Willdan Group (WLDN) Delivers Q3
New addition Willdan Group (WLDN) reported a solid beat and raise after the close yesterday.
I mentioned in my write-up on the company that Willdan reports both “contract revenue” and “net revenue.” The difference between the two (contract revenue is higher) is “subcontractor services and other direct costs,” which are pass through costs paid out to contractors, like electricians, plumbers, excavators, etc. Keep that in mind when reviewing WLDN’s numbers. Also, note that there are only one or two analysts following the company so take “consensus” estimates with a grain of salt.
Let’s jump in.
The Numbers:
- Contract revenue grew 15.9% to $158.3 million, beating $108.4 million consensus (two analysts) by almost $50 million.
- Net revenue grew 15.9% to $75.7 million
- Adjusted EBITDA was $15.2 million, beating consensus by $400,000.
- EPS of $0.73 beat by $0.18 and grew 97.3%.
Guidance for Fiscal Year 2024:
- Net revenue of $285 – $295 million, implying about 7.4% growth. This seems slow, but Q4 2023 was a MONSTER quarter that’s not likely to repeat this year.
- Adjusted EPS of $2.15 to $2.25 vs. consensus of $2.10
- Adjusted EBITDA $52 – $54 million vs. consensus of $52.4 million
Guidance for Fiscal 2025
- Organic revenue growth of 7% to 9% (M&A will likely add to this), with upside potential. More detail to come in March.
Conference Call Takeaways:
- On the election: State policy is more influential on WLDN operations than federal; business was good under both Trump and Biden administrations.
- Public Utility Commissions are increasingly rejecting rate hikes, focusing on electricity savings amid rising prices.
- There is rapid growth in Florida and Texas, especially with post-hurricane rebuilding efforts in northern Florida.
- Enica acquisition boosts commercial sector presence.
- Additional M&A will be aimed at data center opportunities.
- Main revenue growth drivers: strong performance in state and local government sectors, significant Q4 utility revenue expected.
My Take:
Willdan Group had a very, very solid third quarter, smashing both consensus (all two analysts!) and management’s expectations. Contract revenue grew 19% organically, and adjusted EBITDA jumped 50% year-over-year. Adjusted EPS doubled, and GAAP EPS soared more than four times. With strong year-to-date results and ongoing momentum, WLDN raised full-year financial targets, but keep in mind that it’s unlikely Q4 will be bigger than last year’s, which was off-the-charts good. Although the future speed and scale of electricity load growth is uncertain, there’s widespread agreement that growth is happening, and will continue. Willdan remains a solid and still unknown play on energy efficiency, electrification and decarbonization. The stock should act well on this report. BUY
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