Willdan Group Inc (WLDN) 2015 Q1 法說會逐字稿

Good day and welcome to the Willdan Group Inc. first-quarter 2015 conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Nii Tetteh, Business Analyst. Please go ahead, sir.

Thank you. Good afternoon, everyone. Thank you for joining us to discuss Willdan Group's financial results for the first quarter ended April 3, 2015.

With us today from management are Chief Executive Officer Thomas Brisbin; Chief Financial Officer Stacy McLaughlin; and Mike Bieber, Senior Vice President Corporate Development. 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 and 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 annual report on Form 10-K filed for the year ended January 2, 2015.

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 Stacy McLaughlin. Stacy?

Thanks, Nii. I'd like to add my welcome to those joining us on today's call. In addition to GAAP financial results, we also provide non-GAAP financial measures that we believe enhance investors' ability to analyze our business trends and performance. Our non-GAAP measures include revenue, net of subcontractor costs, and EBITDA.

We believe revenue, net of subcontractor costs, allows for an improved measure of the revenue derived from the work performed by our employees. EBITDA is a supplemental measure used by Willdan to evaluate operating performance. GAAP reconciliations for both of these non-GAAP measures are included at the end of the earnings release we issued today.

I am pleased to share with you our strong financial results for the first quarter 2015. And I'll start with an overview of our income statement, then our balance sheet, and finally our guidance.

Total contract revenue for the first quarter of 2015 increased 46.7% to $33.3 million from $22.7 million for the first quarter of 2014. In January, we made two acquisitions: 360 Energy Engineers and Abacus Resource Management Company. These acquisitions contributed $3.7 million in contract revenue for the first quarter of 2015.

Willdan's organic growth rate was 30% for the first quarter of 2015. From an organic standpoint, the increase in total contract revenue reflects greater demand for Willdan's energy efficiency services in the states of New York and California.

By segment, revenue from energy efficiency services grew 82.5% to $18.9 million. Engineering services contract revenue increased 21.5% to $10.8 million. Revenue from public finance services was $2.7 million and Homeland Security services revenue was $0.9 million.

Revenue, net of subcontractor costs, increased 35.2% to $25 million compared with $18.5 million for the year-ago quarter. Historically, the first quarter has been our weakest quarter for revenue. This is especially true for the newly acquired companies.

Direct costs of contract revenue were $19.8 million for the first quarter of 2015, an increase of 50% year over year. The increase was a result of incremental direct cost of revenue of $2.5 million attributable to our acquisitions of 360 Energy and Abacus as well as higher direct costs within the engineering services segment and energy efficiency services segment. Both of these segments generally utilize a higher percentage of subconsultants than Willdan's other subsidiaries.

General and administrative expenses for the first quarter were $10.9 million compared to $8.2 million for the prior-year period. Approximately 35% of the increase in G&A expenses were attributed to increases in salaries and wages, payroll taxes, and employee benefits.

The increase in employee-related costs primarily resulted from increased headcount within our energy efficiency and engineering services segments. Facilities and facility-related expenses remained flat.

G&A expenses as a percentage of total contract revenue improved 340 basis points to 32.6% from 36% for the first quarter of 2014, which reflects the steps we've taken to prudently manage expenses.

Operating income increased to $2.6 million for the first quarter of 2015 compared to operating income of $1.3 million for the first quarter of 2014. EBITDA was $3.1 million for the first quarter of 2015 as compared with $1.5 million for the first quarter of 2014.

EBITDA margin was 9.4%, an increase from 6.5% for the same period in the prior year. The increased margin is due to a higher proportion of energy work, which is higher margin, and business efficiencies. Our overhead expenses do not need to increase at the same rate as revenue; thus, as we grow in the energy sector, our margin should continue to improve.

We had a significant swing in our income tax expense relative to the prior-year period. Income tax expense was $1.1 million for the three months ended April 3, 2015, as compared to $0.04 million for the three months ended March 28, 2014. The difference between income tax expense this year versus last year is primarily due to recognition of income tax benefit for net operating loss carryforwards that were fully utilized in the prior year and no longer available to offset taxable income this year.

Net income for the first quarter of 2015 was $1.5 million or $0.18 per diluted share compared to net income of $1.3 million or $0.17 per diluted share for the first quarter of 2014.

Turning to our balance sheet. We reported cash and cash equivalents of $12.1 million at April 3, 2015, down from $20.4 million at January 2, 2015. This decrease is primarily from cash paid for acquisitions, net of cash received. Our accounts receivable days outstanding was 75 days, a temporary increase over our prior quarter, but still within our target range.

Turning to our guidance. For 2015, Willdan expects to generate revenue between $135 million and $145 million and expects a tax rate of approximately 41%. Willdan anticipates that the growth rate in EBITDA will be greater than the growth rate in revenue in 2015 due to margin improvement.

I'd now like to turn the call over to Tom. Tom?

Thanks, Stacy, and good afternoon. I'm going to start off with a question -- or it's a question investors may ask. And the question is can we sustain this exceptional growth rate? I would now like to take a few moments to discuss why we can.

We're off to a good start for 2015 and I would like to reflect a bit on why Willdan is in a much better position and why I believe we will continue to grow. By position, I mean financial, marketplace, employees, customers, and a group of investors that are taking notice of where Willdan is headed.

It was about 2008 that I spoke on a conference call that Willdan was not going to wait for the recession to end. We were not going to wait it out until our base business of engineering for California cities returned to the robust days of subprime loans.

We were going to face the recession and our nearly 70% loss of business as the new reality. Given the new reality as a new public company, Willdan had much to do. We decided to enter the energy efficiency market. Energy efficiency is important to the nation for many reasons: political, economic, environment, and security. And is not going away for many years to come.

California has been a leader in energy efficiency and the rollout across the country was just beginning. Willdan elected to enter the energy efficiency business for several reasons: it was synergetic with our California customer base; it provided a diversification that was independent of the recession; it allowed for geographic expansion; it is a highly fragmented industry with a large growth potential; and five, it played well the technical expertise of the Willdan team. It was not a big stretch for engineers, scientists, and economists to grasp.

That being said, we acquired an $8 million firm in 2008 that led to nearly 60% of revenue in our geographic expansion across the country. This growth engine is supported by our base businesses of engineering, financial management, and security.

Some highlights of what we have accomplished are the following. At the corporate level, we need to be prepared for rapid growth. Nearly three years ago, we focused on cash, project profitability, and systems to support a rapidly growing organization. A culture has been created to drive DSO consistently down from a high -- I maybe shouldn't say this -- but from a high of nearly 144 days to the year end 2014 of 65 days.

The cash that Willdan puts in the bank allows us to begin to fund strategic tuck-in acquisitions that help catalyze our growth.

Next, we reduced our operating cost everywhere to focus on margin improvement. Free cash flow and DSO are metrics we live by. We automated every part of corporate to prepare for growth.

In human resources, or HR, we prepared for the Affordable Care Act. We automated most paper transactions and outsourced to ADP. In marketing, we developed a team that can write a proposal that can compete with any major firm in the nation. We are also using the IT application sales force to enhance our doer-seller capabilities.

In accounting, we recently changed to Deltech to give our project managers better visibility and prepare Willdan for federal opportunities. Our IT capabilities have been continuously updated to service a nationwide footprint, rather than just California.

Our management team has a very good grasp of what we are doing and, most importantly, where we are going. All this has been accomplished over the last three years to prepare Willdan for substantial and profitable growth. One can really see the G&A rate going down while revenue is growing.

Our corporate support is in a much better position than three years ago. Our corporate team also includes our bank, BMO Harris, who is acting like a real partner in where Willdan wants to go. We are fortunate to have them on the team.

Our new auditors, KPMG, which Willdan started with in 2006, just completed 2015 first quarter. And they are committed to ensuring that Willdan rises to the top as a public reporting company. We also have McGladrey and Moss Adams for SOX and taxes. Again, these are excellent team members.

I wanted to take a moment to welcome our two new Board members. Dr. Mohamed Shahidehpour is Bodine Chair Professor in the Electrical and Computer Engineering Department at the Illinois Institute of Technology in Chicago, where he also serves as Director of the Robert Galvin Center for Electricity Innovation.

In addition, I would like to welcome Dr. Steven Cohen, who has served as a senior advisor to Willdan over the past seven years and is a recognized expert in the field of sustainability. Dr. Cohen is Executive Director and Chief Operating Officer of Columbia University's Earth Institute.

Dr. Shahidehpour and Dr. Cohen have well-established relationships in the respective markets of New York and Chicago. We are excited to have them both on the Board and believe they will be significant contributors to Willdan as we continue to grow our business and expand energy efficiency practice and national footprint.

Our corporate team has made a lot of progress taking on the growth and preparing for much more. Now let's turn to operations. Growth, excellent product profit, DSO, and delighted customers are the metrics for operations.

A few years back, a very astute and recognized successful investor said Willdan had a tough challenge ahead. Simply stated: change what you do and where you do it. Since that day, we have done exactly what he said. 60% of our business is in energy efficiency and more people are out of California rather than in it.

We work for 18 utility programs across the country. These 18 utility programs allow us to touch nearly 8,000 end users per year. These end users are hospitals, schools, lodging, laboratories, datacenters, municipalities, commercial, and industrial.

Strategy-wise, we needed to move our capabilities to service these end users. Often the end users want more than utility-incentivized savings like lighting. The utilities and the end users want to go deeper into their energy usage. They want to look at boilers, chillers, pumps, refrigeration, controls, weatherization renewables, and storage to name a few.

Our future opportunity is driven by these 8,000 end users. Willdan needs deeper mechanical and electrical engineering expertise. These engineers also have to grow up in an environment of energy efficiency and customer-driven infrastructure upgrades.

With our January acquisitions of 360 Energy Engineers and Abacus Resource Management Company, we took an important step in expanding our capabilities and our geographic footprint to capitalize on these opportunities. The founders of 360 Energy Engineers -- Scott McVey, Joe Hurla, and Aaron Etzkorn, in Lawrence, Kansas -- are a hard-driving, intelligent, experienced, youthful, and very business-minded team.

360's approach to sales is unique and successful. Their dedication to excellence comes from many years as a large performance contractor and their desire to do things better.

Abacus is similar and yet a bit different. The founders have been around a little bit longer and their experience goes back before energy efficiency, performance contracting, or SCOs were common vocabulary.

The founders -- Mark Kinzer and Steve Rubbert -- have built energy engineering firms before. We are delighted they want to build another one as Willdan. Their approach to the market is a bit different from 360, but for Willdan, that sees many potential customers, different approaches are good.

We have already used our combined resources to win the State of Pennsylvania, the State of Washington, three microgrids for New York Prize, the New Jersey Utility for M&V and retrocommissioning, as well as expansion into Colorado and Minnesota for a Texas-based utility.

Acquisition success is very important. Organic growth is more important. We will not lose our focus on organic growth. Acquisition success can be defined as the firms rapidly grow their presence. That is the goal; just as we grew the first acquisition from $8 million to $57 million, thus putting Willdan in the energy business.

Let me make one more important point. We have added a lot of smart people to help drive this Company in the right direction. Looking forward a bit, our overall M&A strategy is to pursue selective tuck-in acquisitions that can expand our geographic footprint, broaden our service offerings, and improve our competitive position.

We are seeing an abundance smaller scale deals and opportunities through the highly fragmented nature of the marketplace. We are focused on identifying opportunities in three key areas.

First is the acquisition of businesses that can expand our East Coast engineering and planning practice. We are especially focused on companies that enhance our capabilities and reputation for the technical and consulting work we do with public agencies.

Second, we plan to acquire companies that offer a gateway into the federal marketplace, with a goal of providing energy management services to the federal government. Our management team has a great deal of federal experience, which we believe can be leveraged to win large and long-term contracts that enhance revenue visibility.

Third, we are pursuing opportunities that give Willdan greater exposure to larger scale contracts: what we call c-suite consulting opportunities. These include policy and migratory consulting for public utility commissions and electrical engineering for utilities. This is where the market is headed and where we plan to capture a strong share of this business.

With a dedicated M&A effort, we are now in a position to act on these opportunities. And we expect to be reporting on a steady flow of acquisitions as we go forward.

Now I will provide a brief update on our business segments since our last earnings call just six weeks ago. Energy efficiency services was a key contributor to our strong first-quarter results. It is important to note that these initiatives are being driven by the increased demand for electricity and correlating higher costs and not by the price of oil.

With a tremendous growth potential that we see our energy efficiency services, we are intent on building a business that is both national in scope and ready to address the rapidly changing landscape of how our nation buys, sells, and uses energy.

We have already begun to expand our scope of work outside utilities, which is the next part of our growth story. Our initial work for the large utility, such as ConEd and SoCal Edison, has translated into new business in a broad group of end markets, including hotels, hospitals, datacenters, and financial service firms, to name a few.

Another new avenue of growth for Willdan in energy efficiency is a rapidly emerging area of microgrids. In short, microgrids are local energy networks that can separate from large electrical grids during extreme weather events and provide power to individual customers in critical public services, such as hospitals and water treatment facilities.

Currently, New York and other East Coast states want to establish microgrids in the wake of Superstorm Sandy a few years ago. We believe microgrids are the wave of the future for distributed generation, renewables, and battery storage.

One of our new board members, Dr. Shahidehpour, is an acknowledged expert in the field and is widely regarded as the father of the modern microgrid. There are a number of potential microgrid projects in our pipeline and we look forward to sharing more detail when we can. We believe our deep expertise, combined with our strong relationships with the largest utilities in the US, gives us a strong competitive position to win important projects in this area.

On a separate note, President Obama signed the Energy and Efficiency Improvement Act of 2015 on April 30. The law aims to cut energy use in commercial buildings, manufacturing plants, and homes. While the move toward greater energy efficiency is government mandated, we are seeing a definite shift towards demand being driven by the customer.

A consumer, whether a business, institution, municipality, or an individual, wants more control over how they use energy more efficiently. Since I updated you on our projects a short while ago, I will give you a quick review of progress in the first quarter.

We continue to execute on our important contracts with ConEd, SoCal Edison, and NYSERDA. For ConEd. We began work last August to reduce the load pocket for communities in Brooklyn and Queens, New York, and received another $5 million contract this year to continue our work.

For New York City Energy Efficiency Corp., Willdan Energy and Willdan Financial were jointly retained for the first six months of 2015 to identify new loans for energy efficiency, renewable energy, and other clean energy projects.

We've wrapped up the market surveys and we are currently trained -- it's called NYCEEC -- staff that will be performing this work following contract completion. For our new direct consult project with San Diego Gas and Electric, we are currently negotiating the measure mix and pricing ahead of the project startup this summer.

We also have begun work on a $4 million contract with a global financial services company to provide lighting and other energy efficiency upgrades at various facilities.

Now turning to engineering services. We continued to carry the momentum from 2014 to Q1, with contract revenue up 22% year over year. During the quarter, we continued to execute on recent project wins mentioned on our last call, such as the contract for the city of Southgate, which includes street, traffic, landscape improvements, and our contract for on-call engineering services for the city of Winters in Northern California.

Our pipeline for opportunities remain strong in building and safety, construction management, inspection, and municipal engineering. In summary, the cities are recovering and construction is starting up again in California.

Moving on to Homeland Security services. We successfully completed our bioterrorist response contract in the San Francisco Bay Area. We believe our work on this contract could lead to similar work in California as well as Hawaii and Arizona.

Also in the Bay Area, we continue to plan the 2015 [Urban Shield Yellow Command] full-scale exercise to test the Super Bowl 50 communications and information management plans.

And finally in public finance services. Year to date, we have secured over $4.5 million in new contracts for 2015, with approximately 20% of our new project wins coming from agencies outside the state of California. One of those is in Florida, where we recently won a contract to conduct a wastewater rate study for the City of DeLand.

We continue to see a marked increase in RFPs in this business. In particular, the ongoing drought in California and other states has spurred an increased need for water utility agencies and municipalities to analyze their service cost and update their water rate schedules. Overall, we believe we are well positioned for continued growth and geographic expansion.

In April, we acquired Economist.com, led by Dan Jackson. They are a leader in economic and financial analysis utility, cost-of-service studies, and regulatory representation and litigation support. This acquisition is an outstanding complement to our public finance services and gives us regional offices specializing in utility management consulting in Florida, Texas, Colorado, and California.

This expanded presence takes us from a regional to a national level professional service firm in public finance. Economist.com also delivered 30 secured contracts that are in process and an additional $1 million in targeted projects that we are pursuing through the Dallas headquarters.

So in summary, overall, we had a strong first quarter across each of our businesses. And we are well positioned for another year of growth and profitability.

I would now like to open the call to questions. Operator, please go ahead.

(Operator Instructions) Al Kaschalk, Wedbush Securities.

Very strong performance in the quarter. I want to focus first quickly on the acquisition. I believe you disclosed $4 million of revenue in the quarter. In terms of annualized contribution, was that on a trailing basis doing about $20 million? So is this about the right pace in terms of the historical business for 2015?

Yes, we had 2.5 months of contribution, Al. And Q1 is typically the seasonal low quarter for these acquisitions, just as it is in Willdan. The acquisitions tend to be a little more seasonal, so $20 million is the right run rate approximately on an annual basis.

Thanks, Mike. And then in terms of the integration, seems like it's going well. Talk a little bit about the -- to the extent you can about the calendar of business coming in, based on the structures of the acquisitions and how you're progressing on that front.

There's a lot of activity right now. We are 4 months, 3.5 months since the acquisitions. And we've won 6 or 7 new contracts already. We've got an active pipeline of pursuits.

There's probably 20 different pursuits focused on the East Coast and the West Coast. It's a good cross-selling effort. We've already been successful. So it's a good pipeline, Al.

Okay. Great. Stacy, just a clarification on the commentary about guidance. I think you said EBITDA would grow better than the revenue growth rate. Are we talking 30% on an organic basis if you took the midpoint? So EBITDA would be much better than that, but could you frame what type of number you folks have in mind?

We're trying to decide who should answer, Al. Hang on a second.

And you can answer -- I guess not to give you a free pass on this, but I mean 100% growth (laughter). I think in this quarter here, you did about 100% growth off of last year. So is that the type, given the cost take out you have, the type of work that went in, the margin performance.

The other way to answer that I guess is net margin was about 4.5% in the quarter. And I believe you're tracking to get that towards the 6% or 7% over time. But [15%] should be well above 5% from what I'm hearing.

Our calculation for the EBITDA growth is on a organic and acquisitive basis.

Okay. I'll follow up off-line.

I think that answers your first question. Does that answer all of your questions?

Fair enough. No, I think you're directionally going in the right level of north of 5% on the net margin. And I want to focus on the two business opportunities.

Tom, could you elaborate just on the microgrid side? Very interesting and exciting opportunity. But what type of ramp is that in terms of potential wins and duration of contracts on that specific target area?

Okay, there's probably -- that I know of -- 7 to 10 pilot programs in the country. Here in California, there's UC Irvine. The Department of Power and Water has a little bit. DOE-funded pilot programs. Chula Vista down near San Diego has one.

Those are the three in California I'm aware of. Air Force Academy, Illinois Institute of Technology. On the East Coast, there's a few universities, one down in the Southeast, that have DOE funding to experiment with this.

But your question is how big are they; when are they going to start? What they're finding, it is -- the microgrid is primarily focused on reliability. So if you get a falter or a lightning storm or whatever, you quickly shift your power from one area to another and keep critical infrastructure going. So any type of hospital operating room, data centers, anything of that sort doesn't like power failures

Historically, they've bought backup generation. Going forward, microgrid is a better answer, because you can switch very quickly to other parts of the grid, storage, wherever, and get your power, rather than starting up generators. And there's a cost to those big generators.

So this is being proven out now. The opportunities we're looking at is the State of New York came out with something called New York Prize. Initially, they talked about 35 -- let's call them feasibility studies in the state of New York.

We had to come forth with an area in New York that needed a microgrid because they were suffering from outages, let's say, and you proposed on that. The first six studies, they were $200,000 each. Willdan was awarded 3 of them.

If this study proves that a microgrid is feasible for that area, the State of New York is going to provide $7 million to the community to put the microgrid in. So if we win 3 to 5 to 6 of these -- and we are very, very good -- just in New York, we could have -- hey, it would be fantastic if we had three that went to completion. That would give us the capabilities and the experience in the nation that pretty much, except for Illinois Institute of Technology, is leading.

So does that answer your question now?

Yes, that's helpful. And then just switching over real quick. Obviously, the drought is an issue here in California in the water utility commentary. But how about the ramp in that activity and the skill set that you currently have?

Or do you need to go out and provide -- find additional skill sets for you to be providing services in that area? Just a little bit more talk on that.

We're not going to go out and compete with the major infrastructure firms to convey water from the north to south. When infrastructure upgrades may be preventing leaks or doing things at the municipal level, when that regulatory level comes down or rate studies, just how to make people to pay for things through our financial group, that's where we'll come in.

We have those people in place; they done this work before. So for us, it's a matter of when the state starts to do something. We are not going to go chasing the big infrastructure underground tunnels from the north to the south; we will only be affected when it comes to the cities.

But as you elaborated during your prepared remarks, I think the message we should be taking away is that the incremental business you're picking up and what you're focused on or have the team focused on is driving a better marginal dollar, let alone the organic growth.

Well, it is. But I wouldn't say it's due to the water situation.

No, no. That was more of a broader portfolio question about the book of business you're going after.

Oh, okay. [Then we're in link]. Yes. We are doing --

Thank you. I'll hop in queue.

JD Padgett, ALMAK Capital.

Another great quarter, so congratulations on that. Just a couple questions. In Q4 or Q1, did you have any acquisition-related expenses that don't continue?

There might have been some small ones, but nothing material.

Like $20,000.

Okay. Nothing huge to call out. Okay. And another question would be when we look at the acquisitions, is there any purchase accounting impacts on their contributions right now? In terms of revenue or profit that you can realize?

Yes, the amortization related to the intangibles. The purchase price accounting is not final at this point, but the amortization related to backlog, trade name, and noncompete that will be recorded.

Okay. But nothing that impacts your ability to recognize revenue fully or anything like that?

No.

Okay. And then I know the pro formas that you guys put out in the Form 8-K for the acquisitions awhile back showed them, the acquired companies, as having a pretty substantial combined operating margin through the nine months of last year.

Is that something that is sustainable? Or do think they were kind of running their business too lean to really be able to grow it and you need to reinvest in that? Or how do you look at that?

I don't think they were running it too lean. They were running it -- the hit to them will be coming part of Willdan. We have a larger fringe benefit. We have a corporate F&A that's not in line with how they were running. They were running lean and mean. We are probably going to reduce them by 6%, 7%.

Okay. And that's just kind of within the context of your corporate structure, but the offset is then ability to drive synergy across both companies and so forth.

Correct.

How quickly do you think you could really move the revenue needle with that -- the efforts and what you are pursuing with the combined operations on the revenue side?

Well, they are -- in that pro forma, they are poised to grow considerably, so --.

So just benefiting from your customer relationships and vice versa?

Vice versa, yes. I mean, the part of the sale is that Willdan has to introduce them to our customer base. We have to close deals. I mean, they can do fine on their own, both of them. They were doing fine.

To really benefit, we need to provide customers to them. They've already helped us in winning jobs that we would not have won because of their resumes and past performance. So it's just a little too early yet. I think I had written at one point that by the end of the year, we'll have a pretty good handle on it.

But project is just a project. If you look at a project from the time you know about it until the time it actually starts in this business, it is 6 months to 8 months to 12 months. So we have to identify; we have to kind of down select, pursue, then the customer has to elect to go forward. So that's a six -- a minimum 6 months to 12 month period of time.

So there's kind of a sales cycle in there. And hopefully by next year, we are really seeing the benefits of the synergies between the companies.

Yes. And just for your information as an investor, we've put in cumulative earnouts because we think that ramp up will not happen year-by-year. It will -- I don't want to say hockey stick, but it won't happen in the first six months.

Right. Okay. You can't share any of the criteria around the earnouts, can you?

Actually, it's all in the Form 8-K that was filed in January.

Did it talk about the hurdles?

Yes, I believe it does in the actual detail. Also attached are the agreements, which has it as well.

A lot of good late-night reading. (laughter)

I didn't say it was exciting. (laughter)

And then I guess just the final question on ConEd. I think you mentioned a follow-on contract that you might have received there that I don't know that you necessarily press released. But is there just opportunity for continued follow-on business in that respect? Because I think the scope of the initial contract was, what, like $50 million or something?

Yes. So you're referring to the demand response portion of Brooklyn/Queens load pocket comment I had.

Okay. And there's just additional business that you've been able to layer on top of that with them as you prove yourself there?

Right. So they modified our existing contract to give us demand-response type work rather than direct install. I shouldn't say rather than, but it's a direct installer approach to demand-response. That's a better way to say.

Okay, perfect. Thank you guys very much.

(Operator Instructions)

We're waiting because we had a question come on late last time that we didn't get to. We're giving it an extra second so we don't have that happen again.

Okay.

So there are no further questions from what we can see, operator.

No, it appears there are no further questions at this time. And I'd like to turn the conference back to Mr. Tom Brisbin for any additional or closing remarks.

They're trying to tell me that they can hear me. I know you can hear me. Thanks for your attention and interest in Willdan. We look forward to seeing some of you in the coming weeks and keeping you posted on our achievements this year. So thanks a lot.

This concludes today's conference. Thank you for your participation.