Willdan Group Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Contract Revenue: Increased 2% year-over-year to $155 million; normalized growth of 10%.

Net Revenue: Grew 8% to $92 million; normalized growth of 17%.

Adjusted EBITDA: Reached a record $18.1 million, up 35% year-over-year, representing 19.6% of net revenue.

Adjusted EPS: Increased 44% to $0.91 per share compared to $0.63 in Q1 2025.

Gross Margin: Expanded to 40.7%, up from 37.8% in the prior year.

Net Income: Increased 82% to $8.5 million or $0.55 per diluted share on a GAAP basis.

2Strategic Updates and Business Highlights

Acquisition of Burton Energy Group: Closed recently, expected to enhance capabilities in energy management and procurement, adding approximately $103 million in contract revenue from 2025. This acquisition is anticipated to be accretive to margins and earnings.

Commercial Sector Expansion: Commercial revenue projected to rise from 7% in 2024 to about 25% in 2026, contributing to improved margins.

New Contracts: Secured significant contracts including a $100 million extension with Southern California Edison and a $54 million project with the Dormitory Authority of the State of New York.

Operational Strength: Continued focus on energy efficiency and grid infrastructure, with a robust pipeline of opportunities driven by increasing electricity demand.

3Forward Guidance and Outlook

2026 Financial Targets:

Net revenues expected between $410 million and $425 million.

Adjusted EBITDA projected between $100 million and $105 million.

Adjusted diluted EPS forecasted between $4.90 and $5.05.

Long-term Margin Goals: Adjusted EBITDA margins are now targeted in the high 20s, reflecting improved productivity and service mix.

4Bad News, Challenges, or Points of Concern

Cash Flow: Operating cash flow was negative at $24 million for the quarter, compared to a positive $3 million in the prior year. However, trailing 12-month cash flow from operations remained positive at $52 million.

Leverage Increase: Following the acquisition, the leverage ratio increased to 0.6x, though still considered low. The company plans to repay the revolver by year-end.

Labor Constraints: While not currently limiting growth, there are concerns about the availability of specialized labor, particularly in electrical engineering and construction management.

Market Competition: Competing with private equity for strategic acquisitions may pose challenges, although Willdan is seen as a preferred partner by some firms.

5Notable Q&A Insights

Profitability Drivers: CEO Mike Bieber highlighted four key factors contributing to increased profitability: growth and cost absorption, rising energy demand, a more differentiated service offering, and a balanced customer portfolio with increased commercial work.

Los Angeles Water & Power Contract: The contract is expected to ramp up in Q2 but did not significantly impact Q1 results or guidance upgrades.

Acquisition Strategy: The Burton acquisition was a lengthy process, taking 7-8 months. Willdan is actively evaluating additional acquisition opportunities, focusing on commercial and differentiated solutions.

Growth Potential: Management expressed confidence in the ability to achieve higher margins and maintain a robust pipeline of opportunities, with no immediate resource constraints limiting organic growth. Overall, Willdan Group reported a strong start to 2026, driven by strategic acquisitions and operational improvements, while also navigating challenges related to cash flow and labor availability.