to be 44%, while utilities are forecasted to be around 41% of our revenue. Demand remains healthy across all customer groups. Our commercial work is increasingly centered around electricity usage at data centers, where AI-driven load growth is creating significant demand. We'll then help technology clients navigate energy constraints, optimize infrastructure, and meet aggressive power requirements. We see strong momentum in this area and intend to pursue acquisitions that further expand our capabilities and relationships with commercial customers. Our utility business continues to perform well. Most of our utility contracts are multi-year in nature, funded by ratepayer fees, and continue to provide a strong foundation of recurring revenue. On the public sector side, our work for state and local governments continues to grow organically at a double-digit pace. Demand remains solid, and the outlook is positive. It's worth noting that WILDAN has minimal exposure to direct federal contracts or federally funded programs. As a result, recent federal spending cuts have had little impact on our backlog or near-term visibility, just like I said last quarter. Most of our public sector work is funded through user fees and municipal bonds, which have remained stable. Last week, we released our 2024 sustainability report, highlighting meaningful progress. Notably, we help clients avoid about 100 times the GHG emissions that the company emits. Our energy segment makes up more than 80% of our revenue, while the legacy part of our business makes up the remainder. We work out of 55 offices across On slide four. Our upfront policy and data analytics work informs WLDAN's strategy and helps us navigate market change. In our upfront work, we're seeing particular demand for integrated resource planning and asset valuation on projects associated with data center electricity load. Those market changes have led us to acquisitions that provide solutions to these clients. In engineering, we saw strong execution and growth, particularly formed above our plan on utility programs and building energy programs for cities. Putting this model to work, for the last 25 years, we've performed upfront financial planning and on-call civil engineering work for the city of Fairfield, California. Then in Q1, we were awarded a new $30 million program management energy savings and modernization contract that provides EV charging stations, solar arrays, central plant, and other electric infrastructure upgrades. On slide five, we have a strong pipeline of opportunities that we are converting into contracts. Here are just a few examples we converted since our last conference call. I already talked about the City of Fairfield, California example. Then for the Paramount Unified School District, that's another example of cross-selling. We won an $18 million design and management contract for solar arrays and EV charging stations. For National Grid in Massachusetts, we were awarded a new $20 million multiple award contract providing energy efficiency services to small business. And for Warner School District, we were awarded a new $11 million contract. We were also awarded an important recompete to provide the California Public Utility Commission, CPUC, with integrated resource planning and technical support. That $9.8 million award supports analysis of a resource stack necessary to achieve California ISO's requirements. On the last call, I mentioned winning the expanded re-compete with the Los Angeles Department of Water and Power, LADWP. The new $330 million five-year contract delivers more complex energy efficiency measures to a broader set of commercial and government clients. We don't expect significant revenue from the LADWP program until the fourth quarter of this year but ultimately think it will become among our largest programs annually. On slide six. From 1970 to 2005, the U.S. experienced several decades of sustained electric load growth, followed by 15 years of relative flatness. Today, we're seeing a return to meaningful load growth, marking a structural shift in the energy landscape. This shift is creating significant new opportunities for Wildand, and we believe it will be a powerful tailwind for our business in the years ahead. Key drivers include the electrification of cities, buildings, and transportation, reshoring of industrial manufacturing, and the rapid rise in electricity demand from data centers powering AI. Electricity demand in the U.S. is expected to increase by 50% between now and 2050. We spent a fair amount of effort this quarter discussing and preparing for the uncertainty created by tariff risks. This new uncertainty has had little immediate impact on Wilden. However, we and our clients are watching carefully for price increases in the specialized equipment we use on our projects. We are inserting more flexible contract terms with our customers, and we are working to identify alternative product suppliers that could be cost-effective if tariff risks persist. If a recession occurs, we'll then be better positioned than most due to our clients' funding sources, but we would not likely be immune to a variety of economic slowdowns. Turn to slide 7. The graph on the left depicts the strong margin execution the team has delivered over the last five years. Several years ago, we laid out a goal of 20% operating margin, measured as adjusted EBITDA divided by net revenue. We've significantly improved our operating margin over the last five years, reflecting disciplined execution, more efficient cost absorption, and a shift towards higher-value work. The 20% EBITDA margin in our industry represents best-in-class performance and is associated with a highly differentiated customer solution. This year, Worldin estimates that it will be around that 20% margin goal. Q1 is typically our lowest margin quarter, so we're right on track for this year. On the right, and reflected over the same five-year period, we've continued to increase revenue per employee, reflecting higher productivity and the growing value our teams are delivering to clients. This consistent improvement, alongside our expanding operating margin, underscores the scalability of our model and the strength of our operating leverage as we grow. Kim, over to you.