Willdan Group (WLDN) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Contract Revenue: Increased 33% year-over-year to $231 million.

Net Revenue: Grew 23% to $117 million, with organic growth at 18%.

Adjusted EBITDA: Rose 51% to a record $33 million, achieving a margin of 28.2%.

GAAP EPS: Increased 53% to $1.58; adjusted EPS rose 38% to $2.07.

First Half Performance: Contract revenue up 19% to $386 million; net revenue increased 16% to $210 million.

Cash Flow: Generated $71 million from operations over the last 12 months, with $62 million in free cash flow.

2Strategic Updates and Business Highlights

Commercial Market Expansion: Commercial revenue now constitutes about 25% of total revenue, driven by demand from data centers and energy management projects.

Acquisition Integration: The Burton acquisition is performing well, contributing to cross-selling opportunities and enhancing capabilities in HVAC and energy controls.

Contract Wins: Secured significant contracts, including a $110 million expansion with LADWP and a $53 million project for City College of New York.

Diversification: Expanded geographic presence with new offices in Florida, Georgia, North Carolina, Kentucky, and Texas to capture data center growth.

3Forward Guidance and Outlook

Revised Full-Year Targets:

Net revenue projected between $415 million and $430 million.

Adjusted EBITDA expected in the range of $103 million to $107 million.

Adjusted diluted EPS forecasted between $5.00 and $5.15.

Long-Term Margin Goals: Targeting adjusted EBITDA margins in the high 20% range, with an estimated 25% for 2026, up from 21.8% in 2025.

4Challenges and Points of Concern

Gross Margin Pressure: Gross margin declined by 150 basis points due to a shift towards lower-margin commercial projects.

Visibility on Future Projects: Uncertainty regarding the ramp-up of major contracts, particularly the LADWP project, which could affect revenue timing.

Labor Market Pressures: While not currently experiencing labor shortages, there are rising costs for experienced talent, which could impact margins.

5Notable Q&A Insights

LADWP Project Ramp-Up: The project is expected to ramp up through Q3 and into early 2027, but exact contributions remain uncertain.

Cross-Selling with Burton: Early traction is noted in both directions, with opportunities to sell Willdan services to Burton's clients and vice versa.

Geographic Diversification: Expansion into new states driven by data center projects, with a focus on building local teams to support growth.

Tax Guidance: The 179D tax benefits will carry forward but will not apply to new projects post-June, leading to an anticipated tax rate of 15%-20% in the second half of the year. Overall, Willdan Group reported strong financial performance in Q2 2026, with significant growth across various metrics and strategic initiatives aimed at expanding their market presence. However, challenges related to gross margins, project visibility, and labor costs remain areas to monitor.