Q4 2023 Willdan Group Inc Earnings Call

Operator: Hello, and welcome to the Willdan Group fourth quarter and full year 2023 financial results conference call. If anyone should require operator assistance, please press star zero on your telephone keypad.

Hello, and welcome to the World in groups fourth quarter and full year 2023 financial results conference call. If anyone should require operator assistance. Please press star zero on your telephone keypad, a question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. You may be placed on the question queue at any time by pressing star 1 on your telephone keypad. At this time, I'd like to turn the call over to Al Castro. Please go ahead, Al. Thank you, Kevin. Good afternoon, everyone.

Would it be placed in the question queue at any time by pressing star one on your telephone keypad at.

At this time I'd like to turn the call over to Al Cashcall because go ahead al.

Thank you Kevin Good afternoon, everyone and welcome to <unk> group's fourth quarter and full.

Unknown Attendee: And welcome to Willdan Group's fourth quarter and full year fiscal 2023 earnings call. Joining our call today are Mike Bieber, President and Chief Executive Officer, and Kim Early, Executive Vice President and Chief Financial Officer. The call today builds on our earnings release we issued after the market closed today. You may find the earnings release in the Willdan Investor Report that accompanies today's call in the Press Release and Stock Information section of our Investor Relations website. In addition, we have prepared a slide presentation to go along with today's financial results conference call. The presentation is available under the Events section of the Investor website. Management will review prepared remarks, and we will then open the call to your questions.

Full year fiscal 2023 earnings call.

Joining our call today are Mike Bieber, President and Chief Executive Officer, and Jim Early Executive Vice President Chief Financial Officer.

The call today and builds on our earnings release, we issued after market closed today you may find the earnings release and the Investor will then Investor report that accompanies today's call and the press release and stock information section of our Investor Relations website and.

In addition, we have prepared a slide presentation to go along with todays financial results Conference call presentation is available under the events section of the Investor website.

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, including answers to your questions, which are not purely historical are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Unknown Attendee: Statements made in the course of today's conference call, including answers to your questions which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve certain risks and uncertainties. The company's future results could differ materially from those in any such forward-looking statement. 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. The company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call. Willdan disclaims any obligation and does not undertake to update or revise any forward-looking statements made today.

Forward looking statements involve certain risks and uncertainties.

These future results could differ materially from those in 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, the company cautions.

Investors not to place undue reliance on the forward looking statements made during the course of this conference call will then disclaims any obligation and does not undertake to update or revise any forward looking statements made today. In addition to GAAP results. We'll then also provide non-GAAP financial measures.

Unknown Attendee: In addition to GAAP results, Willdan also provides non-GAAP financial measures that we believe enhance the investor's ability to analyze business trends and performance. Our non-GAAP measures include net revenue, adjusted EBITDA, and adjusted EPS. I'll now turn the call over to Mike Bieber, Willdan's president and CEO. Thanks, Al, and good afternoon to everyone.

Now, we believe enhance investors' ability to analyze the business trends and performance.

non-GAAP measures include net revenue adjusted EBITDA and adjusted EPS I'll now turn the call over to Mike Williams, President and CEO. Thanks Al.

Good afternoon to everyone.

Michael A. Bieber: Let's begin on slide two. We had an exceptional fourth quarter. Revenue, profitability, and cash flow were above our expectations and the analyst's expectations, aided by end-of-year program expansions. Strong performance throughout Willdan capped a record year, and with an expanding backlog, positions us for another strong year in 2024. I want to take a minute and talk about Willdan and our market position. Willdan transitions communities to clean energy and a sustainable future.

Let's begin on slide two.

We had an exceptional fourth quarter revenue profitability and cash flow were above our expectations and the analysts expectations aided by end of year program expansions strong.

Strong performance throughout will that capped a record year and with an expanding backlog positions us for another strong year in 2024.

I want to take a minute and talk about will then and our market positioning.

We'll then transitions communities to clean energy and a sustainable future.

Michael A. Bieber: Today, our revenue is 84% energy focused and 16% civil engineering focused. In 2023, Willdan Net Revenue grew organically by 19% overall. We delivered 20% organic growth in energy and 16% organic growth in civil engineering. By customer type, 47% of our work is from state and local government. We don't yet serve the federal government.

Today, our revenue was 84% energy focused and 16% civil engineering focused.

In 2023, we'll then net revenue grew organically by 19% overall we.

We delivered 20% organic growth in energy and 16% organic growth in civil engineering.

Okay.

By customer type, 47% of our work is from state and local government, we don't get the federal government.

Michael A. Bieber: Utilities comprise 46% of revenue, with 7% from commercial customers. We are a professional services company, helping customers solve problems with knowledge and software. We help make America's clean energy transition more affordable for communities. Because of the funding sources of our projects, electrical user fees, and government funding, our business model is resilient and generally less impacted by economic cycles and inflation. We demonstrated this strength throughout 2023, capped by an excellent fourth quarter. On page 3 of the slides,

Utilities.

Price, 46% of revenue with 7% from commercial customers.

We are a professional services company, helping customers solve problems with knowledge and software.

We don't make America as clean energy transition more affordable for communities.

Because of the funding sources of our projects electrical user fees and government funding our business model is resilient and generally less impacted by economic cycles and inflation.

We demonstrated this strength throughout 2023 capped by an excellent fourth quarter.

On page three of the slides.

Michael A. Bieber: A customer's challenge typically starts with our policy consulting, analysis software, and data analytics services, which provide a highly technical roadmap to a solution. This up-front consulting work also informs Willdan's strategy. We are agnostic to the generation source, solar, wind, battery, gas, nuclear, and we help integrate energy generation and energy efficiency into the local grid at the least cost.

A customer's challenge typically starts with our policy consulting analysis software and data analytics services, which provide a highly technical roadmap to a solution.

This upfront consulting work also informs will that strategy.

We are agnostic to the generation source solar wind battery gas nuclear and we help integrate energy generation and energy efficiency into the local grid at the least cost.

Michael A. Bieber: Our engineering services typically come next and often include financial consulting work and rate studies to help fund a customer's project. After engineering design, our program management capabilities manage the delivery of a program on behalf of our customers. We see smaller, higher-margin projects at the top of this pyramid, while larger, longer-term projects are normally at the base. Let me give you some additional color on our markets and the opportunities we are seeing. In 2023, we talked about our goal to grow our consulting software data analytics business. We did that successfully and entered 2024 with a robust pipeline that supports significant new software wins we anticipate in the first half of 2024.

Our engineering services typically come next and often include financial consulting work and rate studies to help fund a customer's project.

After engineering design, our program management capabilities manage the delivery of a program on behalf of our customers.

We see smaller higher margin projects at the top of this pyramid, while larger longer term projects are normally at the base.

Let me give you some additional color on our markets and the opportunities we are seeing.

In 2023, we talked about our goal to grow our consulting software and data analytics business. We did that successfully and enter 2024 with a robust pipeline that supports significant new software wins, we anticipate in the first half of 2024.

Michael A. Bieber: Our engineering business grew 16% organically in 2023, and much of this work is for state and local government customers. Counter to the fears about a slowdown here, we have seen strong organic growth and are carrying that momentum into 2024. The biggest change to our business in 2023 was the recovery of program management work that had slowed during COVID. This work improved throughout the year as supply chain concerns became more manageable. Our program management backlog is at a record high entering 2024 and is expected to drive strong performance. Each of these three areas is strategic to our model and provides us with a competitive advantage. The upfront policy clients want to know about practical constraints Willdan sees in engineering and program management.

Our engineering business grew 16% organically in 2023 and much of this work is for state and local government customers counter to the fears about slowdown here, we have seen strong organic growth and are carrying that momentum into 2024.

The biggest change to our business in 2023 was the recovery of program management work that has slowed during COVID-19.

This work improved throughout the year as supply chain concerns became more manageable.

Our program management backlog is at a record high entering 2024.

And is expected to drive strong performance.

Each of these three areas is strategic to our model and provides us with a competitive advantage.

Policy clients want to know about practical constraints will then cease and engineering and program management.

Michael A. Bieber: Engineering and Program Management clients want to know about policy and planning shifts that might affect their programs years later. On to page four. I want to provide you with a partial list of wins since the last earnings call. These include, at the top of the table.

Engineering and program management clients want to know about policy and planning shifts that might affect their programs years later.

On page four.

I wanted to provide you with a partial list of wins since the last earnings call.

These include at the top of the table.

Michael A. Bieber: A $46 million program for Clark County School District, phase One provides energy upgrades to about one-third of their schools. This program was two years in development and provides strong backlog for us entering 2024; phase one will be mostly complete this year, and there is an additional $100 million of opportunity with this client that we are developing for next year. Next, the decarbonization strategies for the building portfolio of a national health care provider. This win is one of our most exciting opportunities in the next several years and touches over 1,000 hospitals and health care facilities for one of America's largest health care providers. Next, we've won a $30 to $50 million New England utility program for energy efficiency and program management. This new win that is being announced today is our first large anchor program in New England. The Energy Efficiency Program addresses a wide variety of New England energy users.

$46 million program for Clark County School District.

Phase one provides energy upgrades to about one third of their schools.

This program was two years in development and provides strong backlog for us entering 2024.

Phase one will be mostly complete this year and there is an additional $100 million of opportunity with this client that we are developing for next year.

Next the decompensation strategies for the building portfolio of a national health care provider. This win is one of our most exciting opportunities in the next several years and touches over 1000 hospitals and health care facilities for one of America's largest health care providers.

Next we've won a $30 million to $50 million, New England utility program for energy efficiency and program management.

This new win that is being announced today is our first large anchor program in new England.

The energy efficiency program addresses a wide variety of new England energy users, including small and large businesses industrial facilities multi use buildings and municipal infrastructure.

Michael A. Bieber: Including small and large businesses, industrial facilities, multi-use buildings, and municipal infrastructure. The contract is expected to ramp up through 2024 and is expected to continue its growth in 2025. Next, the $18 million Puget Sound contract is the 7th consecutive time we've won those important re-competes, indicating the success of those programs. We've also won a major Western utility grid planning contract and two smaller municipal utility software and planning services contracts. These new wins, on top of our other multi-year contracts, position us well to continue mid to high single-digit organic growth in 2024. Kim, over to you. Thanks, Mike. And good afternoon, everyone.

The contract is expected to ramp up through 2024 and is expected to continue its growth in 2025.

Next the $18 million Puget sound contract is the seventh consecutive consecutive time.

And con Ed the $16 million contract is the fifth consecutive time we've.

One of those important recompete.

Indicating the success of those programs.

We've also won a major western utility grid planning contract and two smaller municipal utility software and planning services contracts.

These new wins on top of our other multi year contracts position us well to continue mid to high single digit organic growth in 2024.

Jim over to you.

Thanks, Mike and good afternoon, everyone as Mike said, our fourth quarter provided a very strong finish to an exciting and productive year, resulting in record setting performance in establishing a firm foundation for continued momentum into the new year.

Creighton K. Early: As Mike said, our fourth quarter provided a very strong finish to an exciting and productive year, resulting in record-setting performance and establishing a firm foundation for continued momentum into the new year. The fourth quarter results reflect the highest level of quarterly and annual contract and net revenue, gross profit, and operating income in the company's nearly 60-year history. Clicking on the right side of your presentation and moving to slide five.

The fourth quarter results reflect the highest level of quarterly and annual contracted net revenue gross profit and operating income in the company's nearly 60 year history.

Clicking on the right side of your presentation and moving to slide five.

Creighton K. Early: For the fourth quarter of 2023, contract revenue was up 37% for Q4 2022 to a record $155.7 million, and net revenue was up 25% to a record $80.8 million. The increase was fueled by some exceptional opportunities to over-deliver target quantities on some of our utility programs, providing approximately a $20 million contract revenue boost and a $3 million adjusted EBITDA boost to the quarter. The quarter also reflects significant year-to-year increases across our service lines as demand for energy and municipal services remains strong. The growth in revenues was accompanied by a solid 35% gross profit margin for the fourth quarter, while G&A expenses increased only half as fast as revenues, as lower stock compensation, depreciation, and interest accretion on earn-out liabilities partially offset higher wages and intensive compensation derived from the improved profitability. Interest expense increased 9% over the prior year quarter to $2.3 million in Q4 of 2023 due to higher interest rates.

During the fourth quarter of 2023 contract revenue was up 37% over Q4 2022 to a record $155 seven Dalian and net revenue was up 25% to a record $88 million in.

The increase was fueled by some exceptional opportunities to over deliver target quantities on some of our utility programs, providing approximately $20 million contract revenue boost and a $3 million adjusted EBITDA boost in the quarter.

The quarter also reflect significant year to year increases across our service lines as demand for energy and municipal services remained strong.

The growth in revenues was accompanied by a solid 35% gross profit margin for the fourth quarter, while G&A expenses increased only half as fast as revenues as lower stock compensation depreciation and interest accretion on earn out liabilities, partially offset higher wages and incentive comp.

Sensation derived from the group profitability.

Interest expense increased 9% over the prior year quarter to $2 3 million in Q4 of 2023 due to the higher interest rates and our income tax rate was 19, 5% in the fourth quarter compared to an extraordinary tax rate at 120% for the fourth quarter of.

Creighton K. Early: And our income tax rate was 19.5% in the fourth quarter compared to an extraordinary tax rate of 120% for the fourth quarter of 2022. So, for the fourth quarter, net income was $8.0 million, or 58 cents per diluted share, versus a net loss of $425,000 or a 3 cent loss per diluted share a year ago. Adjusted EBITDA for the fourth quarter was $17.5 million, up 48% over the $11.8 million for the fourth quarter of 2022. Adjusted earnings per share in Q4 of this year were $0.80 versus $0.36 in Q4 a year ago, mainly reflecting the increase in pre-tax income.

2022.

For the fourth quarter net income was $8 8 million or <unk> 58 per diluted share versus a net loss of 425000 or <unk> <unk> loss per diluted share a year ago.

Adjusted EBITDA in the fourth quarter was $17 5 million up 48% over the $11 8 million for the fourth quarter of 2022.

Adjusted earnings per share in Q4 of this year was 80.

Versus <unk> 36 in Q4, a year ago, mainly reflecting the increase in pretax income.

Creighton K. Early: In terms of the full year, move to slide 6. Slide 6 shows that 2023 continues the pattern of double-digit annual organic growth since the emergence of the COVID restrictions. Contract revenue for 2023 increased 19% over 2022 to a record $510 million, and that revenue also increased 19% to $270 million with solid growth across all our service lines. Double-digit percent increases in program management activities in our utility programs were the primary factors behind the higher revenues in the energy segment, while revenue from engineering and consulting services also grew a robust 16%, reflecting increased demand for our municipal services. Right clicking again on slide seven, you can see that adjusted EBITDA nearly doubled in 2023 to $45.7 million. And our adjusted earnings per share also nearly doubled to $1.75 per share compared to $0.88 a year ago.

In terms of the full year move to slide six.

Slide six shows that 2023 continued the pattern of double digit annual organic growth since the emergence from the COVID-19 restrictions.

Contract revenue for 2023 increased 19% over 2022 to a record $510 million and net revenue also increased 19% to $270 million with solid growth across all our service lines.

Double digit percent increases in program management activities in our utility programs were the primary factors behind the higher revenues in the energy segment, while revenue from engineering and consulting services also grew up grew a robust 16% reflect the increased demand for our municipal.

Services.

Right clicking again on slide seven you can see that adjusted EBITDA nearly doubled in 2023% to $45 7 million and our adjusted earnings per share also nearly doubled to $1 75 per share compared to 88 turns a year ago.

Creighton K. Early: Gross profit in 2023 increased 25% to $179.8 million, and gross margin expanded to 35% from 33.5% a year ago, driven by higher software licensing and improved performance in our restructured California IOU contracts, tempered by higher revenue from construction management activities, which carry a lower margin profile. We realized further operating leverage in 2023, as G&A expenses increased only 5% versus the same period a year ago, while net revenue grew Higher employee incentive compensation consistent with the improvements in income from operations and increased costs related to employee benefits was partially offset by the lower stock base compensation and lower interest decrease in unearned liabilities, which have now all been satisfied. Interest expense for the year increased by 77% to $9.4 million.

<unk> profit in 2023 increased 25% to $179 8 million and gross margin expanded to 35% from 33, 5% a year ago, driven by higher software licensing and improved performance in our restructured, California IOU contracts temporary.

Higher revenue from construction management activities, which carry a lower margin profile.

We realized further operating leverage in 2023, SG&A expenses increased only 5% versus the same period a year ago, while net revenue grew 19% higher employee incentive compensation consistent with the improvement in income from operations and increased costs related to employees.

Benefits was partially offset by the lower stock based compensation and lower interest accretion on earn out liabilities, which have now all been satisfied.

Interest expense for the year increased by 77% to $9 4 million.

Creighton K. Early: In 2023, compared to the same period a year ago, primarily due to the higher interest rate, income tax expense was $3.7 million, or an effective tax rate of 25.1%, compared to an income tax benefit of $3 million on the loss in 2022. For 2023, net income was 10.9 million or 80 cents per diluted share compared to a loss of 8.4 million or minus 65 cents per diluted share in 2022. Improved results throughout the company enabled a significant turnaround on Friday. I like that some of the important metrics reflecting our significantly improved balance sheet and financial condition are presented. With $39.2 million in cash flow from operations and $29.3 million in free cash flow for the year, our leverage ratio of net debt, net of our $23.4 million year-end cash balance, improved significantly to 1.6 times trailing 12 month EBITDA from 4.3 times at the end of 2022. Net debt was $75.1 million at the end of 2023, a reduction of $24.1 million over the course of the year.

In 2023 compared to the same period, a year ago, primarily due to the higher interest rates.

Income tax expense was $3 7 million or an effective tax rate of 25, 1% compared to an income tax benefit of $3 million on the loss in 2022.

For 2023, net income was $10 9 million or <unk> 80 per diluted share compared to a loss of $8 4 million or minus 65 cents per diluted share in 2022.

Improved results throughout the company enabled a significant turnaround.

On slide eight.

Highlights of some of the important metrics, reflecting our significantly improved balance sheet and financial condition are presented with.

With $39 $2 million in cash flow from operations, and $29 3 million and free cash flow for the year, our leverage ratio of net debt net of our 23 $4 million year end and cash balance improved significantly to one six times trailing 12 months EBITDA.

From four three times at the end of 2022.

Net debt was $75 1 million at the end of 2023, a reduction of $24 $1 million over the course of the year.

Creighton K. Early: With the refinancing of our bank credit facilities and our new three-year credit agreement, no outstanding borrowings under our $50 million revolving credit facility, and a leverage ratio below 2.0, we're well-positioned to pursue strategic acquisition opportunities. Moving to slide 9. It provides our financial guidance for 2024. We're expecting contract revenue of $525 to $540 million and net revenue in the range of $270 to $280 million. Adjusted EBITDA is expected to be in the range of $48 to $50 million for the year, and adjusted earnings per share is expected to be in the range of $1.80 to $1.87 per share, assuming a 25% tax rate and 14.2 million shares outstanding. This guidance does not include any potential future acquisitions.

With the refinancing of our bank credit facilities, and our new three year credit agreement no outstanding borrowings under our $50 million revolving credit facility to a leverage ratio below two point no.

We are well positioned to pursue strategic acquisition opportunities.

Moving to slide nine.

It provides our financial guidance for 2024.

We're expecting contract revenue of $525 million to $540 million and net.

Net revenue in the range of $270 million to $280 million.

Adjusted EBITDA is expected to be in the range of $48 million to $50 million for the year and adjusted earnings per share is expected to be in the range of $1 80 to $1 87 per share, assuming a 25% tax rate and $14 2 million shares outstanding.

This guidance does not include any potential future acquisitions.

Michael A. Bieber: Mike, back to you. Thank you. In summary, solid execution in the fourth quarter has capped a record year for Willdan. We've broken through the half billion dollar revenue mark and have strong momentum and backlog entering 2024. Demand for our services remains healthy as our clients try to navigate America's energy transition.

Mike back to you.

Thanks Kim.

In summary, solid execution in the fourth quarter has capped a record year for wheel there.

We've broken through the $5 billion revenue, Mark and have strong momentum and backlog entering 2024.

Demand for our services remains healthy as our clients try to navigate America's energy transition.

Michael A. Bieber: Strong operating results have now delevered our balance sheet, so we are resuming our acquisition program. We now have a growing pipeline of potential deals that we are cultivating. Willdan is in the right market.

Strong operating results have now de Levered, our balance sheet. So we are resuming our acquisition program we.

Now have a growing pipeline of potential deals that we are cultivating.

We will then is in the right market.

Operator: And we now have the means and opportunity to build a multi-billion dollar world-class company. Operator, we're now prepared for Q&A. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad.

We now have the means an opportunity to build a multibillion dollar world class company.

Operator, we're now prepared for Q&A.

Thank you would now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad. We ask you. Please ask two questions and a follow up then return to the queue. Once again Thats star one to be placed in the question queue. Our first question today is coming from most of the country.

Moshe Katri: We ask you to please ask two questions and a follow-up, then return to the queue. Once again, that's star 1 to be placed in the question queue. Our first question today is coming from Moshe Katri from Wedbush Security. Your line is now live.

From Wedbush Securities Your line is that right.

Michael A. Bieber: Thanks and congratulations on very strong and solid results. So maybe we can start by talking a bit about the pending deal pipeline. What are you seeing there in terms of maybe there's any way to kind of compare the current deal pipeline versus where it was a year ago, including software, obviously, and then maybe talk about the nature of the deal flow and visibility. Sure. We're continuing the momentum we built up in the back half of the year and especially the fourth quarter, Moshe. It looks really good.

Hey, Thanks, and congrats on very strong and solid results.

So maybe we can start by talking a bit about the the pending deal pipeline.

What are you seeing there in terms of maybe is there if there's any way to kind of compare the current deal pipeline versus where it was a year ago.

Including software, obviously, and then maybe talk about the nature of the deal flow and visibility.

Sure.

We're continuing the momentum we built up in the back half of the year and especially the fourth quarter Moshe.

It's really good.

Michael A. Bieber: With respect to software, I specifically called that out. We just attended our big Distributech conference and met many customers that are in the pipeline. That looks very good, and we're optimistic that we'll have some significant announcements there in the first half of this year.

With respect to software I, specifically called that out.

We just attended our big distribute Tech conference and met many customers that are in the pipeline.

That looks very good and we're optimistic that we'll have some significant announcements there in the first half of this year.

It looks very good.

Michael A. Bieber: The pipeline here continues to grow. And I would say it supports that type of tennis percent growth that we saw last year. Okay, and then the nature of the deal flow? Is there anything different in terms of what you're being asked to do by clients?

The pipeline here continues to grow and.

I would say, it's it supports that type of a 10 ish percent type growth that.

That we saw last year.

Okay, and then the nature of the deal flow is there anything different in terms of what you're being asked to do by clients.

Michael A. Bieber: The grid is becoming more complex. And as nuclear plants retire, especially coal-fired power plants retire, that complexity is causing them to choose a lot of software solutions that are required. You can no longer analyze these problems with spreadsheets, and a lot of consulting services are required.

The grid is becoming more complex.

And as <unk>.

Nuclear plants retire, especially coal fired power plants retire.

That complexity is causing them to choose a lot of software solutions, which are required you can no longer analyze these problems with spreadsheets.

And a lot of consulting services that are required. So those are the areas I pointed out.

Michael A. Bieber: So those are the areas I'd point out. The other is that, you know, as the cost of energy goes up, the value of energy efficiency that we provide also goes up. So those programs are robust as well, as you saw from the big win that we had in New England. What's embedded in the model from the recent credit refinancing versus maybe some of the expenses before that? Well, I'm not sure what you mean by that, Moshe.

The other is that.

The cost of energy goes up the value of energy efficiency that we provide also goes up.

So those programs are robust as well as you saw from the the big win that we had in new England.

Yeah understood and then just a couple of questions related.

The guidance, what's embedded in the model from the recent credit refinancing versus maybe some of the expenses before that.

Yeah.

Well I'm not sure.

Creighton K. Early: I mean, the interest rates table is, the spread provides us with the opportunity to lower the rates, particularly over what the spreads were for us in most of 2023 and 2022. So by reducing the leverage, we can reduce the spread over the SOFR numbers. But there isn't a whole lot of difference in any of the costs related to the agreement beyond the interest expense.

What you mean by that Moshe.

The interest rates the table is that I mean, the spread provide.

Provides us the opportunity to lower the rates, particularly over what the spreads were for us and most.

Most of 2023 and 2022, so by reducing the leverage we can we can produce it spread over the sofa numbers, but there isn't a whole lot of difference.

And any of the cost related.

Could the agreement beyond beyond the interest expense.

Creighton K. Early: And what's the delta between what it was and where it's expected to be in 2024? Well, our interest rates here in the first quarter compared to the fourth quarter will be about 1% lower annually. Okay. And over the course of the year, I'm expecting the interest expense, the net interest expense, to be probably at least $2 million lower than it was in 2023. Okay, $2 million.

And what's the delta between what it was and where it works well, where it's expected to be in 2024.

Well, our our interest rates here in the first quarter compared to the fourth quarter will be about 1% lower annually.

Okay and okay on the course of the year, you know I am expecting the interest expense net interest expense to be probably.

At least $2 million lower than it was in 2023.

Okay $10 million and then.

Creighton K. Early: And then, how does the year look like in terms of first half versus the second half in terms of net revenue contribution? Yeah, I think this year it's about 60-40 back half to first and front half, and it's not quite as back end loaded as 2023 was, which was, you know, closer to maybe 70-30 kind of a split. This will be a much smoother transition, won't have quite as steep a hockey stick curve into the fourth quarter as maybe we've seen in the past.

How does that look like in terms of first half versus the second half in terms of net revenue contribution.

Yeah, I think this year, it's about 60 40 back half the first at the front half and it is not not quite as back end loaded as.

That is 2023 was which was closer to maybe 70 30 kind of but.

Split this will be a much smoother transition won't have quite as steep a hockey stick.

Into the fourth quarter.

Maybe we exceeded in the past.

Yeah.

Craig Edward Irwin: Thank you. Our next question is coming from Craig Irwin from Roath MKM. Your line is now live. Thank you.

Thank you. Our next question is coming from Craig Irwin from Roth I'm Kim Your line is now live.

Thank you evening gentlemen.

Craig Edward Irwin: Congratulations on another impressive quarter. It's, you know, something that happens routinely now. So actually, Mike, I wanted to ask specifically about the character of the business. This past year, it seems that there's been a fairly substantial shift in the volatility, or I would say the lack of volatility compared to what we saw over the prior couple of years. Can you maybe talk us through what's becoming more predictable, what's working for you with your customers that eliminates some of this downside volatility that we've seen? I'm not saying that it can't happen again, but you've repeatedly surprised everybody on the outside with some very healthy numbers and healthy profitability. What's changed that's delivering this in business? https://www.youtube.com. Well, thanks, Craig.

Actually since I'm on.

On another impressive quarter.

Something happened routine events happening routinely now.

Yeah.

It's actually Mike I want I wanted to ask specifically about the character of the business.

This past year, it seems that there's been a fairly substantial shift.

In the.

The volatility of our I would say the lack of volatility compared.

Compared to what we saw over the prior couple of years can you maybe talk us through about whats becoming more predictable.

What's.

Working for you with your customers.

That that eliminate some of the downside volatility that we've seen I am not saying that it can't happen again.

But you know you use repetitively I'm surprised everybody to the upside and with some very healthy numbers and healthy profitability.

What's changed.

Delivering this new business.

Well thanks Craig.

Michael A. Bieber: Willdan should be a very predictable business, and we were that from 2015 to 2019. Very predictable.

We will then should be a very predictable business and we were that from 2015 to 2019 very predictable and that is because of the nature of our long term engagements with clients and the funding sources to fund our projects they tend to be very resilient.

Michael A. Bieber: And that is because of the nature of our long-term engagements with clients and the funding sources that fund our projects; they tend to be very resilient and consistent. The difference was, you know, the volatility you saw with COVID and the startup of the California IOU contracts. Barring those two events, we should be a very consistent producer of results. And you saw the resumption of, you know, sort of our performance prior to COVID this year. And we're expecting that to continue into next year. That's excellent. That's excellent news. So then, you know, can you talk us through a little bit of the...

A resilient and consistent with.

The difference was the volatility you saw with Covid and the startup of a California IOU contracts.

Barring those two events, we should be a very consistent producer.

Our results and you saw the resumption of <unk>.

Our performance prior to Covid this year.

We're expecting that to continue into next year.

That's excellent that's excellent news. So then can you talk us through a little bit of the success with integral analytics this year.

Michael A. Bieber: Success with Integral Analytics this year; how has overall momentum taken shape for this business? And can you maybe share with us what the fourth quarter and full year contribution, both on a revenue and EBITDA basis, was from this business? Software is a big part of our business. It's doing very well. It grew.

It has overall momentum taking shape with this business and can you maybe share with us what the fourth quarter and full year contribution on both on a revenue basis switched from this business.

Software.

A big part of our business, it's doing very well.

True.

Michael A. Bieber: A few million dollars year over year. This year, it was around $15 million in revenue. We don't break out EBITDA, but it was, I believe, the highest-margin business that we have at Willdan, so outstanding. And even better yet, they have a great pipeline going into the beginning of the year. We're expecting some contract notifications here very soon that we'll be able to talk about. So that looks really good going into next year. And it's all driven by the fact that

A few million dollars year over year. This year was around $15 million in revenue, we don't breakout EBITDA, but it was I believe the highest margin business that we have that will then so outstanding.

And even better yet they have a great pipeline going into the beginning of the year, we're expecting some contract notifications here very soon that we'll be able to talk about so that looks really good going into next year and it's all driven by the fact that.

Michael A. Bieber: We have very little competition in that area. It's really the competition of inaction by clients. We have a dominant solution that's being widely adopted by large utilities around America right now. And it's also starting to spin off consulting work. The partnership with the consulting side of the business is very effective. These newest contracts are about 50-50 software and consulting. So, very good.

We have.

Very little competition in that area, it's really the competition of inaction by clients.

We have a dominant solution that's been widely adopted by large utilities around America right now and it's also starting to spin off consulting for the partnership with the consulting side of the business is very effective. These newest contracts are about 50, 50 software and consulting so.

Good.

Michael A. Bieber: Okay, excellent. And then the project closeouts or the sort of end of year budget flush that did help us a little bit this quarter. Can you maybe scope out for us what that came from, you know, with that from several customers sort of broadly across the customer base, one or two customers. And, you know, if you could give us any color on the relative outperformance there versus the organic growth, and obviously that is organic, but so is organic growth in the core business. Yeah. It was very clearly three different areas.

Okay excellent and then on the project Closeouts or the the sort of end of your budget flush that did help us a little bit this quarter.

Can you can you maybe scope out for us what.

Where that came from was that from several customers sort of broadly across the customer base, one or two customers.

And if you could give us any color on.

The relative outperformance there versus the organic growth and obviously that is organic but the organic growth from our core business.

Yeah.

It was very clearly three different areas. It was the California ious.

Michael A. Bieber: It was the California IOUs, First Energy on the East Coast, and Con Edison. All three of those customers were behind in their energy efficiency goals and came to Willdan and asked us to expand our contracts if we could. In every case, we made those expansions in the fourth quarter of the year and hit bigger, higher numbers, and the results were very clear. It earned $20 million in gross revenue, about $15 million in net revenue, and $3 million in EBITDA.

Firstenergy on the East Coast and Con Edison all three of those customers were behind.

In other energy efficiency goals and came to we'll Dan and asked us to expand our contracts. If we could in every case, we made those expansions in the fourth quarter of the year.

And hit the bigger the higher numbers and the results were very clear it was $20 million in gross revenue about $15 billion of net revenue.

And $3 million and EBITDA I think Tim mentioned that in the script.

Michael A. Bieber: I think Kim mentioned that in the script, came right out in the fourth quarter, which we just couldn't have expected. When you look at that, you know, obviously, it was great results for the fourth quarter. We didn't factor that in. You can't rely on that happening next year.

Okay right out in the fourth quarter that we just couldn't have expected.

When you look at that obviously it was a great results for the fourth quarter, we didn't factor that in you can't rely on that happening next year. So that's why in guidance if you back into our organic revenue growth.

Michael A. Bieber: So that's why in guidance, if you back into our organic revenue growth, you only see five to seven percent. Well, the $15 million of extra revenue that we booked in the fourth quarter of this year is about a 5.3 percent headwind for the next year or so. If that happens again next year, then we'll see the types of double-digit organic growth that we've been printing here for many quarters now. Then last question, if I may. CRE has been.

Only see like 5% to 7% well the $15 million of extra revenue that we booked in the fourth quarter of this year, it's about a five 3% headwind the next year or so.

If that happens again next year, then we will see two types of double digit organic growth that.

We've been printing here for many quarters now.

Excellent and then last question if I may.

Craig Edward Irwin: You know, a little bit of a headwind for many of the other companies in the energy efficiency space, but, you know, at Willdan, we've seen quite a lot of activity with your customer base looking for you to provide consulting to help them figure out, you know, how they would use IRA money and, you know, what makes sense for them as far as long-term investment that this could unlock. Can you maybe describe for us a little bit about what you're doing to prepare for the next phase when the actual funding for these projects becomes available? Do you expect to have material participation in the projects where you've been, you know, advising and consulting, or would you expect the consulting business to remain the driver of that? Yeah, it's a good question, Craig.

CRA and its been a you know.

Little bit of a headwind.

For many of the other companies in the energy efficiency space, but you know it will then you've.

You've seen quite a lot of activity with your customer base.

We're looking for you to provide consulting to.

Help them figure out how they would use higher any money.

And you know what makes sense for them as far as long term investment.

That's correct Mark.

Can you maybe describe for us a little bit about what you're doing to prepare for our next phase when the actual the actual funding for <unk>.

For these projects becomes available do you expect to have material.

Participation on the projects where you've been.

You know advising and consulting.

Sure.

Would you expect the consulting business to remain the driver there.

Yes, good question Craig.

Michael A. Bieber: We don't quite know what's to come, but we are helping. More than 20 clients, and they're generally municipalities. Figure out and apply for IRA funding right now.

We don't quite know what's to come but we are helping more than 20 clients and theyre generally municipalities.

Figure out and apply for IRS funding right. Now these are not material contributors to revenue right now and they weren't in 2023, they're small dollar studies, you know less than $100000 a piece so not material in aggregate, but theres a lot of activity going on in the small front end consulting work.

Michael A. Bieber: These are not material contributors to revenue right now, and they won't be in 2023. They're small dollar studies, less than $100,000 a piece. So not material in aggregate, but there's a lot of activity going on in the small front-end consulting work trying to figure out how to access IRA dollars. We have a number of opportunities if the funding is received by those communities, and that turns into projects. We have a number of opportunities where we will likely follow some of that funding into the next phases of design and implementation, but it's still early. None of that money has hit the streets at this point.

Turning to figure out how to access IRI dollars.

We have a number of opportunities if those if the funding is received by those communities.

And that turns into projects, we have a number of opportunities where we will likely follow some of that funding into the next phases of design and implementation, but it is still early and none of that money has hit the street at this point, it's still in the application phase.

Michael A. Bieber: It's still in the application phase. Thank you. The next question is coming from Richard Eisenberg, a private investor. Your line is now live.

Thank you next question is coming from Richard Eisenberg private Investor Your line is that right.

Richard Eisenberg: Good afternoon, gentlemen, and congratulations on a great quarter. Thank you, Richard. The software contracts that you are anticipating in the first half, is that embedded in the guidance, or not? If they come through, you can raise guidance for the year in the 180 to 187 range. Also, is there potential business in states like Florida, Texas, North Carolina, and South Carolina?

Good afternoon, gentlemen, and congratulations on a great quarter.

Thank you Richard.

All right.

The software contracts that you are anticipating.

First half is that embedded in the guidance for that.

If they come through then you can raise guidance for the year for money in the one eight to one seven range and.

Also is there a potential business in states like Florida, Texas North Carolina's.

Carolina.

Michael A. Bieber: And the last question is, is the company able to take advantage of this huge demand for artificial intelligence, such as in data centers and your engineering center? Thanks again, Mike, and congratulations. Thanks, Richard. And I'll take them in order of your questions here.

And the last question is.

Is the company able to take advantage of this huge demand for artificial intelligence like data centers and your engineering segment. Thanks, again, Mike and congratulations again, thank you.

Thanks, Richard and I'll take them in order of your questions here.

Michael A. Bieber: The first part, I think, was, you know, is there upside? We've embedded some of what we can foresee of the software licensing into guidance, but there's still upside. We factor that down as a probability, and our probabilities are going up, especially after the meetings last week. So that looks really good.

First part I think was is there upside.

We've embedded some of what we can foresee.

The software licensing into guidance, but there is still upside we factor those down as a probability.

Probabilities are going up, especially after the meetings last week, so that looks really good there is upside.

Michael A. Bieber: There is upside, you know, in both the first half and the second half of the year. The second question, and I'm glad you asked it, is, you know, what opportunities are we seeing outside of California? Very specifically, the hottest states for us are Florida and Texas right now. The population, the demographic shift is noticeable in those states, and activity for municipal clients is very robust in both places.

In both the first half in the second half of the year.

The second question and I'm glad you asked it is what opportunities are we seeing outside of California.

Very specifically.

Hottest states for Us are Florida, and Texas right now.

The population of the demographic shift is noticeable in those states activity for municipal clients is.

Very robust in both places I was just in the Orlando office and I'm heading to Texas next month.

Michael A. Bieber: I was just in the Orlando office, and I'm heading to Texas next month. It is the growth market for Willdan right now, especially with its municipal clients. So there is a lot of opportunity there.

It is the growth market for will down right now, especially with its municipal clients. So.

A lot of opportunity there.

The third was AI and we have a working group at AI, that's been in place for about a year.

Michael A. Bieber: And we have a working group on AI that's been in place for about a year. Still early on, we'll be adopting AI tools across the company in 2024. We're evaluating those tools right now because we want to be at the forefront of using those tools to help solve our customers' problems. The working group is, I would say, close to world class.

Still early on.

We will be adopting AI tools across the company in 2024, we're evaluating those tools right now.

Because we want to be at the forefront of using those tools to help solve our customers' problems.

The working group is I would say close to world class, we hired AI experts when I AI was not a well known term.

Michael A. Bieber: We hired AI experts when AI was not a well-known term. This was more than five years ago, and they've been working on this and preparing both our software and the tools that we're using across our businesses to solve those problems. Thanks, Mike, http://TheBusinessProfessor.com. As a reminder, that's star number one to be placed into question Q. Our next question is coming from Greg Kitt from Pinnacle Family Office.

This was more than five years ago, and they've been working on this and preparing both our software and the tools that we're using across our businesses to solve those problems.

Thanks, Mike.

Appreciate that.

Yeah.

As a reminder, that star one to be placed into question queue. Our next question is coming from Greg <unk> from Pinnacle family Office. Your line is now live.

Greg Kitt: Hi, congratulations on a great quarter. Thanks, Craig. I wanted to ask you, I can't remember a period in which you've had so many meaningful customer contract wins with, you know, Clark County and the New England program announced today as a healthcare provider, which was, you know, a big commercial win, which is not the majority of your business. And then the re-competes with Con Ed in Puget Sound. Is there some, among others, is there something happening that you think, has there been some change that's helping you win business more effectively? Maybe you can help us understand what?

Hi, congratulations on the great quarter.

Thanks, Greg.

I wanted to ask I can't remember a period in which you've had so many meaningful customer.

The contract wins with Clark County, and then New England program announced today is a health care provider, which was that.

Commercial win which.

Which is not the majority of your business and then the re competes with Con Ed in Puget Sound is there is there some.

Among others is there some thing happening.

That you think has there been some change that's helping you win business more effectively maybe can you help us understand what's going on.

Michael A. Bieber: Huh. I don't think there's a change other than, We're a big company, and we focused on a lot of those contracts two years in the making. You mentioned Clark County and New England specifically.

Uh huh.

I don't think Theres a change other than we're a big company and we focused on a lot of those contracts two years in the making.

You've mentioned Clarke County, and New England, specifically both of those contracts were well over two years in the making and the impressive part I think was yes, we knew about them they were both competitive.

Michael A. Bieber: Both of those contracts were well over two years in the making. And the impressive part, I think, was that yes, we knew about them. They were both competitive. In both cases, we thought the customers would make multiple awards to many of our competitors. And in both cases, in those examples, they selected Willdan.

In both cases, we thought the customers would make multiple awards to many of our competitors.

And in both cases in those examples they selected will theyre very surprising so the contract sizes were larger than we even we expected to receive there and we're seeing that.

Michael A. Bieber: Very surprising. So the contract sizes were larger than we even expected to receive there. And we're seeing that. We're also doing a good job of delivering. You saw that in the fourth quarter.

We're also doing a good job of delivering you saw that in the fourth quarter and that's what allows I think customers to have confidence in us.

Michael A. Bieber: And that's what allows, I think, customers to have confidence in us. When the customers came and asked for expansions in the fourth quarter, we actually delivered those higher numbers on a very short order. So, that's what we're seeing, Greg. The contracts are getting larger because of that. That's, that's great. Thank you very much.

When the customers came in and asked for expansions in the fourth quarter, we actually delivered those higher numbers on very short order. So.

That's what we're seeing Greg the contracts are getting larger because of that.

That's that's great. Thank you very much and maybe.

Greg Kitt: And maybe just I wanted to make sure I understood the guidance because I think you did, if I saw correctly, just under 270 million of net revenue in 23, and the forward commentary was 270 to 280. And so to me, it sounded like a lot of the commentary was that mid to high single-digit growth made sense off of that 270 that you did in 2023. But first, I guess was that commentary, you know, talking about opportunities for mid to high single-digit growth? Was that on a contract revenue basis or a net revenue basis? It's both, Greg.

Maybe just I wanted to make sure I understood the guidance because I think you did if I saw correctly, just under 270 million of net revenue in 'twenty three and forward commentary was.

And $2 70 to $2 80, and so to me it sounded like a lot of the commentary was that mid to high single digit growth.

Made sense off of that $2 70 that you did in 2023 and.

But first I guess was that commentary.

Talking about opportunities for mid to high single digit growth was that on a contract revenue basis or a net revenue basis.

Yeah.

It's both Greg we wanted to be appropriately conservative coming into the beginning of the year announcing guidance, but you've seen the wins out there.

Michael A. Bieber: We wanted to be appropriately conservative coming into the beginning of the year and announcing guidance, but you've seen the wins out there. The only note I would say is the $15 million headwind that we faced due to the exceptional revenue in Q4. We don't know if that's going to happen again next year.

The only note I would say is the $15 million headwind that we face due to the.

Exceptional revenue in Q4.

Don't know if thats going to happen again next year. It doesn't happen every year, but it looks very good to expand our existing contracts were already missed at the beginning of the year and we're already talking about contract expansions in a couple of places.

Michael A. Bieber: It doesn't happen every year, but it looks very good to expand our existing contracts. This is the beginning of the year, and we're already talking about contract expansions in a couple of places. We're optimistic that as we get into the year, we'll be able to potentially beat and raise that number. Thank you very much.

We're optimistic that as we get into the year, we'll be able to potentially beat and raise that number.

Thank you very much and then on contract expansions.

Greg Kitt: And then on contract expansions that you talked about with me, you talked about the California IOUs, First Energy, and then Con Ed. Is there some change in how you're working with those customers? Or was it, you know, every couple of years, you just get a dramatically larger budget flush? Wondering if those customers are looking at you as more like a partner in giving you a little bit more lead time versus, hey, it just all kind of shows up at the end of the IOU. No, I think you're exactly right, Greg.

That you had with he talked about the California Ious.

Firstenergy and Con Ed.

Right.

Is there some change in how you're working with those customers or was that.

Every couple of years, you just get it.

Romantically larger budget flush.

I'm wondering if it.

Those customers are looking at you as more like a partner and giving you a little bit more lead time.

Versus hey, it just all kind of shows up at the end of the year.

No I think youre exactly right Gregg.

Michael A. Bieber: That's a result of us earning their trust throughout the year. The California IOU programs, you know the story. Those were new programs, new clients. We had to earn their trust before they would come to us with that kind of year-end expansion, with that kind of problem. And we appreciate the opportunity to deliver, and we did that for them. The same thing with First Energy.

That's a result of us, earning their trust throughout the year.

California IOU programs you know the story there is for new programs new clients, we had to earn their trust before they would come to us with that kind of year end expansion with that kind of problem really and we appreciate the opportunity to deliver and we did that for them.

Same thing with Firstenergy, we had to earn their trust that was a difficult program.

Michael A. Bieber: We had to earn their trust. That was a difficult program. It started off, it was a small program, but it started off. Rock!

Started off it.

It was a small program, but it started off.

Rocky.

Michael A. Bieber: And as we got into it and approached the end of the first year, they came to us with a problem we were able to solve. Again, we earned their trust. Con Ed is a client that has trusted us for years. And when they have these issues, they come to us, and we deliver for them. So that's what happened.

And as we got into it and approached the end of the first year. They came to us with a problem. We were able to solve again, we've earned their trust Con Ed is a client that has trusted us for years and when they have these issues they come to us and we deliver for them. So that's what happened.

Greg Kitt: Thank you very much, congratulations, and thank you for your hard work. Thank you. Next question is a follow-up from Moshe Katri from Red Bush Securities. Your line is now live. Thanks. This is for Mike. Perhaps you could talk a bit about the company's strategy and positioning under your leadership.

Thank you very much congratulations and thank you for your hard work.

Thank you next question is a follow up from Moshe country from Wedbush Securities. Your line is that lives.

Hey, Thanks. This is for Mike maybe talk a bit about.

The company's strategy and positioning under your leadership and he came to us or what should we expect on an ongoing basis.

Moshe Katri: Any changes or what should we expect on an ongoing basis? Thanks. Thanks for the question. You know, I've worked with Tom for a number of years. He's been my mentor, and he's still the chairman of the board. Having said that, the differences between us are probably that Tom is a little more business development focused, and I'm probably a little more operationally focused. It's just our nature, and it was the nature of our partnership. I'll bring that to Willdan.

Thanks for the question.

I've worked with Tom for a number of years.

He has been my mentor.

And you still the chairman of the board.

Having said that.

The differences between us are probably that Thomas little more business development focus and I'm, probably a little more operationally focused.

Just our nature and it was the nature of our partnership I'll bring that to will there.

Michael A. Bieber: And if there's anything I'll spend more time on, it's developing that operational excellence that leads to the contract expansions and other opportunities I talked about. That's something I'm going to focus on. Other than that,

And if theres anything I'll spend more time on it.

Developing that operational excellence that leads to the contract expansions and other opportunities I talked about.

That that's something I'm going to focus on.

Other than that.

Michael A. Bieber: We're on a good course. Tom started us down a good path, and the opportunities are ours to capture at this point, so I thank him for that.

We're on a good course, Tom started us down a good path.

The opportunities are just to capture at this point so I thank them for it.

Michael A. Bieber: And what about, um..., coming out with some new offerings that will make the business a bit more recurring in nature? We've talked about that. A lot of our business acts more like an annuity, and the energy efficiency programs very much behave that way. The funding doesn't change that much year over year.

Okay and what about.

Graham.

Coming out with some new offerings that are that will make the business a bit more recurring in nature.

Okay.

We've talked about that a lot of our business acts more like an.

In annuity and the energy efficiency programs very much behave that way.

Funding doesn't change that much year over year for like the steady building blocks that you build the business on top up so our.

Michael A. Bieber: They're like steady building blocks that you build the business on top of. So, our business already behaves very much like recurring revenue for the most part. The area that we're trying to do better at is the software area, where the revenue recognition standards cause it to be lumpy. The customers want to capitalize that software rather than expense it, which causes us to have to recognize all the revenue up front.

Our business already behaves very much like recurring revenue for the most part.

The area that we're trying to do better at is the software area, where the revenue recognition standards cause it to be lumpy.

The customers want to capitalize that software rather than expensive, which causes us to have to recognize all the revenue upfront.

Michael A. Bieber: The things we've done to augment that I mentioned are pairing services with software, which we were not doing very well two years ago. Now the average software license that we sign is about half services, which is up from almost no services before. So that's the one area we're trying to smooth out, and consulting in terms of the role of the consulting business, looking at this more as a kind of a network effect, I guess. I think there's a lot of cross-selling opportunity that we can still realize at Willdan. I talked about, you know, how the business model works where the front-end business leads to engineering opportunities two, three years down the pike, and engineering leads to those program management opportunities we see a couple years later.

The things we've done to augment that I mentioned.

Our pairing services with software, which we were not doing very well two years ago now the average software license that we signed is about half services, which is up from almost no services before years ago. So that's the one area, we're trying to smooth out.

Okay.

And consulting in terms of the role of the consulting business.

Looking at this more as a kind of a network effect I guess.

Hmm.

I think theres a lot of cross selling opportunity that we can still realize it will that I've talked about how the business model works for the front end business leads to engineering opportunities two to three years down the Pike and engineering leads to those program management opportunities, we see a couple of years later.

Michael A. Bieber: We're just starting that right now because we added the front end of the triangle, if you will, in 2019. So we're just starting on that journey. We have a lot of cross-selling opportunities. A lot of our organic growth, I think, will be focused on that in the next couple of years. And certainly, we just went through our key pursuit list. A lot of those opportunities are coming out of, you know, policy work in the states that E3 started out or IA started out, where we're seeing later on EE programs developed.

Just starting that right now because we added the front end of the triangle if you will.

2019, so we're just starting on that journey, we have a lot of cross selling opportunity.

Our organic growth I think will.

We will be focused on that in the next couple of years and certainly we just went through our key pursuit list a lot of those opportunities are coming out of policy work into states that <unk> started out where I started out where we're seeing later on EE programs develop.

Moshe Katri: We've reached the end of our question and answer session. I'd like to turn the floor back over to Mike for any further closing comments. I'd just like to thank our employees, shareholders, and the customers out there for standing by us during the tough times in COVID. It's certainly been a brighter year, really a great year in 2023. We're off to a great start in 2024 also.

Thanks.

Yeah.

Thank you we've reset of our question and answer session I'd like to turn the floor back over to Mike for any further or closing comments.

I'd just like to thank our employees shareholders and the customers out there for standing by us during the tough times in Covid.

It's.

Certainly been brighter years.

Really a great year in 2023, we're off to a great start in 2024 also so thank you and we'll talk to you at the end of Q1.

Michael A. Bieber: So thank you, and we'll talk to you at the end of Q1. Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.