Willdan Group Inc (WLDN) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Willdan Group, Inc. third-quarter 2013 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, November 7, 2013. And I'd now like to turn the conference over to Nii Tetteh. Please go ahead, Sir.

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Willdan Group's financial results for the third quarter ended September 27, 2013. With us today from management are Chief Executive Officer Thomas Brisbin and Chief Financial Officer Kimberly Gant. Management will review prepared remarks, and we will then 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. The forward-looking statements involve certain risks and uncertainties, and it is important to note that the Company's future results could differ materially from those in any such forward-looking statements.

Factors that could cause actual results to differ materially and other risk factors are listed from time to time in the Company's SEC reports. Including, but not limited to, the Form 10-K annual report for the year ended December 28, 2012, filed on March 26, 2013; the quarterly report on Form 10-Q for the quarter ended March 29, 2013, filed on May 9, 2013; and the quarterly report on Form 10-Q for the quarter ended September 27, 2013, filed today.

The Company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call. Willdan Group, Inc. disclaims any obligation and does not undertake to update or revise any forward-looking statements made today. With that, I will now turn the call over to Chief Financial Officer Kimberly Gant. Kimberly?

Thank you, Nii. I would like to provide you with a brief overview of our financial results for our third quarter ended September 27, 2013. Tom will then discuss operations and business outlook. We will then conclude the call with questions and answers.

In our third quarter of 2013, we generated revenue of $21.2 million. We earned income from operations of $882,000. We posted diluted earnings per share of $0.11. We provided cash flow from operations of $1.8 million. And on a trailing three-month basis, our day sales outstanding was 75 days, down three days from our second-quarter and 16 days in the same period last year.

And our third quarter's revenue was down slightly by $380,000 to $21.2 million from $21.5 million in the same period last year. On a sequential basis, our revenue was up 3%, or $671,000, from $20.5 million in our second-quarter. On a net revenue basis, which is revenue minus pass-through costs, our net revenue was $15.3 million, down $216,000, or 4% from $15.9 million in the same period of last year.

On a segment basis, our Engineering Services segment contributed $9.1 million, or 43% of our third-quarter revenue. Our energy efficiency services segment contributed $8.6 million, or 40% of our third-quarter revenue.

Our Public Finance Services segment contributed $2.5 million, or 12% of our third-quarter revenue. And our Homeland Security Services segment contributed $1 million, or 5% of our third-quarter revenue. Our income from operations for the third quarter was $882,000, as compared to $1.4 million in the same period last year. Our third-quarter performance reflected continued delays and the deployment of certain energy efficiency programs, specifically schools in Southern California of which Tom will discuss with you further.

In our third quarter of 2013, our total direct costs were $12 million, up 6% from $11.3 million in our third quarter of 2012. Our total salaries, wages, and salary-related expenses were $11.1 million in our third quarter of 2013, up 4% from our third-quarter 2012 but flat from our second quarter of 2013. Our total G&A expenses were down 6%, or $524,000 in our third quarter of 2013 as compared to our third quarter of 2012.

For the third quarter, we posted net income of $842,000, or $0.11 per share, as compared to $787,000, or $0.11 per share, in our third quarter of 2012.

From a balance sheet perspective, at September 27, 2013, we had cash and cash equivalents of $10.4 million. This balance compares to $8.5 million at the end of our second-quarter and $9.2 million at the end of our third quarter of 2012.

As previously stated, we generated cash flow from operations of $1.8 million in our third quarter as compared to $1.4 million in our second quarter of 2013 and $3.7 million in our third quarter last year.

In our third quarter of 2013 and today, we have no outstanding borrowings on our cash collateralized line of credit. Our working capital and our stockholders' equity were $15.2 million and $19.5 million, respectively.

Further business and financial information can be found in our press releases and Forms 8-K and 10-Q filed earlier today. I will now turn it over to Tom.

Thanks, Kim, and good afternoon everyone. I'm pleased to report that we delivered the strong cash flow and positive earnings in the third quarter. In our engineering business, we continue to benefit from the slow recovery of the residential housing market, where building [permits] have been on the rise. We also are seeing new opportunities to provide outsourced staff as more and more cities face significant financial challenges.

Willdan's half century of service in this business uniquely qualifies us to provide cities highly qualified staff to fill key positions both cost effectively and efficiently. We've placed a number of people in key positions in several cities this quarter, and we expect this trend to continue.

Now turning to the long-anticipated project start for California's high-speed rail project. The joint venture has received a limited notice to proceed, and we'll be bidding on the next two segments, which will be awarded in 2014. Willdan expects to become active on this project by December of this year, and we remain excited about this upcoming work in what is a key strategic growth area for us.

To further step up our growth in this market, we have created a new group in our engineering business that will be dedicated to pursuing and implementing large-scale, high-value infrastructure projects in sectors ranging from rail to heavy civil to project management and construction management. We've made a number of key hires for this group and will be making a more detailed announcement about this shortly.

The team will be in place before the end of 2013, and we expect it will make a nice contribution to our results in 2014 and beyond. All told, our engineering business is in good shape and will be a growing contributor to revenue in 2014.

Now turning to our Energy segment. Our energy contracts continue to ramp up during the third quarter. I'd like to remind everyone that there are two anomalies that impact our year-over-year revenue comparisons. First, revenue from our ConEd project is lower this year than it was last year because, one, the contract was split between us and another consultant; and, second, we are now self-performing all of our energy contracts. So this year's revenue did not include the pass-through costs for Con Edison, which inflated revenue last year but made no margin contribution.

Hopefully you saw the press release we issued on our contract for the schools program with Southern California Edison. As I mentioned last quarter, this program is especially important, as the State of California has allocated $2.5 billion over five years to improve energy efficiency in schools through Prop 39. $500 million of the $2.5 billion is expected to come out in the last half of 2014. We also won additional energy efficiency audit contracts with SDG&E as well as some contract extensions as the result of exceeding our goals on the Washington state program. Our outlook for energy remains positive, and the year-over-year comps will look better next year once we move past the anomalies I mentioned earlier.

Our Financial Services business remains steady and profitable thanks to a number of new hires we made in key markets earlier this year. The team continues to win larger jobs outside of California. Our Homeland Security segment also continues to do well. The team is conducting regular training for urban area security initiatives, states, cities, and transit authorities. We recently won additional transportation work with Amtrak, which is similar to our engagement with the New York Metropolitan Transportation Authority. Our Homeland Security team has a solid backlog and a strong pipeline of proposals.

Overall, our business is stable and our outlook is positive. We continue to expect a profitable fourth quarter, and we're very excited about 2014 based on the backlog of work we see across our diversified segments. With that, I will open the call up for your questions.

(Operator Instructions) Terran [Quida], Wedbush.

This is Terran filling in for Al. So just a couple of questions. First on the high-speed rail project, if you could just provide a little more color on your -- the revenues you are expecting in 2014 and also why you are expecting to become active in December versus what I thought was supposed to be in September.

Yes. We -- in the last call, we thought we'd be starting by September. You can all read the press in the newspapers. The project has not started yet. It's primarily not started because of the lack of, let's call it, right-of-way. They have not made the acquisitions of the land; that's the state's role.

And the contractor -- although the contractor has finally been given, as I mentioned, a limited notice to proceed, meaning we now have office space in Fresno, we're developing a baseline for construction, and that is a good step at least from our perspective. So we'll then, as a subcontractor to the Tutor Perini joint venture -- Tutor Perini Parsons joint venture, is looking to start as soon as they get the full notice to proceed. And, as we look at it now, we're expecting December. And that is different than what I told you before, which was September.

Okay. And you feel pretty comfortable with a December start now, then?

I feel as comfortable about that as you read in the newspaper. The comfort part is that they have been given the limited notice to proceed, which is more than what we had the last time we talked.

Okay. And you are still expecting around seven to 10 people of your own up there?

We are expecting to start at about five. But that is totally unknown; it all depends on the type of work once they start. But there is a role for us, a good role. We're happy with it. We've met with Parsons, they are a great partner. And if you've also heard me say the same joint venture stayed together and is bidding segments two and three with an estimated value for the whole group at about $1.8 billion.

So, Willdan is a small player, but for us it's a big opportunity. Does that help you?

Yes, that's helpful. Thank you. Then I was also just wondering, I know this is --

Could you speak up just a little bit?

I was just also wondering how often are -- is your performance under review in these projects -- these longer-term projects?

Under review by who?

By Tutor.

Oh, they are under review every day.

Every day. Okay. And then moving on to the Southern California Edison project, I was just wondering (technical difficulty) --

We lost you.

Hello?

We lost you for a second. Go ahead.

Actually I was just also wondering if you can comment a little bit more on your backlog. And how much of that is related to the high-speed rail project?

None of our backlog that I mentioned that is going into 2014 is related to high-speed rail.

But you're feeling pretty comfortable with your current level? And is there anything else?

We are feeling pretty comfortable about 2014, and we have not put anything in for high-speed rail.

Okay, that's it for me. Thank you.

(Operator Instructions)

That's it?

I'm showing no further questions. I'll turn it back to Thomas Brisbin for closing comments.

I'd like to thank you all for joining our call today and for your interest in Willdan, and have a great day.

Ladies and gentlemen, this concludes our conference for today. We thank you for your participation. You may now disconnect.