Willdan Group, Inc. 2026 Q2 Earnings Call

Thank you, Cleo. Good afternoon, everyone, and welcome to Willdan Group's second quarter 2026 earnings call. Joining our call today are Mike Bieber, President and CEO, and Kim Early, Executive Vice President and CFO. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides, all of which are available on our website. Please note that year-over-year commentary or variances on revenue, adjusted EBITDA, and adjusted EPS discussed during our prepared remarks are on an actual basis unless otherwise specified. We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some time in the future, we do not undertake any obligation to do so.

As described in our SEC filings, actual results may differ materially due to risks and uncertainties. With that, I'll hand the call over to Mike, who will begin on slide two.

Thanks, Al, and good afternoon to everyone on the call. We had a very strong second quarter, capping a strong first half and continuing the momentum we've built across the business. Demand remains healthy. Execution was strong, and we delivered significant growth in both revenue and profitability. In the second quarter, contract revenue increased 33% year-over-year to $231 million. Net revenue grew 23% to $117 million, and adjusted EBITDA increased 51% to a record $33 million in the quarter. GAAP earnings per share increased 53%, even faster, to $1.58, and adjusted earnings per share increased 38% to $2.07. All those growth metrics are on top of strong performance we had a year ago. Overall, the business is performing well. We're seeing strength across all of our customer groups, but commercial demand, in particular, is accelerating and expanding our addressable market.

AI is adding to electric load growth and is also improving Willdan's productivity to help us solve clients' more complex problems. With a strong first half behind us and good visibility into the remainder of the year, we're raising our full-year financial targets. On slide three. When I became CEO at the beginning of 2024, I talked about our strategy to significantly increase our presence in the commercial market. We believed then that a broader customer base would add stability, create new growth opportunities, and support higher margins. That strategy has worked well, and commercial revenue has now added a third leg to the stool. It's currently about a quarter of our business and is helping create more balanced, consistent results. Importantly, this growth complements our strong utility and government business.

The largest part of our commercial revenue is for electricity at data centers and is the fastest-growing part of Willdan. As another data point, revenue from our APG acquisition, which is commercially focused, is projected to nearly triple this year over last, to roughly $75 million. The commercial market also gives us another channel to deploy our engineering, software, procurement, and energy management capabilities. We believe that broadens our addressable market and strengthens Willdan's long-term growth profile. On slide four. This slide shows how that diversification is taking shape across our customers, contracts, and services. We now serve a broader mix of utilities, public agencies, and commercial clients. We balance recurring program work with project-based engagements, and our services now span advisory, engineering, software, implementation, and ongoing energy management.

This balance matters because it reduces our dependence on any single customer type or service line, allows us to participate across more of the energy investment life cycle, and positions us to pursue larger and more complex opportunities. Burton Energy is a good example of how we're extending that strategy. On the next slide five. Burton is performing well right out of the gate. It had the characteristics we look for in all acquisitions: a strong management team, differentiated capabilities, strong client relationships, and meaningful cross-selling opportunities with the rest of the company. Since closing on May 4th, we've focused on converting to Willdan's ERP system, customer continuity, and cross-sell. We're pleased with the early progress, including new customer relationships with Walgreens, Carter's, and Five Below, all since May. Burton adds significant expertise in building HVAC and energy controls technology.

It also adds a new line of business in commercial energy procurement. Burton is already involved in two Willdan utility programs, and we're particularly optimistic about cross-selling Burton's commercial experience with Willdan's broader technical capabilities. Next on slide six. We've had another strong stretch of contract wins, and here are six notable examples since our last earnings call. For the Los Angeles Department of Water and Power, LADWP, we were awarded a $110 million solar streetlight contract expansion through the existing commercial direct install program. This project combines energy efficiency, resiliency, and public infrastructure. It removes streetlight load from the LADWP power grid, providing additional capacity while also increasing public safety. We hope that programs like this could be launched in major metro areas across the country. We're also awarded a $53 million central plant upgrade for the City College of New York.

Energy projects like these are core competencies of Willdan's, especially for the municipal utility, school, and hospital, or MUSH market. Since the last call, we were awarded a new five-year, $49 million energy efficiency contract with the Southern California Regional Energy Network, or SoCalREN, supporting the public sector on resiliency. The California RENs are assuming a larger role from traditional investor-owned utilities in the energy efficiency space. And we have a number of future opportunities with the RENs that are even larger in scope and funding than this contract. We were also awarded a $31 million renewable biogas cogeneration and microgrid project, a $15 million battery energy storage project in Texas, and a $6 million substation project in Illinois. Taken together, these wins demonstrate three trends we're seeing. Customers trust us with larger projects, the customer base continues to broaden, and the solutions we deliver are becoming more complex.

Each quarter, we try to step back and look at the broader forces shaping electricity markets and Willdan's opportunity. On the next slide seven, electricity providers are confronting several major challenges at the same time. Load growth due to rapidly changing or rapidly growing demand, continued pressure on affordability rates, and an increasing need for reliability. These challenges are closely connected, and they're intertwined. Utilities are being asked to add capacity, modernize the grid, and improve reliability while limiting the impact on customer rates. That requires more sophisticated planning, investment, and execution. Demand is already straining generation and grid capacity in certain circumstances and locations, while data center development is adding permitting and interconnection pressure in several markets. At the same time, substantial capital needs are placing pressure on rates and utility returns, making energy efficiency and distributed resources increasingly valuable.

Extreme weather and wildfires are also raising outage risk and disrupting grid operations, especially in the Western U.S. This environment aligns well with Willdan's capabilities. We help customers evaluate trade-offs, plan investments, improve efficiency, and implement solutions across the grid and behind the meter. The next big question is: how are the customers responding? On slide eight. Utilities and hyperscalers alike are responding with the increased investment in large-scale battery storage. Battery storage is important because it adds flexibility to the power system. It can help manage peak demand, support intermittent renewable generation, improve resiliency, and provide backup power for critical facilities. Batteries are also rapidly dispatchable power available to the grid in milliseconds and ideally suited to AI learning model electricity load spikes.

These batteries complement, and sometimes they can replace the need for gas peaker plants, which require 5-15 minutes to spool up compared to the milliseconds for batteries. We're seeing a growing pipeline of battery storage opportunities, often as part of larger projects that combine planning, engineering, controls, renewable generation, and microgrid capabilities. That increasingly complex multidisciplinary work is a good fit for us. Finally, on slide nine. As we've mentioned, the largest growth in electricity demand is due to data centers. This growth is occurring throughout the U.S. Speed to power is the primary factor determining where data centers will be located. Accordingly, there are a lot of opportunities in Texas, and Willdan already has a number of projects underway there. Several studies have shown that to date, data center load growth has reduced the public's electricity bills.

However, more grid investment will be required to accommodate future AI load growth. Willdan is involved in studies across the country that inform these decisions and help ensure data centers continue to pay their fair share. We believe the convergence of power load growth, affordability, and reliability will create opportunities for Willdan for years to come. We do seem to be right now at the right place at the right time. I'm very pleased with our performance throughout the first half of 2026. Good job to the Willdan team. Tim, now over to you.

Thanks, Mike, and good afternoon, everyone. We delivered another quarter of strong financial performance, driven by healthy underlying demand, disciplined execution, and continued growth across all our markets. Another quarter of record profitability, strong cash flows, and a healthy balance sheet positions us well to capitalize on the opportunities ahead. Turning to our second quarter results on slide 11. Contract revenue increased 33% year-over-year to $231 million, while net revenue grew 23% to $117 million. While our Burton acquisition contributed strongly to the growth, the organic growth rate and net revenue was 18% year-over-year, reflecting the higher revenues from data centers, battery storage projects, and the continued health of our utility and municipal infrastructure businesses. Higher volume and strong execution drove gross profit dollars up 28% year-over-year.