Willdan Group, Inc. (WLDN) Bundle
Understanding Willdan Group, Inc. (WLDN) Revenue Streams
Understanding Willdan Group, Inc.’s Revenue Streams
The company generates revenue primarily through two segments: Energy and Engineering and Consulting. The breakdown of revenue sources for the three months ended September 27, 2024, is as follows:
| Contract Type | Energy (in thousands) | Engineering and Consulting (in thousands) | Total (in thousands) |
|---|---|---|---|
| Time-and-materials | $7,953 | $17,767 | $25,720 |
| Unit-based | $52,487 | $4,993 | $57,480 |
| Fixed price | $73,596 | $1,456 | $75,052 |
| Total | $134,036 | $24,216 | $158,252 |
For the nine months ended September 27, 2024, the revenue breakdown is as follows:
| Contract Type | Energy (in thousands) | Engineering and Consulting (in thousands) | Total (in thousands) |
|---|---|---|---|
| Time-and-materials | $25,190 | $51,193 | $76,383 |
| Unit-based | $147,022 | $14,375 | $161,397 |
| Fixed price | $180,422 | $3,535 | $183,957 |
| Total | $352,634 | $69,103 | $421,737 |
Year-over-Year Revenue Growth Rate
For the three months ended September 27, 2024, consolidated contract revenue increased by $25.5 million, or 19.2%, compared to the same period in 2023. The Energy segment's revenue rose by $23.0 million, or 20.7%, while the Engineering and Consulting segment saw an increase of $2.5 million, or 11.6%.
For the nine months ended September 27, 2024, consolidated contract revenue increased by $67.3 million, or 19.0%, compared to the nine months ended September 29, 2023. The Energy segment's revenue rose by $60.3 million, or 20.6%, and the Engineering and Consulting segment increased by $7.0 million, or 11.3%.
Contribution of Different Business Segments to Overall Revenue
In the three months ended September 27, 2024, the Energy segment contributed 84.7% of total revenue, while the Engineering and Consulting segment contributed 15.3%. In the nine months ended September 27, 2024, the proportions were 83.5% and 16.5%, respectively.
Significant Changes in Revenue Streams
In the Energy segment, the increase in revenue was primarily driven by higher construction management revenues and increased demand for energy and electrification services under utility programs. The Engineering and Consulting segment's growth was attributed to increased demand for services provided to clients.
Overall, the company’s total gross profit increased by 18.8% to $51.6 million for the three months ended September 27, 2024, compared to $43.4 million for the same period in 2023. The gross margin remained relatively stable, decreasing slightly to 32.6% from 32.7%.
A Deep Dive into Willdan Group, Inc. (WLDN) Profitability
Profitability Metrics
Gross Profit: For the three months ended September 27, 2024, the gross profit was $51.6 million, representing a gross margin of 32.6%. This reflects an increase of 18.8% from the gross profit of $43.4 million and a gross margin of 32.7% for the same period in 2023.
Operating Profit: Operating income rose to $8.7 million for the three months ended September 27, 2024, compared to $3.8 million for the three months ended September 29, 2023, indicating a significant increase of 126.1%.
Net Profit: Net income for the three months ended September 27, 2024, was $7.3 million, up from $1.6 million for the same period in the previous year, yielding a year-over-year increase of 369.1%.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit | $51.6 million | $43.4 million | +18.8% |
| Operating Income | $8.7 million | $3.8 million | +126.1% |
| Net Income | $7.3 million | $1.6 million | +369.1% |
Trends in Profitability Over Time: For the nine months ended September 27, 2024, consolidated contract revenue reached $421.7 million, a 19.0% increase from $354.4 million in the same period in 2023. Gross profit for the nine months was $147.8 million, with a gross margin of 35.1%, compared to $125.3 million and 35.4% in the prior year. Operating income for this period increased to $20.5 million from $10.3 million, indicating a growth of 98.4%.
Comparison of Profitability Ratios with Industry Averages: The gross margin of 32.6% for Q3 2024 is slightly below the industry average of approximately 35%. Similarly, the operating margin of 5.5% is also below the industry benchmark of around 10%.
| Metric | WLDN Q3 2024 | Industry Average |
|---|---|---|
| Gross Margin | 32.6% | 35% |
| Operating Margin | 5.5% | 10% |
Analysis of Operational Efficiency: General and administrative expenses for Q3 2024 were $42.9 million, an increase of 8.4% compared to $39.6 million in Q3 2023. Salaries and wages accounted for 16.4% of contract revenue, a decrease from 17.9% year-over-year. This reduction indicates improved cost management despite the overall increase in expenses.
Direct costs of contract revenue rose to $106.7 million in Q3 2024 from $89.3 million in Q3 2023, a 19.4% increase, driven primarily by increases in subcontractor services and other direct costs, which accounted for 52.2% of contract revenue.
Debt vs. Equity: How Willdan Group, Inc. (WLDN) Finances Its Growth
Debt vs. Equity: How Willdan Group, Inc. Finances Its Growth
As of September 27, 2024, the company's total debt stood at $92.6 million, which includes outstanding borrowings on a term loan and other debt agreements. The breakdown of debt is as follows:
| Debt Type | Amount (in thousands) |
|---|---|
| Outstanding borrowings on Term Loan | $92,500 |
| Outstanding borrowings on Revolving Credit Facility | $0 |
| Other debt agreements | $137 |
| Total Debt | $92,637 |
| Issuance costs and debt discounts | ($743) |
| Subtotal | $91,894 |
| Less current portion of long-term debt | ($10,137) |
| Long-term debt portion | $81,757 |
The company's debt-to-equity ratio is currently 0.44, which indicates a conservative approach to leveraging compared to industry standards, where the average ratio typically ranges between 0.5 and 1.0.
In terms of recent debt activity, the company has reduced its term loan from $98.1 million in December 2023 to $92.5 million as of September 2024. This reflects a commitment to deleveraging and improved credit metrics. The company’s composite interest rate on its borrowings is reported at 7.2%.
Additionally, the company has demonstrated prudent management of its debt obligations by maintaining compliance with financial covenants, including a maximum Net Leverage Ratio and a minimum Fixed Charge Coverage Ratio. As of the latest reporting period, the company was in compliance with all these covenants.
Willdan Group, Inc. balances its financing strategies through a combination of debt and equity funding. In the most recent quarter, the company's net cash provided by operating activities was $38.6 million, which aids in supporting its operational and financial obligations without overly relying on debt.
In summary, the current financial structure of Willdan Group, Inc. reflects a disciplined approach to managing growth through a balanced mix of both debt and equity funding, ensuring financial stability and operational flexibility.
Assessing Willdan Group, Inc. (WLDN) Liquidity
Assessing Willdan Group, Inc.'s Liquidity
Current and Quick Ratios
As of September 27, 2024, the current ratio stands at 2.30, indicating a strong liquidity position. The quick ratio is reported at 1.75, suggesting that the company can cover its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
Working capital as of September 27, 2024, is approximately $53.1 million. This reflects an increase compared to $24.5 million as of September 29, 2023, indicating improved operational efficiency and short-term financial health.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 27, 2024, is $38.6 million, up from $24.1 million for the same period in 2023. Cash used in investing activities is ($6.0 million) compared to ($9.1 million) in 2023, while cash used in financing activities decreased to ($2.9 million) from ($21.6 million).
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $38,611 | $24,112 |
| Investing Activities | ($6,045) | ($9,115) |
| Financing Activities | ($2,857) | ($21,595) |
| Net Increase (Decrease) in Cash | $29,709 | ($6,598) |
Potential Liquidity Concerns or Strengths
As of September 27, 2024, the company holds $53.1 million in unrestricted cash and cash equivalents, which enhances its liquidity position. The fully drawn $100 million term loan has $92.5 million outstanding, with a revolving credit facility of $50 million available, indicating robust access to additional liquidity if needed.
Is Willdan Group, Inc. (WLDN) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Valuation Ratios
The following ratios are essential for assessing the company's valuation:
- Price-to-Earnings (P/E) Ratio: As of September 27, 2024, the P/E ratio stands at 12.5, compared to 22.0 from the previous year.
- Price-to-Book (P/B) Ratio: The P/B ratio is 1.8, reflecting a decrease from 2.1 in the previous year.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: Currently, the EV/EBITDA ratio is 9.0, down from 12.0 last year.
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 15.00 |
| December 2023 | 18.50 |
| March 2024 | 20.00 |
| June 2024 | 22.50 |
| September 2024 | 19.00 |
Dividend Yield and Payout Ratios
The company has not traditionally paid dividends. As of September 27, 2024:
- Dividend Yield: 0%
- Payout Ratio: 0%
Analyst Consensus
As of the latest reports, the analyst consensus regarding the stock's valuation is:
- Buy: 5 Analysts
- Hold: 4 Analysts
- Sell: 1 Analyst
The overall sentiment indicates a majority favoring a buy recommendation based on the company’s growth potential and recent financial performance.
Key Risks Facing Willdan Group, Inc. (WLDN)
Key Risks Facing Willdan Group, Inc.
The company faces several internal and external risks that impact its financial health. These risks can be categorized into industry competition, regulatory changes, and market conditions.
Industry Competition
Willdan operates in a highly competitive environment, particularly within the engineering and consulting sectors. The company recorded a 19.0% increase in consolidated contract revenue, amounting to $421.7 million for the nine months ended September 27, 2024, compared to $354.4 million for the same period in 2023. Despite this growth, the presence of numerous competitors could pressure profit margins and market share.
Regulatory Changes
Changes in regulations, particularly those related to environmental standards and energy efficiency, pose a risk to operations. The company has seen a 20.6% increase in contract revenue from its Energy segment, totaling $352.6 million for the nine months ended September 27, 2024. Regulatory compliance may require increased investment in technology and processes, impacting operational costs.
Market Conditions
Fluctuations in economic conditions can significantly affect the demand for the company's services. The overall economic environment influences both government and commercial spending on infrastructure and energy efficiency projects. The company reported a 2.1% effective tax rate for the three months ended September 27, 2024, down from 31.3% for the same period in 2023, indicating potential volatility in financial performance due to changing market conditions.
Operational Risks
Operational risks include the potential for project delays and cost overruns, which could adversely affect financial performance. Direct costs of contract revenue increased by 19.6%, amounting to $273.9 million for the nine months ended September 27, 2024. These rising costs could squeeze margins and affect profitability if not managed effectively.
Financial Risks
Financial risks encompass interest rate fluctuations and debt levels. As of September 27, 2024, the outstanding borrowings on the term loan were $92.5 million, with total debt at $92.6 million. The company's interest expense net was $6.0 million for the nine months ended September 27, 2024, compared to $7.1 million for the same period in 2023. Increased debt levels can lead to higher interest costs, impacting net income and cash flow.
Mitigation Strategies
To address these risks, the company has implemented several mitigation strategies. Diversifying its client base and service offerings can reduce dependence on any single customer or segment. The company’s top 10 customers accounted for 49.1% of total contract revenue for the nine months ended September 27, 2024, a slight decrease from 52.9% in the same period in 2023. This diversification helps cushion against revenue volatility.
Table of Financial Overview
| Metrics | September 27, 2024 | September 29, 2023 | Change (%) |
|---|---|---|---|
| Contract Revenue | $421.7 million | $354.4 million | 19.0% |
| Direct Costs of Contract Revenue | $273.9 million | $229.1 million | 19.6% |
| Net Income | $14.9 million | $2.9 million | 414.5% |
| Outstanding Debt | $92.6 million | $98.5 million | -6.6% |
| Interest Expense | $6.0 million | $7.1 million | -15.5% |
Future Growth Prospects for Willdan Group, Inc. (WLDN)
Future Growth Prospects for Willdan Group, Inc.
Analysis of Key Growth Drivers
Willdan Group, Inc. is positioned to capitalize on several growth drivers in the coming years:
- Product Innovations: The company has seen a 20.6% increase in contract revenue in its Energy segment for the nine months ended September 27, 2024, driven by enhanced energy and electrification services.
- Market Expansions: Willdan has expanded its operations across 22 U.S. states, with significant revenue contributions from California and New York, which accounted for 42.2% and 21.0% of consolidated contract revenue, respectively.
- Acquisitions: The company continues to explore strategic acquisitions to enhance its service offerings and market reach, although no specific acquisitions were noted in the latest reports.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections indicate a continued upward trend:
- Consolidated contract revenue increased by $67.3 million, or 19.0%, in the nine months ended September 27, 2024, compared to the same period in 2023.
- Operating income for the nine months ended September 27, 2024, rose to $20.5 million, up 98.4% from $10.3 million in the previous year.
Strategic Initiatives or Partnerships
Strategic initiatives are expected to drive further growth:
- Partnerships with utility companies are enhancing service delivery and expanding market presence, particularly in energy efficiency programs.
- The company is actively engaging in energy-efficiency building projects that benefit from state and federal incentives, further bolstering growth.
Competitive Advantages
Willdan's competitive advantages include:
- Strong Market Position: The company’s top ten customers accounted for 49.1% of consolidated contract revenue for the three months ended September 27, 2024.
- Diverse Service Offerings: Willdan provides a wide range of engineering and consulting services, allowing it to cater to various sectors including commercial, government, and utilities.
- Robust Financial Health: The company reported a net income of $14.9 million for the nine months ended September 27, 2024, compared to $2.9 million in the same period in 2023.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Contract Revenue | $158,252,000 | $132,738,000 | +19.2% |
| Net Income | $7,346,000 | $1,566,000 | +369.5% |
| Operating Income | $8,674,000 | $3,837,000 | +126.5% |
| Gross Profit | $51,601,000 | $43,428,000 | +18.8% |
| General and Administrative Expenses | $42,927,000 | $39,591,000 | +8.4% |
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Article updated on 8 Nov 2024
Resources:
- Willdan Group, Inc. (WLDN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Willdan Group, Inc. (WLDN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Willdan Group, Inc. (WLDN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.