Willdan Group Reports Third Quarter 2016 Financial Results

Willdan Group, Inc. (“Willdan”) (NASDAQ: WLDN), a provider of
professional technical and consulting services, today reported financial
results for its third quarter ended September 30, 2016, and provided a
business update.

For the third quarter of 2016, Willdan reported total contract revenue
of $58.7 million and net income of $2.5 million, or $0.28 per diluted
share. This compares with total contract revenue of $33.5 million and
net income of $0.8 million, or $0.10 per diluted share, for the third
quarter of 2015. The increase in earnings per share in the third quarter
of 2016 was primarily driven by higher total contract revenue, resulting
from both organic growth and incremental revenue contributed by the
assets of Genesys Engineering P.C. (“Genesys”) acquired in March 2016.

“We delivered another excellent quarter driven by strong demand for our
energy efficiency services,” said Tom Brisbin, Willdan’s CEO. “Total
contract revenue in our Energy Efficiency Services segment more than
doubled over the prior year, as we continue to execute well and deliver
energy savings for public utilities, municipalities and universities.
Our proven track record has enabled us to expand our geographic presence
and win significant new energy efficiency programs in states such as
Utah and New Jersey. The expanded capabilities provided by our recent
acquisition of the assets of Genesys have significantly improved our
business development pipeline, and have already led to several new wins.
Organic growth accelerated in the quarter, pushing our year to date
organic growth rate to 30%. Based on the volume of new program activity
currently ramping up, we expect a strong finish to 2016 and continued
growth in the coming year.”

Third Quarter 2016 Financial Highlights

Total contract revenue for the third quarter of 2016 was $58.7 million,
an increase of 75.0% from $33.5 million for the third quarter of 2015.
The increase was primarily due to higher contract revenue from the
Energy Efficiency Services segment, which increased $24.2 million, or
135.7%, from the third quarter of 2015. Total contract revenue for the
third quarter of 2016 included $16.2 million of revenue generated by the
assets of Genesys, which were acquired in March 2016. Contract revenue
for the Energy Efficiency Services, Engineering Services, Public Finance
Services, and Homeland Security Services segments was $42.0 million,
$12.9 million, $3.2 million and $0.6 million, respectively, in the third
quarter of 2016.

Direct costs of contract revenue were $42.6 million for the third
quarter of 2016, an increase of 103.1% from $21.0 million for the third
quarter of 2015. Included in direct costs of contract revenue for the
third quarter of 2016 was incremental direct costs of contract revenue
of $14.7 million attributable to the assets of Genesys. Excluding the
direct costs of contract revenue attributable to the assets of Genesys,
direct costs of contract revenue increased by $6.9 million, primarily as
a result of the increase in subcontractor services and production
expenses in the Energy Efficiency Services segment.

Revenue, net of subcontractor services and other direct costs, (as
defined below) for the third quarter of 2016 was $26.5 million, compared
with $20.3 million for the third quarter of 2015.

Total general and administrative expenses for the third quarter of 2016
were $13.1 million, an increase of 19.5% from $10.9 million for the
prior year period, due primarily to an increase in general and
administrative expenses to support the growth of the Energy Efficiency
Services and Engineering Services segments.

Income tax expense was $0.5 million for the third quarter of 2016, as
compared to $0.6 million for the third quarter of 2015. The effective
tax rate in the third quarter of 2016 was 18.2%, as compared to 44.5% in
the same period last year. The difference in the effective tax rate is
primarily due to an increase in energy efficient commercial building
deductions related to some of the Company’s energy efficiency activities.

Net income for the third quarter of 2016 was $2.5 million, or $0.28 per
diluted share, as compared to net income of $0.8 million, or $0.10 per
diluted share, for the third quarter of 2015.

EBITDA (as defined below) was $4.0 million for the third quarter of
2016, as compared to $2.0 million for the third quarter of 2015.

Nine Months 2016 Financial Highlights

Total contract revenue for the nine months ended September 30, 2016 was
$151.5 million, an increase of 46.3% from $103.6 million for the nine
months ended October 2, 2015. The increase was primarily due to higher
contract revenue from the Energy Efficiency Services segment, which
increased $45.3 million, or 77.8%, from the nine months ended October 2,
2015. Total contract revenue for the nine months ended September 30,
2016 included $35.6 million of revenue generated by the assets of
Genesys, which were acquired in March 2016. Contract revenue for the
Energy Efficiency Services, Engineering Services, Public Finance
Services, and Homeland Security Services segments was $103.6 million,
$36.9 million, $9.2 million and $1.9 million, respectively, for the nine
months ended September 30, 2016.

Direct costs of contract revenue were $103.9 million for the nine months
ended September 30, 2016, an increase of 63.3% from $63.7 million for
the nine months ended October 2, 2015. Included in direct costs of
contract revenue for the nine months ended September 30, 2016 was
incremental direct costs of revenue of $31.9 million attributable to the
assets of Genesys. Excluding the direct costs of contract revenue
attributable to the assets of Genesys, direct costs of contract revenue
increased by approximately $8.3 million, primarily as a result of the
growth in subcontractor services and production expenses in the Energy
Efficiency Services segment.

Revenue, net of subcontractor services and other direct costs, (as
defined below) for the nine months ended September 30, 2016 was $76.4
million, compared with $63.9 million for the nine months ended October
2, 2015.

Total general and administrative expenses for the nine months ended
September 30, 2016 were $38.7 million, an increase of 17.9% from $32.9
million for the prior year period, due primarily to an increase in
general and administrative expenses to support the growth of the Energy
Efficiency Services segment.

Income tax expense was $2.0 million for the nine months ended September
30, 2016, as compared to $2.9 million for the nine months ended October
2, 2015. The effective tax rate for the nine months ended September 30,
2016 was 22.8%, as compared to 42.5% in the same period last year. The
reduction in income tax expense for the nine months ended September 30,
2016 was attributable to an increase in energy efficient commercial
building deductions for both the 2015 and 2016 tax years. During the
nine months ended September 30, 2016, the Company recognized a tax
benefit of $0.6 million as a change in estimate related to energy tax
deductions earned for the 2015 tax year. Additionally, the Company
recognized an increase in energy tax deductions related to some of the
Company’s 2016 energy efficiency activities.

Net income for the nine months ended September 30, 2016 was $6.7
million, or $0.79 per diluted share, as compared to net income of $3.9
million, or $0.48 per diluted share, for the nine months ended October
2, 2015.

EBITDA (as defined below) was $11.4 million for the nine months ended
September 30, 2016, as compared to $8.4 million for the nine months
ended October 2, 2015.

Liquidity and Capital Resources

Willdan reported $18.6 million in cash and cash equivalents at September
30, 2016, as compared to $10.5 million at July 1, 2016. The increase
primarily resulted from net income generated in the third quarter of
2016 and strong collections on accounts receivable.

Outlook

Willdan has raised its financial and operational targets for the full
year 2016 to the following:

• Total contract revenue of $190 - $195 million
• Diluted earnings per share of $0.92 - $0.97
• Annual effective tax rate of approximately 28%

Conference Call Details

Chief Executive Officer Thomas Brisbin and Chief Financial Officer Stacy
McLaughlin will host a conference call today, November 3, 2016, at 5:30
p.m. Eastern/2:30 p.m. Pacific to discuss Willdan’s financial results
and provide a business update.

Interested parties may participate in the conference call by dialing
800-723-6498 (785-830-7989 for international callers) and providing
conference ID 6805383. The conference call will be webcast
simultaneously on Willdan’s website at www.willdan.com
under Investors:
Events and the replay will be archived for at least 12 months.

The telephonic replay of the conference call may be accessed following
the call by dialing 888-203-1112 and entering the passcode 6805383. The
replay will be available through November 17, 2016.

About Willdan Group, Inc.

Willdan provides professional consulting and technical services to
utilities, public agencies and private industry throughout the United
States. Willdan’s service offerings span a broad set of complementary
disciplines that include energy efficiency and sustainability,
engineering and planning, financial and economic consulting, and
national preparedness. Willdan provides integrated technical solutions
to extend the reach and resources of its clients, and provides all
services through its subsidiaries specialized in each segment. For
additional information, visit Willdan's website at www.willdan.com.

Use of Non-GAAP Financial Measures

“Revenue, net of subcontractor services and other direct costs,” a
non-GAAP financial measure, is a supplemental measure
that Willdan believes enhances investors' ability to analyze our
business trend and performance because it substantially measures the
work performed by our employees. In the course of providing services,
Willdan routinely subcontracts various services. Generally, these
subcontractor services and other direct costs are passed through to our
clients and, in accordance with Generally Accepted Accounting Principles
(“GAAP”) and industry practice, are included in our revenue when it is
our contractual responsibility to procure or manage these activities.
Because subcontractor services and other direct costs can vary
significantly from project to project and period to period, changes in
revenue may not necessarily be indicative of our business trends.
Accordingly, Willdan segregates costs from revenue to promote a better
understanding of our business by evaluating revenue exclusive of costs
associated with external service providers. A reconciliation of contract
revenue as reported in accordance with GAAP to revenue, net of
subcontractor services and other direct costs is provided at the end of
this news release.

EBITDA is a supplemental measure used by Willdan’s management to measure
its operating performance. Willdan defines EBITDA as net income plus
interest expense (income), income tax expense, interest accretion and
depreciation and amortization. EBITDA is not a measure of net income
determined in accordance with U.S. generally accepted accounting
principles, or GAAP. Willdan believes EBITDA is useful because it allows
Willdan’s management to evaluate its operating performance and compare
the results of its operations from period to period and against its
peers without regard to its financing methods, capital structure and
non-operating expenses. Willdan uses EBITDA to evaluate its performance
for, among other things, budgeting, forecasting and incentive
compensation purposes.

EBITDA has limitations as an analytical tool and should not be
considered as an alternative to, or more meaningful than, net income as
determined in accordance with GAAP. Certain items excluded from EBITDA
are significant components in understanding and assessing a company’s
financial performance, such as a company’s costs of capital, as well as
the historical costs of depreciable assets. Willdan’s definition of
EBITDA may also differ from those of many companies reporting similarly
named measures. Willdan believes EBITDA is useful to investors, research
analysts, investment bankers and lenders because it removes the impact
of certain non-operational items from its operational results, which may
facilitate comparison of its results from period to period. A
reconciliation of net income as reported in accordance with GAAP to
EBITDA is provided at the end of this news release.

Willdan's definition of Revenue, net of subcontractor services and other
direct costs, and EBITDA may differ from other companies reporting
similarly named measures. These measures should be considered in
addition to, and not as a substitute for, or superior to, other measures
of financial performance prepared in accordance with GAAP, such as
contract revenue and net income.

Forward Looking Statements

Statements in this press release that are not purely historical,
including statements regarding Willdan's intentions, hopes, beliefs,
expectations, representations, projections, estimates, plans or
predictions of the future are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements involve risks and uncertainties including,
but not limited to, the risk that Willdan will not be able to expand its
services or meet the needs of customers in markets in which it operates.
It is important to note that Willdan's actual results could differ
materially from those in any such forward-looking statements. Factors
that could cause actual results to differ materially include, but are
not limited to, Willdan’s failure to execute on existing projects,
inability to integrate recent acquisitions, including Genesys, a
slowdown in the local and regional economies of the states where Willdan
conducts business, Willdan’s inability to successfully implement its tax
strategy and the loss of or inability to hire additional qualified
professionals. Willdan's business could be affected by a number of other
factors, including the risk factors listed from time to time
in Willdan's SEC reports including, but not limited to, the Annual
Report on Form 10-K filed for the year ended January 1, 2016. Willdan
cautions investors not to place undue reliance on the forward-looking
statements contained in this press release. Willdan disclaims any
obligation to, and does not undertake to, update or revise any
forward-looking statements in this press release.

WILLDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		September 30,			January 1,
		2016			2016
Assets
Current assets:
Cash and cash equivalents		$	18,587,000		$	16,487,000
Accounts receivable, net of allowance for doubtful accounts of $705,000 and $760,000 at September 30, 2016 and January 1, 2016, respectively			26,549,000			17,929,000
Costs and estimated earnings in excess of billings on uncompleted contracts			22,887,000			13,840,000
Other receivables			2,699,000			177,000
Prepaid expenses and other current assets			2,417,000			2,082,000
Total current assets			73,139,000			50,515,000
Equipment and leasehold improvements, net			4,424,000			3,684,000
Goodwill			22,264,000			16,097,000
Other intangible assets, net			6,489,000			1,545,000
Other assets			482,000			504,000
Total assets		$	106,798,000		$	72,345,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	18,949,000		$	5,561,000
Accrued liabilities			15,886,000			10,334,000
Contingent consideration payable			1,925,000			1,420,000
Billings in excess of costs and estimated earnings on uncompleted contracts			8,687,000			6,218,000
Notes payable			5,210,000			4,039,000
Capital lease obligations			289,000			444,000
Total current liabilities			50,946,000			28,016,000
Contingent consideration payable			2,376,000			4,305,000
Notes payable			1,400,000			1,085,000
Capital lease obligations, less current portion			179,000			255,000
Deferred lease obligations			728,000			737,000
Deferred income taxes, net			3,490,000			331,000
Total liabilities			59,119,000			34,729,000
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding			—			—
Common stock, $0.01 par value, 40,000,000 shares authorized; 8,323,000 and 7,904,000 shares issued and outstanding at September 30, 2016 and January 1, 2016, respectively			83,000			79,000
Additional paid-in capital			41,706,000			38,377,000
Retained earnings (accumulated deficit)			5,890,000			(840,000	)
Total stockholders’ equity			47,679,000			37,616,000
Total liabilities and stockholders’ equity		$	106,798,000		$	72,345,000

WILLDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended								Nine Months Ended
		September 30,				October 2,				September 30,				October 2,
		2016				2015				2016				2015
Contract revenue		$	58,660,000			$	33,511,000			$	151,516,000			$	103,581,000
Direct costs of contract revenue (exclusive of depreciation and amortization shown separately below):
Salaries and wages			10,421,000				7,745,000				28,753,000				23,940,000
Subcontractor services and other direct costs			32,134,000				13,206,000				75,161,000				39,712,000
Total direct costs of contract revenue			42,555,000				20,951,000				103,914,000				63,652,000
General and administrative expenses:
Salaries and wages, payroll taxes and employee benefits			7,825,000				6,070,000				23,035,000				18,993,000
Facilities and facility related			1,039,000				1,207,000				2,978,000				3,203,000
Stock-based compensation			268,000				190,000				732,000				468,000
Depreciation and amortization			742,000				349,000				2,308,000				1,276,000
Other			3,178,000				3,103,000				9,694,000				8,915,000
Total general and administrative expenses			13,052,000				10,919,000				38,747,000				32,855,000
Income from operations			3,053,000				1,641,000				8,855,000				7,074,000
Other (expense) income:
Interest income			—				1,000				—				1,000
Interest expense			(43,000	)			(234,000	)			(137,000	)			(342,000	)
Other, net			—				—				2,000				18,000
Total other expense, net			(43,000	)			(233,000	)			(135,000	)			(323,000	)
Income before income taxes			3,010,000				1,408,000				8,720,000				6,751,000
Income tax expense			548,000				626,000				1,990,000				2,872,000
Net income		$	2,462,000			$	782,000			$	6,730,000			$	3,879,000
Earnings per share:
Basic		$	0.30			$	0.10			$	0.82			$	0.50
Diluted		$	0.28			$	0.10			$	0.79			$	0.48
Weighted-average shares outstanding:
Basic			8,308,000				7,862,000				8,181,000				7,817,000
Diluted			8,720,000				8,102,000				8,516,000				8,087,000

WILLDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Nine Months Ended
		September 30,				October 2,
		2016				2015
Cash flows from operating activities:
Net income		$	6,730,000			$	3,879,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,314,000				1,276,000
Deferred income taxes			2,556,000				2,480,000
Loss on sale/disposal of equipment			3,000				8,000
Provision for doubtful accounts			92,000				431,000
Stock-based compensation			732,000				468,000
Accretion and fair value adjustments of contingent consideration			(139,000	)			182,000
Changes in operating assets and liabilities, net of effects from business acquisitions:
Accounts receivable			5,148,000				(1,321,000	)
Costs and estimated earnings in excess of billings on uncompleted contracts			(7,956,000	)			(5,645,000	)
Other receivables			(1,918,000	)			63,000
Prepaid expenses and other current assets			(335,000	)			583,000
Other assets			56,000				75,000
Accounts payable			1,760,000				2,697,000
Accrued liabilities			5,246,000				(1,857,000	)
Billings in excess of costs and estimated earnings on uncompleted contracts			2,469,000				2,290,000
Deferred lease obligations			(9,000	)			114,000
Net cash provided by operating activities			16,749,000				5,723,000
Cash flows from investing activities:
Purchase of equipment and leasehold improvements			(1,386,000	)			(1,678,000	)
Cash paid for acquisitions, net of cash acquired			(8,857,000	)			(8,168,000	)
Net cash used in investing activities			(10,243,000	)			(9,846,000	)
Cash flows from financing activities:
Payments on contingent consideration			(1,285,000	)			—
Payments on notes payable			(3,083,000	)			(1,628,000	)
Proceeds from notes payable			—				2,000,000
Principal payments on capital lease obligations			(411,000	)			(218,000	)
Proceeds from stock option exercise			164,000				369,000
Proceeds from sales of common stock under employee stock purchase plan			209,000				78,000
Net cash (used in) provided by financing activities			(4,406,000	)			601,000
Net increase (decrease) in cash and cash equivalents			2,100,000				(3,522,000	)
Cash and cash equivalents at beginning of period			16,487,000				18,173,000
Cash and cash equivalents at end of period		$	18,587,000			$	14,651,000
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest		$	137,000			$	156,000
Income taxes			2,046,000				951,000
Supplemental disclosures of noncash investing and financing activities:
Issuance of notes payable related to business acquisitions		$	4,569,000				4,250,000
Issuance of common stock related to business acquisitions			2,228,000				1,485,000
Contingent consideration related to business acquisitions			—				6,110,000
Other receivable for working capital adjustment			604,000				—
Equipment acquired under capital leases			186,000				139,000

Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Revenue and “Revenue, Net of Subcontractor Services and Other Direct Costs”
(Non-GAAP Measure)
		Three Months Ended						Nine Months Ended
		September 30,			October 2,			September 30,			October 2,
		2016			2015			2016			2015
Contract revenue		$	58,660,000		$	33,511,000		$	151,516,000		$	103,581,000
Subcontractor services and other direct costs			32,134,000			13,206,000			75,161,000			39,712,000
Revenue, net of subcontractor services and other direct costs		$	26,526,000		$	20,305,000		$	76,355,000		$	63,869,000

Willdan Group, Inc. and Subsidiaries
Reconciliation of GAAP Net Income to EBITDA
(Non-GAAP Measure)
		Three Months Ended							Nine Months Ended
		September 30,			October 2,				September 30,			October 2,
		2016			2015				2016			2015
Net income		$	2,462,000		$	782,000			$	6,730,000		$	3,879,000
Interest income			—			(1,000	)			—			(1,000	)
Interest expense			43,000			234,000				137,000			342,000
Income tax expense			548,000			626,000				1,990,000			2,872,000
Interest accretion(1)			168,000			—				278,000			—
Depreciation and amortization			742,000			349,000				2,308,000			1,276,000
EBITDA		$	3,963,000		$	1,990,000			$	11,443,000		$	8,368,000

_______________
(1)		Interest accretion represents the imputed interest on the earn-out payments to be paid by us in connection with our acquisitions of Abacus and 360 Energy in January 2015.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161103006768/en/

Source: Business Wire
(November 3, 2016 - 4:30 PM EDT)

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