Willdan Group Inc

Previous wording

Contract revenue. Consolidated contract revenue increased $25.5 million, or 19.2%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023, due to incremental revenues in both our Energy segment and our Engineering and Consulting segment.

Current wording

Contract revenue. Consolidated contract revenue increased $29.9 million, or 24.4%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024, reflecting increased demand for our services in both our Energy segment and our Engineering and Consulting segment.

Previous wording

Contract revenue in our Energy segment increased $23.0 million, or 20.7%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily as a result of increased demand for energy efficiency and electrification services under utility programs and higher construction management revenues.

Current wording

Contract revenue in our Energy segment increased $25.5 million, or 25.3%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily as a result of increased demand for energy efficiency and electrification services under utility programs, higher construction management revenues, higher planning and advisory consulting revenues, and the incremental revenues from our acquisitions of Enica Engineering, PLCC. (“Enica”) and Alternative Power Generation, Inc. (“APG”).

Previous wording

Contract revenue in our Engineering and Consulting segment increased $2.5 million, or 11.6%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily due to increased demand for services provided to our clients.

Current wording

Contract revenue in our Engineering and Consulting segment increased $4.4 million, or 20.2%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily due to increased demand for services provided to our clients, combined with the incremental revenues from our acquisition of Alpha Inspections, Inc. (“Alpha”).

Previous wording

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $17.3 million, or 19.4%, for the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily as a result of the increase, and change of mix, in contract revenues as described above. As a percentage of contract revenue, direct salaries and wages decreased to 15.2% in the three months ended September 27, 2024 from 16.5% in the three months ended September 29, 2023, while subcontractor services and other direct costs increased to 52.2% in the three months ended September 27, 2024 from 50.8% in the three months ended September 29, 2023.

Current wording

Direct costs of contract revenue. Direct costs of consolidated contract revenue increased $19.7 million, or 26.2%, for the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily as a result of the increase and change of mix in contract revenues as described above. As a percentage of contract revenue, direct salaries and wages increased to 18.2% in the three months ended April 4, 2025 from 17.6% in the three months ended March 29, 2024, while subcontractor services and other direct costs was relatively flat for the three months ended April 4, 2025 compared to the three months ended March 29, 2024.

Previous wording

Direct costs of contract revenue in our Energy segment increased $17.1 million, or 21.6%, for the three months ended September 27, 2024, compared to the three months ended September 29, 2023. Direct costs of contract revenue for the Engineering and Consulting segment increased $0.2 million, or 2.7%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023.

Current wording

Direct costs of contract revenue in our Energy segment increased $17.7 million, or 27.1%, for the three months ended April 4, 2025, compared to the three months ended March 29, 2024. Direct costs of contract revenue for the Engineering and Consulting segment increased $2.0 million, or 20.0%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024.

Previous wording

Subcontractor services and other direct costs increased by $15.1 million, or 22.4%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily due to the increase in utility program revenues and construction management revenues, which utilize a higher percentage of material cost and installation subcontracting. Salaries and wages increased by $2.2 million, or 10.2%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily as aresult of the increases in contract revenue as described above.

Current wording

Subcontractor services and other direct costs increased by $13.5 million, or 25.2%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily due to the increase in utility program revenues and construction management revenues, which utilize a higher percentage of material cost and installation subcontracting. Salaries and wages increased by $6.2 million, or 28.7%, in the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily as aresult of the increases in contract revenue as described above.

Previous wording

Gross Profit. Gross profit increased 18.8% to $51.6 million, or 32.6% gross margin, for the three months ended September 27, 2024, compared to gross profit of $43.4 million, or 32.7% gross margin, for the three months ended September 29, 2023. The decrease in our gross margin was primarily driven by changes in the mix of revenues as described above.

Current wording

Gross Profit. Gross profit increased 21.6% to $57.7 million, or 37.8% gross margin, for the three months ended April 4, 2025, compared to gross profit of $47.4 million, or 38.7% gross margin, for the three months ended March 29, 2024. The decrease in our gross margin was primarily driven by changes in the mix of revenues as described above.

Previous wording

General and administrative expenses. General and administrative (“G&A”) expenses increased $3.3 million, or 8.4%, in the three months ended September 27, 2024, compared to the three months ended September 29, 2023. G&A expenses consisted of an increase of $2.0 million in the Energy segment combined with an increase of $0.8 million in the Engineering and Consulting segment, and an increase of $0.5 million in unallocated corporate expenses.

Current wording

General and administrative expenses. General and administrative (“G&A”) expenses increased $8.6 million, or 20.4%, to $50.6 million in the three months ended April 4, 2025, compared to $42.1 million for the three months ended March 29, 2024. G&A expenses consisted of an increase of $7.0 million, or 21.9%, in the Energy segment combined with an increase of $1.4 million, or 15.5%, in the Engineering and Consulting segment, and an increase of $0.2 million, or 17.1%, in unallocated corporate expenses.

Previous wording

Within G&A expenses, the increase of $2.1 million in salaries and wages, payroll taxes and employee benefits, combined with the increase of $0.9 million in other general and administrative expenses, and the increase of $0.8 million in stock-based compensation was partially offset by a decrease of $0.5 million in depreciation and amortization. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to an increase in incentive compensation, consistent with the improvement in operating profit, and higher fringe benefit costs. The increase in other general and administrative expenses was primarily due to increased professional service fees and computer-related expenses. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees and executives. The decrease in depreciation and amortization was primarily related to lower amortization of intangible assets from prior acquisitions.

Current wording

The overall increase in G&A expenses consisted of an increase of $4.6 million in salaries and wages, payroll taxes and employee benefits, an increase of $1.9 million in other general and administrative expenses, an increase of $1.0 million in stock-based compensation, and an increase of $0.8 million in depreciation and amortization. The increase in salaries and wages, payroll taxes and employee benefits was primarily due to an increase in incentive compensation, consistent with the improvement in operating profit, and higher fringe benefit costs. The increase in other general and administrative expenses was primarily due to increased professional service fees and computer-related expenses. The increase in stock-based compensation expenses was primarily related to new stock grants to current employees and executives at a higher stock price. The increase in depreciation and amortization was primarily related to higher amortization of intangible assets from recent acquisitions.

Previous wording

Income (loss) from operations. Operating income increased to $8.7 million for the three months ended September 27, 2024, compared to an operating income of $3.8 millionfor the three months ended September 29, 2023, as a result of the factors noted above.

Current wording

Income (loss) from operations. Operating income increased to $7.0 million for the three months ended April 4, 2025, compared to an operating income of $5.4 millionfor the three months ended March 29, 2024, as a result of the factors noted above.

Previous wording

Total other expense, net. Total other expense, net, decreased $0.4 million, or 24.8%, for the three months ended September 27, 2024, compared to the three months ended September 29, 2023, primarily due to lower interest expense resulting from the reduced interest rate spread derived from lower debt leverage levels under our credit facilities.

Current wording

Total other expense, net. Total other expense, net, increased $0.4 million, or 28.6%, for the three months ended April 4, 2025, compared to the three months ended March 29, 2024, primarily due to a one-time charge related to a facility lease modification, partially offset by lower interest expense resulting from the reduced interest rate spread derived from lower debt leverage levels under our credit facilities.

Previous wording

Income tax expense (benefit). We recorded an income tax expense of $0.2 million for the three months ended September 27, 2024, an effective tax rate of 2.1% on income before income tax expense, compared to an income tax expense of $0.7 million for the three months ended September 29, 2023, an effective tax rate of 31.3% on income before tax expense. The reduction in the effective tax rate resulted from increases in discrete items related to stock compensation deductions and additional energy-efficiency building deductions.

Current wording

Income tax expense (benefit). We recorded an income tax expense of $0.5 million for the three months ended April 4, 2025, an effective tax rate of 9.8% on income before income tax expense, compared to an income tax expense of $1.0 million for the three months ended March 29, 2024, an effective tax rate of 25.1% on income before tax expense. The reduction in the effective tax rate resulted from increases in discrete items related to stock compensation deductions and additional energy-efficiency building deductions.

Previous wording

Net income (loss). Our net income was $7.3 million for the three months ended September 27, 2024, as compared to a net income of $1.6 million for the three months ended September 29, 2023. The increase in net income was primarily attributable to the increase in income from operations combined with the decrease in total other expense, net and the lower effective tax rate.

Current wording

Net income (loss). Our net income was $4.7 million for the three months ended April 4, 2025, as compared to a net income of $2.9 million for the three months ended March 29, 2024. The increase in net income was primarily attributable to the increase in income from operations combined with the lower effective tax rate.

Previous wording

As of September 27, 2024, we had a fully drawn $100 million term loan with $92.5 million outstanding (the “Term Loan”, and collectively with the Revolving Credit Facility, the “Credit Facilities”), and a $50.0 million Revolving Credit Facility with no borrowed amounts and $1.6 million in letters of credit issued, each scheduled to mature on September 29, 2026. In addition, as of September 27, 2024, we had $53.1 million of unrestricted cash and cash equivalents.

Current wording

As of April 4, 2025, we had a fully drawn $100 million term loan with $87.5 million outstanding (the “Term Loan”, and collectively with the Revolving Credit Facility, the “Credit Facilities”), and a $50.0 million Revolving Credit Facility with no borrowed amounts and $1.6 million in letters of credit issued, each scheduled to mature on September 29, 2026. In addition, as of April 4, 2025, we had $38.4 million of unrestricted cash and cash equivalents. As of April 4, 2025, unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 6.4%.

Previous wording

As of September 27, 2024, unhedged borrowings under our Credit Facilities, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, bore interest at an annual rate of 7.2%. See Part I, Item 1, Note 6, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 6, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, for information regarding our indebtedness, including information about borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Current wording

On May 5, 2025 (the “Closing Date”), we entered into the Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement (A) increased the borrowing limit under the Revolving Credit Facility to $100.0 million, (B) reduced the Term Loan A (“TLA”) commitment to $50.0 million, (C) provided a new $50.0 million Delayed Draw Term Loan (the “Delayed Draw Term Loan,” and together with the Revolving Credit Facility and TLA, the “Credit Facilities”), and (D) extended the maturity date of the Credit Facilities to May 5, 2030. In connection with the Amended and Restated Credit Agreement, the Company borrowed $38.4 million under the Revolving Credit Facility which it used to repay a portion of the TLA such that, on the Closing Date, the outstanding principal amount of the TLA was $50.0 million. See Part I, Item 1, Note 6, “Debt Obligations”, Note 14, “Subsequent Events” of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, for information regarding our indebtedness, including information about borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Previous wording

Cash flows provided by operating activities were $38.6 million for the nine months ended September 27, 2024, as compared to cash flows provided by operating activities of $24.1 million for the nine months ended September 29, 2023. Cash flows from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities. Cash flows provided by operating activities for the nine months ended September 27, 2024, resulted primarily from the increase in earnings and lower working capital requirements. Cash flows provided by operating activities for the nine months ended September 29, 2023, resulted primarily from the increase in earnings, combined with lower working capital requirements.

Current wording

Cash flows provided by operating activities were $3.3 million for the three months ended April 4, 2025, as compared to cash flows provided by operating activities of $26.9 million for the three months ended March 29, 2024. Cash flows from operating activities primarily consists of net income, adjusted for non-cash charges, such as depreciation and amortization and stock-based compensation, plus or minus changes in current operating assets and liabilities. Cash flows provided by operating activities for the three months ended April 4, 2025, resulted primarily from the increase in earnings and working capital requirements. Cash flows provided by operating activities for the three months ended March 29, 2024, resulted primarily from the increase in earnings and lower working capital requirements

Previous wording

Cash flows used in investing activities were $6.0 million for the nine months ended September 27, 2024, as compared to cash flows used in investing activities of $9.1 million for the nine months ended September 29, 2023. Cash flows used in investing activities for the nine months ended September 27, 2024 and for the nine months ended September 29, 2023, were primarily due to cash paid for the development of software and the purchase of computers and equipment.

Current wording

Cash flows used in investing activities were $34.8 million for the three months ended April 4, 2025, as compared to cash flows used in investing activities of $2.0 million for the three months ended March 29, 2024. Cash flows used in investing activities for the three months ended April 4, 2025 were primarily due to cash paid for acquisitions, combined with cash paid for the development of proprietary software and the purchase of computers and equipment. Cash flows used in investing activities for the three months ended March 29, 2024 were primarily due to cash paid for the development of software and the purchase of computers and equipment.

Previous wording

Cash flows used in financing activities were $2.9 million for the nine months ended September 27, 2024, as compared to cash flows used in financing activities of $21.6 million for the nine months ended September 29, 2023. Cash flows used in financing activities for the nine months ended September 27, 2024 were primarily attributable to the repayments of $5.6 million under our Term Loan, $1.2 million cash used to pay withholding taxes on stock grants, and $1.0 million principal payments on finance leases, partially offset by $2.8 million of proceeds from sales of common stock under employee stock purchase plan and $2.4 million in proceeds from stock option exercises. Cash flows used in financing activities for the nine months ended September 29, 2023 were primarily attributable to the disbursement of $10.7 million in restricted cash for utility rebate incentives, payments of $4.0 million for contingent consideration related to prior acquisitions, combined with repayments and borrowings of $111.0 million and $105.0 million, respectively, under our term loan facility and line of credit, which resulted primarily from refinancing our Prior Credit Facility.

Current wording

Cash flows used in financing activities were $4.3 million for the three months ended April 4, 2025, as compared to cash flows used in financing activities of $1.5 million for the three months ended March 29, 2024. Cash flows used in financing activities for the three months ended April 4, 2025 were primarily attributable to the $2.9 million cash used to pay withholding taxes on stock grants, the repayments of $2.5 million under our Term Loan, partially offset by $1.5 million of proceeds from sales of common stock under employee stock purchase plan. Cash flows used in financing activities for the three months ended March 29, 2024 were primarily attributable to the repayments of $1.9 million under our Term Loan, and $0.8 million cash used to pay withholding taxes on stock grants, partially offset by $1.4 million of proceeds from sales of common stock under employee stock purchase plan.

Previous wording

We do not have any off-balance sheet financing arrangements or liabilities. In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements. We have, however, an administrative services agreement with Genesys in which we provide Genesys with ongoing administrative,

Current wording

We do not have any off-balance sheet financing arrangements or liabilities. In addition, our policy is not to enter into futures or forward contracts. Finally, we do not have any majority-owned subsidiaries or any interests in, or relationships with, any special-purpose entities that are not included in the consolidated financial statements. We have, however, an administrative services agreement with Genesys in which we provide Genesys with ongoing administrative, operational and other non-professional support services. We manage Genesys and have the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, we are the primary beneficiary of Genesys and consolidate Genesys as a variable interest entity.

Previous wording

See Part I, Item 1, Note 6, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 6, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2023, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Current wording

See Part I, Item 1, Note 6, “Debt Obligations”, Note 14, “Subsequent Events”, of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, and Part II, Item 8, Note 5, “Debt Obligations”, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 27, 2024, for information regarding our indebtedness, including information about new borrowings and repayments, principal repayment terms, interest rates, covenants, and other key terms of our outstanding indebtedness.

Previous wording

We generally provide our services under contracts, purchase orders or retainer letters. The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract. As of September 27, 2024, 18% of our contracts are time-and-materials contracts, 38% are unit-based contracts, and 44% are fixed price contracts, compared to 21% are time-and-materials contracts, 39% are unit-based contracts, and 40% are fixed price contracts, as of September 29, 2023.

Current wording

We generally provide our services under contracts, purchase orders or retainer letters. The agreements we enter into with our clients typically incorporate one of three principal types of pricing provisions: time-and-materials, unit-based, and fixed price. Revenue on our time-and-materials and unit-based contracts are recognized as the work is performed in accordance with specific terms of the contract. As of April 4, 2025, 20% of our contracts are time-and-materials contracts, 35% are unit-based contracts, and 45% are fixed price contracts, compared to 20% are time-and-materials contracts, 42% are unit-based contracts, and 38% are fixed price contracts, as of March 29, 2024.

Previous wording

Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is recognized in the current period in its entirety. Claims and change orders that have not been finalized are evaluated to determine whether or not a change has occurred in the enforceable rights and obligations of the original contract. If these non-finalized changes qualify as a contract modification, a determination is made whether to account for the change in contract value as a modification to the existing contract, or a separate contract and revenue under the claims or change orders is recognized accordingly. Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the assessment above of whether or not a contract modification has occurred. Estimated profit for un-priced change orders is recognized only if collection is probable.

Current wording

Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is recognized in the current period in its entirety. Claims and change orders that have not been finalized are evaluated to determine whether or not a change has occurred in the enforceable rights and obligations of the original contract. If these non-finalized changes qualify as a contract modification, a determination is made whether to account for the change in contract value as a modification to the existing contract, or a separate contract and revenue under the claims or change orders is recognized accordingly. Costs related to un-priced change orders are expensed when incurred, and recognition of the related revenue is based on the

Previous wording

Our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation, which could impact the profitability on that contract. In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause. While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, the Dormitory Authority-State of New York, the New York City Housing Authority, and utility programs associated with

Current wording

Our contracts come up for renewal periodically and at the time of renewal may be subject to renegotiation, which could impact the profitability of that contract. In addition, during the term of a contract, public agencies may request additional or revised services which may impact the economics of the transaction. Most of our contracts permit our clients, with prior notice, to terminate the contracts at any time without cause. While we have a large volume of contracts, the renewal, termination or modification of a contract, in particular contracts with Consolidated Edison, the Dormitory Authority-State of New York, the New York City Housing Authority, and utility programs associated with Los Angeles Department of Water and Power and Southern California Edison, may have a material effect on our consolidated operations.

Previous wording

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for our fiscal year ended December 29, 2023. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 29, 2023 for a discussion of our critical accounting policies and estimates.

Current wording

There have been no material changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for our fiscal year ended December 27, 2024. Please refer to Part II, Item 7 of our