Q2 2024 Willdan Group Inc Earnings Call
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Operator: Greetings and welcome to the Willdan Group second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Kaschalk, Vice President. Thank you, Al. You may begin.
Operator: Greetings and welcome to the Willdan Group Second Quarter, 2024 earnings call. At this time, all participants are to listen-only mode. A brief question-and-answer session will follow the formal presentation.
Operator: If anyone should require offer assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Al Kaschalk: It is now my pleasure to introduce your host, Al Kaschalk, Nice President.
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Al Kaschalk, Vice President. Thank you, Al. You may begin.
Operator: Thank you, Al. You may begin.
Al Kaschalk: Thank you, Paul. Good afternoon, everyone, and welcome to Willdan Group's second quarter fiscal 2024 earnings call. Joining our call today are Mike Bieber, President and Chief Executive Officer, and Ken Early, Executive Vice President and Chief Financial Officer. This call builds on our earnings release we issued after the market closed today. You can find today's earnings release in the press release section of our website at ir.willdangroup.com. A copy of the slides that accompany today's call is located in the Events and Presentations section of the website.
Operator: Thank you, Paul. Good afternoon, everyone, and welcome to Willdan Group's second quarter, fiscal 2024 earnings call. Joining our call today are Mike Bieber, President and Chief Executive Officer, and Kim Arling, Executive Vice President and Chief Financial Officer. This call builds on our earnings release we issued after market close today. Find today's earnings release and the press release section of our website at ir.willdangroup.com. A copy of this slide that a company today is called located in the events and presentation section of the website. In addition, our Willdan investor report is available under stock information section of the website.
Speaker Change: You can find today's earnings release in the press release section of our website at ir.willdangroup.com.
Al Kaschalk: In addition, our Willdan Investor Report is available under the stock information section of the website. Management will review prepared remarks and then we'll 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. Forward-looking statements involve certain risks and uncertainties and include non-death measures
Operator: Management will review prepared remarks and then will 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. Our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements involve certain risks and uncertainties and include non-gett measures.
Speaker Change: Management will review prepared remarks and then we'll open the call up to your questions.
Speaker Change: statement made in the course of today's conference call.
Speaker Change: including answers to your questions.
Operator: A more detailed safe harbor statement is on the cover of our first slide and then our annual report on Form 10-K.
Michael Bieber: I will now turn the call over to Mike Bieber, Willdan's president and CEO, who will begin on slide two. Thank you. We had a record second quarter, exceeding consensus estimates and our own expectations. Contract revenue was up 18% organically, and adjusted EBITDA was up 56% year-over-year. Gaffer and Adjusted EDS were up even stronger, no more than doubling year over year. During Q2, we had unexpectedly strong revenue across the engineering and program management. We've also done a good job converting revenue into free cash flow this year.
Al Kaschalk: A more detailed safe harbor statement is on the cover of our first slide, and then our annual report on Form 10-K. I will now turn the call over to Mike Bieber, Willdan's president and CEO, who will begin on slide two. Thank you.
Speaker Change: and our annual report on Form 10-K . I will now turn the call over to Mike Bieber, Willdan's President and CEO , who will begin on slide 2.
Michael Bieber: We had a record second quarter, exceeding consensus estimates and our own expectations. Contract revenue was up 18% organically, and adjusted EBITDA was up 56% year-over-year. Gap and adjusted EPS were up even stronger, both more than doubling year over year.
Michael Bieber: During Q2, we had unexpectedly strong revenue across engineering and program management. We've also done a good job of converting revenue into free cash flow this year. Given our results for the first half of 2024 and our current momentum, we are raising our whole year financial targets, which Kim will expand on. The electric load growth macro trend strengthened during the quarter, and I'll talk more about that in a few minutes. I'm proud of our team for delivering another quarter above expectations.
Michael Bieber: Given our results for the first half of 2024 and our current morning momentum, we are raising our four-year financial targets, which Kim will expand on later. The electric load growth macro-trans strengthened during the quarter, and I'll talk more about that in a few minutes. I'm proud of our team for delivering another quarter above expectations.
Michael Bieber: Slide three is a quick reminder of where Willdan is positioned for the newer listener. Willdan helps transition communities to clean energy and a more sustainable future. We are just under 1,700 employees, comprised mostly of scientists, engineers, and other technical professionals. We have 53 offices across North America and have helped apply to avoid emissions of 7.8 million metric tons of greenhouse gases. State and local government customers comprise 49 percent of our revenue. While utilities are 44 percent and commercial customers are 7 percent. Demand for our services with all three customer groups is healthy. Our work for government clients is growing organically at a double-digit pace, and the outlook is positive.
Michael Bieber: Slide 3 is a quick reminder of where Willdan is positioned. For the newer listeners, Willdan helps transition communities to clean energy and a more sustainable future. We have just under 1,700 employees, comprised mostly of scientists, engineers, and other technical professionals. We have 53 offices across North America and have helped clients avoid emissions of 7.8 million metric tons of greenhouse gases. State and local government customers comprise 49% of our residents, while utilities are 44%, and commercial customers are 7%.
Speaker Change: Slide 3 is a quick reminder of where Willdan is positioned for the newer listener.
Mike Bieber: We are just under 1,700 employees.
Michael Bieber: We have 53 offices across North America and have helped clients avoid emissions of 7.8 million metric tons of greenhouse gases.
Michael Bieber: Demand for our services with all three customer groups is healthy. Our work for government clients is growing organically at a double-digit pace, and the outlook is positive. Our work for utilities is primarily under multi-year contracts and remains robust.
Michael Bieber: Our work for utilities is primarily under multi-year contracts and remains robust. Our work for commercial clients is largely related to energy usage at data centers. Willdan has focused on the data center market for many years because of its energy intensiveness, but the market's recently become more covered in the media due to AI load growth.
Michael Bieber: I work for a commercial client, and it is largely related to energy usage at data centers. Willdan has focused on the data center market for many years because of its energy intensiveness, but the market has recently become more covered in the media due to AI Load Group. We would like to expand our percentage of commercial work, both organically and through future acquisitions. On slide four.
Michael Bieber: is largely related to energy usage at data centers.
Michael Bieber: We would like to expand our percentage of commercial work both organically and through future acquisitions.
Michael Bieber: On slide four. Our upfront policy and data analytics work informs Willdan's strategy. In our upfront work, we are seeing particular demand for integrated resource planning and asset valuation work that is often associated with data center electricity load. In engineering, we saw strong geographic expansion in Florida and Texas and continued demand from Southwestern city customers. In program management, we performed above our plan on utility programs and building energy programs for cities. I'll note that at Willdan while revenue is huge towards larger program management, our profit is delivered about equally from each of the three phases of work.
Michael Bieber: Our upfront policy and data analytics work informs Willdan's strategy. In our early work, we are seeing particular demand for integrated resource planning and asset valuation work that is often associated with data center electricity loads. In engineering, we saw strong geographic expansion in Florida and Texas and continued demand from southwestern city customers. In program management, we performed above our plan on utility programs and building energy programs for cities. I'll note that at Willdan, while revenue is skewed towards larger program management, our profit is delivered about equally from each of the three phases of work.
Mike Bieber: In program management, we performed above our plan on utility programs and building energy programs for cities.
Michael Bieber: The right side of this slide provides two examples of how this business model works. More than ten years ago, we began consulting to a New England investor on utility. That upfront consulting work led in part to a new software's license sale in 2023 and then to a large energy efficiency program management contract earlier this year. The upfront work allowed us to understand the client's unique needs more thoroughly and craft more effective program management solutions. The City of Paramount win in Q2 is another example of this model in practice. We had been providing consulting and engineering services to this California client continuously since 1973.
Michael Bieber: The right side of this slide provides two examples of how this business model works. More than 10 years ago, we began consulting to a new New England investor on utility. That upfront consulting work led in part to a new software license sale in 2023, and then to a large energy efficiency program management contract earlier this year. The upfront work allowed us to understand the client's unique needs more thoroughly and craft more effective program management solutions. The City of Paramount win in Q2 is another example of this model in action.
Michael Bieber: The upfront work allowed us to understand the client's unique needs more thoroughly and craft more effective program management solutions.
Michael Bieber: We have been providing consulting and engineering services to this California client continuously since 1973. We developed a thorough understanding of the city's needs, and this quarter, we were awarded an $18 million program management contract to oversee the design and construction of new solar, battery, and EV charging infrastructure, all aligned with the city's vision for energy transition, on slide 5. We had several notable wins this quarter.
Michael Bieber: We developed a thorough understanding of the city's needs in this quarter, where then awarded an 18 million dollar program management contract to oversee the design and construction of new solar battery and even charging infrastructure, all aligned with the city's vision for energy transition.
Michael Bieber: We developed a thorough understanding of the City's needs and this quarter were then awarded an $18 million program management contract to oversee the design and construction of new solar, battery, and EV charging infrastructure all aligned with the City's vision for energy transition.
Michael Bieber: On slide five, we had several notable wins this quarter. We want to study from Metta, formerly Facebook, on the emissions related to involuntary clean energy performance program that they put in place. For the state of Virginia, which is the largest data center market in the US, we were awarded a program to study the grid impact for energy demand. This study includes the analysis of integrating 10 to 15 gigawatts of new generation and load into the Mid-Atlantic regional power grid by 2030. That's a lot of change. For Virginia, we are assessing the impacts to both the utility service providers and the ratepayers.
Michael Bieber: We want to study META, formerly Facebook, on the emissions related to a voluntary clean energy procurement program that they have put in place for the state of Virginia, which is the largest data center market in the U.S. We were awarded a grant to study the grid impact on energy demand. This study includes the analysis of integrating 10 to 15 gigawatts of new generation and load into the mid-Atlantic regional power grid by 2030.
Michael Bieber: We want to study from META, formerly Facebook, on the emissions related to a voluntary clean energy procurement program that they had put in place.
Speaker Change: This study includes the analysis of integrating 10 to 15 gigawatts of new generation load into the mid-Atlantic regional power grid by 2030. That's a lot of change.
Michael Bieber: That's a lot of change. For Virginia, we are assessing the impacts on both the utility service providers and the ratepayers. [inaudible] For Glendale Water and Power, located in California, we want a distributed energy resources study. I already mentioned the City of Paramount when in Q2. And lastly, for a Washington State Municipal Utility, we won an Energy Design Assistance Contract on slide six.
Mike Bieber: For Virginia, we are assessing the impacts to both the utility service providers and the ratepayers.
Michael Bieber: Cool price to do. For Glendale Water and Power located in California, we want a distributed energy resources study.
Michael Bieber: For Glendale Water and Power, located in California, we want a distributed energy resources study.
Michael Bieber: I already mentioned the city of Paramount win Q2, and lastly, for a Washington State municipal utility, we want an energy design assistance contract.
Mike Bieber: I already mentioned the City of Paramount when in Q2, and lastly, for a Washington State Municipal Utility, we won an Energy Design Assistance Contract.
Michael Bieber: On slide six, load growth is creating exciting new opportunities for Will Dam, and we believe will help drive our growth for years to come. On the left side of this slide, for the first time in many decades, material electricity load growth has started to occur in the US. Experts are uncertain about the future speed and scale of this load growth, but there is widespread consensus now that it will occur and has already begun. The main drivers for this growth included the electrification of cities, buildings, and transportation, the reshoring of industrial manufacturing facilities in the US, and electricity consumed by data centers.
Michael Bieber: Low growth is creating exciting new opportunities for Willdan and we believe it will help drive our growth for years to come. On the left side of this slide, for the first time in many decades, material electricity load growth has started to occur in the U.S. Experts are uncertain about the future speed and scale of this low growth, but there is widespread consensus now that it will occur and has already begun.
Michael Bieber: On slide six.
Speaker Change: Low growth is creating exciting new opportunities for Willdan, and we believe will help drive our growth for years to come.
Michael Bieber: On the left side of this slide, for the first time in many decades, material electricity load growth has started to occur in the U.S.
Michael Bieber: Experts are uncertain about the future speed and scale of this low growth, but there is widespread consensus now that it will occur and has already begun.
Michael Bieber: The main drivers for this group include the electrification of cities, buildings, and transportation, the reshoring of industrial manufacturing facilities in the U.S., and electricity consumed by data centers. The map on the right shows that AI is expected to drive more power demand from data centers in certain pockets of the U.S. The D.C. area, especially the Southeast U.S., Midwest, and the West Coast, are projecting far more rapid growth than average areas. Low electricity transfer capability between these regions is a key risk for reliability, particularly as electricity load shapes change.
Michael Bieber: The main drivers for this group include the electrification of cities, buildings and transportation, the reshoring of industrial manufacturing facilities in the U.S., and electricity consumed by data centers.
Michael Bieber: The map on the right shows that AI is expected to drive more power demand from data centers in certain pockets of the US. The DC area, especially the Southeast US, Midwest, and the West Coast are projecting far more rapid growth than average areas. Low electricity transfer capability between these regions is a key risk for reliability, particularly as electricity load shakes change. Last quarter, I talked about double-digit electricity price increases in California and New York, currently Will Dam's two largest markets. The compounding effect of higher electricity prices and higher electricity load provides a multi-year catalyst for Will Dam solutions.
Michael Bieber: The map on the right shows that AI is expected to drive more power demand from data centers in certain pockets of the U.S.
Michael Bieber: The D.C. area especially, the Southeast U.S., Midwest, and the West Coast are projecting far more rapid growth than average areas.
Michael Bieber: Low electricity transfer capability between these regions is a key risk for reliability, particularly as electricity load shapes change.
Michael Bieber: Last quarter, I talked about double-digit electricity price increases in California and New York, currently Willdan's two largest markets. The compounding effect of higher electricity prices and higher electricity load provides a multi-year catalyst for Willdan solutions. We're clearly excited about the energy transition capabilities that we've assembled, including planning, software, energy efficiency, and engineering.
Michael Bieber: Last quarter, I talked about double-digit electricity price increases in California and New York, currently Willdan's two largest markets.
Michael Bieber: The compounding effect of higher electricity prices and higher electricity load provides a multi-year catalyst for wheeled-down solutions.
Michael Bieber: We're clearly excited about the energy transition capabilities that we assembled: planning, software, energy efficiency, and engineering.
Michael Bieber: We're clearly excited about the energy transition capabilities that we've assembled, planning, software, energy efficiency, and engineering.
Michael Bieber: We plan to add even more capabilities to M&A in the quarters ahead.
Michael Bieber: We plan to add even more capabilities to M&A in the quarters ahead. Jim, over to you. Thanks, Mike. Good afternoon, everyone. Our second quarter results exceeded expectations. Strong earnings combined with efficient working capital.
Operator: Give them over to you.
Michael Bieber: We plan to add even more capabilities to M&A in the quarters ahead. Jim, over to you.
Kim Arling: Thanks, Mike.
Kim Arling: Good afternoon, everyone. Our second quarter results exceeded expectations. Strong earnings combined with efficient working capital management that reduced our debt leverage, improved liquidity, positioning us to invest more aggressively in future growth. Slide 7 shows the key metrics for our second quarter performance. Contract revenue was up 18% to 141 million in net revenue. Net of contractors and materials increased 17% to 73 million. Adjusted EBITDA increased 56% over the prior year to 12.8 million, or 17.7% of net revenue, versus 8.2 million, or 13.3% of net revenue a year ago. The second quarter earnings benefited from a slightly improved growth profit margin on the expanded volume and GNA expenses, which increased at a slower pace than our revenue growth.
Jim: Thanks, Mike. Good afternoon, everyone. Our second quarter results exceeded expectations. Strong earnings combined with efficient working capital management have reduced our debt leverage, improved liquidity, positioning us to invest more aggressively in future growth.
Ken Early: All of these earnings, combined with efficient working capital management, have reduced our debt leverage and improved liquidity, positioning us to invest more aggressively in future growth. Slide 7 shows the key metrics for our second quarter performance.
Jim: Slide 7 shows the key metrics for our second quarter performance.
Ken Early: Contract revenue was up 18% to $141 million, and net revenue, net of subcontractors and materials, increased 17% to $73 million. Adjusted EBITDA increased 56% over the prior year to $12.8 million, or 17.7% of net revenue versus $8.2 million, or 13.3% of net revenue a year ago. The second quarter earnings benefited from a slightly improved gross profit margin on the expanded volume and G&A expenses, which increased at a slower pace than our revenue growth.
Ken Early: Contract revenue was up 18% to $141 million, and net revenue, net of subcontractors and materials, increased 17% to $73 million.
Ken Early: Suggested EBITDA increased 56% over the prior year to $12.8 million or 17.7% of net revenue versus $8.2 million or 13.3% of net revenue a year ago.
Ken Early: The second quarter earnings benefited from a slightly improved gross profit margin on the expanded volume and G&A expenses which increased at a slower pace than our revenue growth.
Kim Arling: With reduced net interest costs and a significantly lower tax rate in the previous year, are adjusted EPS more than double to 55 cents per share. 33 cents on a gap basis, up from 3 cents to prior year. The second quarter results were favorably impacted by growth in municipal engineering and program management revenues derived from the strong and increasing backlog of new contracts and by the acceleration of utility program management revenues compared to last year when the utility revenues were heavily back-loaded into our fourth quarter. As a result of earlier work authorizations, much of that 2023 fourth quarter revenue surge has been brought forward into the first half of the current year and will thus reduce the kind of year in revenue and earnings spike weeks during the last year.
Ken Early: With reduced net interest costs and a significantly lower tax rate than the previous year, our adjusted EPS more than doubled, to $0.55 per share. $0.33 on a gap basis from $0.03 the prior year. The second quarter results were favorably impacted by growth in municipal engineering and program management revenues derived from the strong and increasing backlog of new contracts and by the acceleration of utility program management revenues compared to last year when utility revenues were heavily back-end loaded into our fourth quarter.
Ken Early: With reduced net interest costs and a significantly lower tax rate than the previous year, our adjusted EPS more than doubled.
Ken Early: to $0.55 per share, $0.33 on a gap basis from $0.03 the prior year.
Ken Early: The second quarter results were favorably impacted by growth in municipal engineering and program management revenues derived from the strong and increasing backlog of new contracts
Ken Early: and by the acceleration of utility program management revenues compared to last year when the utility revenues were heavily back-end loaded into our fourth quarter.
Ken Early: As a result of earlier work authorizations, much of that 2023 fourth-quarter revenue surge has been brought forward into the first half of the current year and will thus reduce the kind of year-end revenue and earnings spike we experienced last year. Lower leverage and higher cash balances reduced net interest costs, and discreet impacts related to stock compensation and energy efficiency building deductions aided in lowering the effective tax rate to result in the bottom line improvement for the quarter compared to last year. We expect our second half effective tax rate to also be favorably impacted by additional deductions derived from these discrete ideas.
Ken Early: As a result of earlier work authorizations, much of that 2023 fourth quarter revenue surge has been brought forward into the first half of the current year and will thus reduce the kind of year-end revenue and earnings spike we experienced last year.
Kim Arling: Lower leverage and higher tax balances reduce net interest costs, and the screen impacts related to stock compensation and energy efficiency building reductions.
Ken Early: Lower leverage and higher cash balances reduce net interest costs and discreet impacts related to stock compensation and energy efficiency building deductions aided in lowering the effective tax rate to result in the bottom line improvement for the quarter compared to last year.
Kim Arling: We expect our second half effective tax rate to also be favorably impacted by additional deductions derived from these discrete items. Slide 8 displays the key metrics for the first half of the year. Contract revenue was up 19% over 2023 to 264 million, while net revenue increased 14% to 141 million. With the gross profit margin only slightly lower than last year on the expanded volume and continued operating leverage from the slower growing Z and A expenses. Adjusted EBITDA increased 32% to 23.9 million, or 16.9% of revenue, for the six months compared to 18.1 million, or 14.6% of net revenue, for the first half of last year.
Ken Early: We expect our second half effective tax rate to also be favorably impacted by additional deductions derived from these discrete items.
Ken Early: Slide 8 displays the key metrics for the first half of the year. Contract revenue was up 19% over 2023 to $264 million, while net revenue increased 14% to $141 million, with the gross profit margin only slightly lower than last year on the expanded volume and continued operating leverage from the slower growing G&A expenses. Adjusted EBITDA increased 32% to $23.9 million, or 16.9% of revenue for the six months, compared to $18.1 million, or 14.6% of net revenue for the first half of last year.
Ken Early: Slide 8 displays the key metrics for the first half of the year.
Ken Early: Contract revenue was up 19% over 2023 to $264 million, while net revenue increased 14% to $141 million.
Ken Early: With the gross profit margin only slightly lower than last year on the expanded volume and continued operating leverage from the slower growing G&A expenses.
Ken Early: Adjusted EBITDA increased 32% to $23.9 million or 16.9% of revenue for the six months compared to $18.1 million or 14.6% of net revenue for the first half of last year.
Kim Arling: The reduced net interest expense in the lower effective tax rate enabled adjusted EPS to grow by 64% to 95 cents per share. 54 cents on a gap basis from 10 cents per year. Again, significantly higher municipal engineering and program management revenue and a smoother acceleration of utility program revenues drove the improved results for the period compared to 2023.
Ken Early: The reduced net interest expense and the lower effective tax rate enabled adjusted EPS to grow by 64% to $0.95 per share, $0.54 on a gap basis, up from $0.10 the prior year. Again, significantly higher municipal engineering and program management revenues and a smoother acceleration of utility program revenues drove the improved results for the period compared to 2023.
Ken Early: The reduced net interest expense and the lower effective tax rate enabled adjusted EPS to grow by 64% to $0.95 per share, $0.54 on a gap basis, up from $0.10 the prior year.
Ken Early: Again, significantly higher municipal engineering and program management revenues and a smoother acceleration of utility program revenues drove the improved results for the period compared to 2023.
Kim Arling: On slide 9, the strong earnings and focused working capital management efforts led to continued improvement in our balance sheet ratios. That debt is down from 75 million a year in 2023 to 50 million at the end of June, resulting in a reduction in the net leverage ratio, total debt less cash to 1.0 cons adjusted EBITDA at the end of June, down from 1.6 times in December. Despite the double-digit revenue growth for the year, non-pass working capital declined since year end and contributed to the $28 million in net cash provided from operations through the first half of the year, up from 19 million a year ago.
Ken Early: On slide nine, the strong earnings and focused working capital management efforts led to continued improvement in our balance sheet ratios. Net debt is down from $75 million a year in 2023 to $50 million at the end of June, resulting in a reduction in the net leverage ratio, total debt less cash, to 1.0 times adjusted EBITDA at the end of June, down from 1.6 times in December. Despite the double-digit revenue growth for the year, non-cash working capital declined since year-end and contributed to the $28 million in net cash provided from operations through the first half of the year, up from $19 million a year ago.
Ken Early: On Flight 9, the strong earnings and focused working capital management efforts led to continued improvement in our balance sheet ratios.
Ken Early: Net debt is down from $75 million a year in 2023 to $50 million at the end of June, resulting in a reduction in the net leverage ratio, total debt less cash, to 1.0 times adjusted EBITDA at the end of June.
Ken Early: down from 1.6 times in December.
Ken Early: Despite the double-digit revenue growth for the year, non-cash working capital declined since year-end and contributed to the $28 million in net cash provided from operations through the first half of the year, up from $19 million a year ago.
Kim Arling: Our $50 million untapped line of credit in $44 million cash balance give us a solid platform of liquidity to finance future growth.
Ken Early: Our $50 million untapped line of credit and $44 million cash balance give us a solid platform of liquidity to finance future growth, with slide 10 in summary. Our second quarter and year-to-date results surpass expectations, reinforcing our optimism about the future and opening doors for accelerated growth, including strategic opportunities through M&A. We're thus raising our guidance for the full year as follows: net revenue between $280 and $290 million, and adjusted Eva Dahl between $50 and $52 million. Suggested diluted earnings per share of between $2.00 and $2.10 per share. These numbers assume an effective tax rate of 14% for the full year and 14.2 million shares outstanding.
Ken Early: Our $50 million untapped line of credit and $44 million cash balance give us a solid platform of liquidity to finance future growth.
Kim Arling: With slide 10 in summary, our second quarter and year-to-date results surpass expectations, reinforcing our optimism about the future and opening doors for accelerated growth, including strategic opportunities through M&A, where thus raising our guidance for the full year as follows. Net revenue between 280 and 290 million, adjusted EBITDA between 50 and 52 million, adjusted diluted earnings per share of between $2 and $2.10 per share. These numbers assume an effective tax rate of 14% for the full year and 14.2 million shares outstanding.
Ken Early: with slide 10 in summary.
Ken Early: Our second quarter and year-to-date results surpass expectations, reinforcing our optimism about the future and opening doors for accelerated growth, including strategic opportunities through M&A. We're thus raising our guidance for the full year as follows.
Ken Early: Net revenue between $280 and $290 million.
Ken Early: adjusted EBITDA between $50 and $52 million.
Ken Early: suggested diluted earnings per share of between $2.00 and $2.10 per share.
Ken Early: These numbers assume an effective tax rate of 14% for the full year, and 14.2 million shares outstanding.
Operator: Operator, we're now ready for questions. Thank you. We will now be conducting
Operator: Operator, we're now ready for questions. Thank you. Well, now we can update a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation terminal indicates your linings and the question to you. You may press star two if you'd like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star key. One moment, please, while we pull for questions. Thank you.
Operator: Operator, we're now ready for questions.
Operator: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star two if you'd like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handwriting before pressing the start button. One moment, please, while we poll for questions. Thank you. Our first question is from Craig Irwin with Ross Capital Partners. Please proceed with your question.
Operator: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handstuffs before pressing the star key. One moment please while we poll for questions.
Craig Irwin: Our first question is from Craig Irwin with Ross Capital Partners. Please proceed with your question. Good evening. Thank you for taking my questions. So Mike, Integral Analytics has made a material of contributions, sort of lumpy contribution in the past, but it looks like this year things are a little bit more even on a quarterly basis. Can you maybe update us on what's changed in the character of this business? Did we see similar revenue in the second quarter, the first quarter? Do you think that some of the volatility and earnings related to integrated analytics might potentially be behind us, and really more of a source of upside over the next number of quarters?
Operator: Thank you. Our first question is from Craig Irwin with Ross Capital Partners. Please proceed with your question.
Craig Irwin: Good evening. Thank you for taking my questions. So Mike.
Craig Irwin: Good evening, thank you for taking my questions. So Mike,
Michael Bieber: Integral Analytics has made a material contribution, a sort of lumpy contribution in the past. But it looks like this year, things are a little bit more even on a quarterly basis. Can you update us on what's changed in the character of this business? Did we see similar revenue in the second quarter and the first quarter? Do you think that some of the volatility in earnings related to Integral Analytics might potentially be behind us and really more of a source of upside over the next number of quarters?
Michael Bieber: Integral analytics has made a material contribution, sort of lumpy contribution in the past.
Michael Bieber: But it looks like this year things are a little bit more even.
Michael Bieber: on a quarterly basis. Can you maybe update us on...
Michael Bieber: What's changed in the character of this business? Did we see similar revenue in the second quarter to the first quarter? Do you think that some of the volatility in earnings related to integral analytics might potentially be behind us?
Michael Bieber: Yeah, good question, Craig. I do think it is smoother now, and we've worked consciously to do that. So it's smoother than last year. We saw early contract wins in queue one of this year. Part of the reason that it is smoother and it will be smoother in the future is that we're doing more add-ons and small additions to existing licenses that we've already sold on. We've also partnered quite a bit with E3 on the services side to pair services with software licenses. So it is smooth; it's a conscious effort we've made, and it should remain so in the future.
Michael Bieber: and really more of a source of upside over the next number of quarters.
Michael Bieber: Yeah, good question, Craig. I do think it is smoother now, and we've worked consciously to do that. So, it's smoother than last year. We saw early contract wins in Q1 of this year. Part of the reason that it is smoother, and it will be smoother in the future, is that we're doing more add-ons and small additions to existing licenses that we've already sold. We've also partnered quite a bit with E3 on the services side to pair services with software licenses.
Michael Bieber: Yeah, good question, Craig.
Michael Bieber: I do think it is smoother now. We've worked consciously to do that. So it's smoother than last year. We saw early contract wins in Q1 of this year.
Michael Bieber: Part of the reason that it is smoother, and it will be smoother in the future, is that we're doing more add-ons and small additions to existing licenses that we've already sold.
Michael Bieber: We've also partnered quite a bit with E3 on the services side to pair Services with software licenses. So you're right. It is smooth. It's a conscious effort We've made and it should remain so in the future
Michael Bieber: So you're right, it is smooth, it's a conscious effort we've made, and it should remain so in the future. Having said that, there will always be some lumpiness due to accounting requirements. When we sell a large license that is capitalized by the customer, we have to recognize all of that license revenue up front. So that's what makes it lumpy. It'll remain somewhat so, but less so than in the past.
Michael Bieber: Having said that, there will always be some lumpiness due to accounting requirements. When we sell a large license that is capitalized by a customer, we have to recognize all of that license revenue upfront. So that's what makes it lumpy. It will remain somewhat so, but less than in the past.
Michael Bieber: Having said that, there will always be some lumpiness due to accounting requirements when we sell a large license that is capitalized by the customer.
Michael Bieber: We have to recognize all of that license revenue up front. So that's what makes it lumpy It'll remain somewhat so but less than in the past
Craig Irwin: Excellent, excellent. So you mentioned E3, and I guess most of the people on the call already know that, you know, E3 consulted on essentially every zero-carbon mandate program in the country, right? All these states that are adopting mandates are giving them, you know, logical paths of how they can get there and what they can support with policy. Now I think the states have a bigger problem with some of this load growth and some of this economic growth we're seeing in different areas.
Craig Irwin: Excellent. So you mentioned E3; I guess most of the people on the call already know that E3 consulted to essentially every zero carbon mandate program in the country. All these states that are adopting mandates, giving them logical paths of how they can get there and what they can support with policy. Now I think the states have a bigger problem with some of this load growth and some of this economic growth we're seeing in different areas. Do you think that the track record that E3 has developed, looking at some of these advanced technologies to handle some of the structural problems in the grid?
Craig Irwin: Excellent, excellent. So you mentioned E3, you know, I guess most of the people on the call already know that, you know, E3 consulted to essentially every zero carbon mandate program in the country, right? All these states that are adopting mandates, giving them...
Craig Irwin: [inaudible]
Craig Irwin: Do you think that the track record that E3 has developed, you know, looking at some of these advanced technologies to handle some of the structural problems in the grid, do you think that E3 has, you know, a potential uptick in potential, you know, in consulting activity and project proposals for... really, what we're going to see is sort of reserved margins eroding quickly?
Craig Irwin: Do you think that the track record that E3 has developed
Craig Irwin: you know, looking at some of these advanced technologies and their ability to...
Michael Bieber: Do you think that E3 has potential uptick in consulting activity and project proposals for really what we're going to see is sort of reserve margins eroding quickly. You're right, Craig; I don't know that they consulted to every state, but they certainly are well known in this area. Maybe the most well known in the United States for doing these types of big energy and carbon studies at the state level and for major cities and major pieces of the power group. Virginia, the project I mentioned is another example of that. We just picked up another one. We're well known for that area of business. It is doing exceptionally well.
Craig Irwin: some of the structural problems in the grid. Do you think that E3 has, you know, a potential uptick in potential, you know, in consulting activity and project proposals for, you know,
Craig Irwin: for more information.
Michael Bieber: You're right, Craig. I don't know that they've consulted with every state, but they certainly are well known in this area, maybe the most well known in the United States for doing these types of big, you know, energy and carbon studies at the state level and for major cities and major pieces of the power grid. Virginia, the project I mentioned is another example of that. We just picked up another one. We're well known for that.
Michael Bieber: You're right, Craig. I don't know that they've consulted to every state, but they certainly are well-known in this area. Maybe the most well-known in the United States for doing these types of big...
Michael Bieber: energy and carbon studies at the state level and for major cities and major pieces of the power grid.
Michael Bieber: Virginia, the project I mentioned is another example of that, we just picked up another one.
Michael Bieber: So we're well known for that. That area of business is doing exceptionally well.
Michael Bieber: That area of business is doing exceptionally well, so I think, you know, yeah, there is some upside, especially as you look out over the next three years. States and utilities are going to have to grapple with. The big changes in load that were not expected. Most of their, you know, enterprise-wide planning that has been done over the last five years is being rethought now and rethought quickly. So this is a rapid change. I think there is more upside to that, and it should be good for the next several years, actually.
Michael Bieber: I think there is some upside, especially as you look out over the next three years. States and utilities are going to have to grapple with the big changes in load that we're not expected. Most of their enterprise-like planning that has been done over the last five years is being rethought now and rethought quickly. So this is a rapid change; I think there is more upside to that, and it should be good the next several years actually.
Michael Bieber: So I think, you know, yeah, there is some upside, especially as you look out over the next three years, you know, states and utilities are going to have to grapple with.
Michael Bieber: The big changes in load that were not expected, most of their, you know, enterprise-wide planning that has been done over the last five years is being rethought now and rethought quickly.
Michael Bieber: So this is a rapid change, I think there is more upside to that, and it should be good the next several years, actually.
Craig Irwin: Thank you. So my last question before I jump back in the queue, Meta, this emission study for voluntary clean energy procurement. Can you help us understand the specifics of the project and the timeline for revenue and whether or not you see similar opportunities for other leaders in clean energy adoption?
Michael Bieber: Thank you. So my last question before I jump back into meta, this emission study for voluntary clean energy procurement. Can you, can you help us understand sort of, you know, the specifics of the project, you know, and the timeline for revenue and whether or not you see similar opportunities for other leaders in clean energy adoption. Yeah, this is just one example project for work we're doing for big tech, largely in the Silicon Valley and up and down the West Coast. We've got several projects like this. You know, it's a study project right now, and this particular project is not that large.
Craig Irwin: Thank you. So, my last question before I jump back in the queue. META, this emission study for voluntary clean energy procurement.
Craig Irwin: Can you help us understand the specifics of the project, and the timeline for revenue, and whether or not you see similar opportunities for other leaders in clean energy adoption?
Michael Bieber: Yeah, this is just one example project for work we're doing for big tech, largely in Silicon Valley and up and down the West Coast. We've got several projects like this. You know, it's, it's a study project right now. And this particular project is not that large. Some of them are large work we do for, you know, Cisco and Microsoft and other big tech companies. And these are becoming more important to us. And so this is a study that's about six months long.
Michael Bieber: Yeah, this is just one example project for work we're doing for big tech, largely, in the Silicon Valley and up and down the West Coast.
Michael Bieber: We've got several projects like this, you know, it's a study project right now and this particular project is not that large, some of them are large, work we do for, you know, Cisco and Microsoft and other big tech companies.
Operator: Some of them are large work we do for, you know, Cisco and Microsoft and other big tech companies is, you know, becoming more important to us. And so this is a study that's about six months long. Good project. Excellent. Well, congratulations. Strong progress across the board. I'll have to hop back in the queue. As a reminder, if you'd like to ask a question, please press star one on your telephone. Keep that.
Michael Bieber: is becoming more important to us. And so this is a study that's about six months long.
Craig Irwin: Excellent. Well, congratulations. Strong progress across the board. I'll hop back in the queue.
Speaker Change: Good project.
Speaker Change: Excellent. Well, congratulations. Strong progress across the board. I'll hop back in the queue.
Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our next question is from Richard Eisenberg, Private Investor. Please proceed with your question.
Speaker Change: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad.
Richard Eisenberg: Our next question is from Richard Eisenberg, private investor. Please proceed with your question. Yeah, I'm good. Afternoon and congratulations on a great quarter. Is there opportunity to do business with the big data center companies like Microsoft and Amazon in the future since you're doing business now with Facebook? Thank you. Yes, there is, and we are doing business with those types of customers. We actually have been for a number of years. This is not new for us. We started out with AT&T. They were an early entrance and owner of debt centers around the country. And we do quite a bit of work for AT&T today.
Speaker Change: Our next question is from Richard Eisenberg, private investor. Please proceed with your question.
Richard Eisenberg: Yeah, good afternoon, and congratulations on a great quarter. Is there an opportunity for you to do business with the big data center companies like Microsoft and Amazon in the future since you're doing business now with Facebook? Thank you.
Richard Eisenberg: Yeah, good afternoon and congratulations on a great quarter.
Michael Bieber: Yes, there is, and we have been doing business with those types of customers for a number of years. We started out with AT&T. They were an early entry and owner of data centers around the country, and we do quite a bit of work for them today. We've expanded that list to include most of the major data centers, both owners and developers. We work for both sides there, so there's definitely that opportunity. Some of that work is confidential, so I'm not going to walk you through the list of customers, but we work for most of them. It's a rapidly expanding market for us.
Michael Bieber: We've expanded that list to include most of the major data centers, both owners and developers. We work for both sides there. So there's definitely that opportunity. Some of that work is confidential. So I'm not going to walk down the list of customers, but we work for most of them. It's a rapidly expanding market for us.
Michael Bieber: both owners and developers. We work for both sides there. So there's definitely that opportunity. Some of that work is confidential, so I'm not going to walk down the list of customers, but we work for most of them.
Operator: Okay.
Richard Eisenberg: Okay, also, are there going to be any possible acquisitions this year or, more likely, in 2025? A great question, and we
Michael Bieber: Also, are there going to be any possible acquisitions this year or more likely in 2025? Great question. And we would like for them to be this year. There's never any guarantees that you can't predict the timing of those, but we've been working on this all year long. We started last year. And we have some mature opportunities that we're working on right now that we're really excited about. Very cool, interesting capabilities that we hope to be adding soon. I hope to this year. We'll see.
Richard Eisenberg: Okay also are there going to be any possible acquisitions this year or more likely in 2025?
Michael Bieber: Great question, and we would like for them to be this year, but there's never any guarantees.
Michael Bieber: You can't predict the timing of those, but we've been working on this all year long. We started last year, and we have some mature opportunities that we're working on right now that we're really excited about. Very cool, interesting capabilities that we hope to be adding soon. I hope that this year, we'll see.
Michael Bieber: We would like for them to be this year
Richard Eisenberg: Okay, thank you.
Richard Eisenberg: And we have some mature opportunities that we're working on right now that we're really excited about. Very cool, interesting capabilities that we hope to be adding soon.
Operator: Okay. Thank you. Congratulations again. Thank you.
Richard Eisenberg: I hope that this year, we'll see.
Richard Eisenberg: Congratulations again; thank you.
Michael Bieber: Thank you. There are no further questions at this time. I would like to hand the floor back over to Mike Bieber for any closing comments.
Operator: There are no further questions at this time.
Michael Bieber: I would like to hand the floor back over to Mike Bieber for any closing comments. Thank you, Paul. To our customers, employees, and investors. Thank you for your support. And we will talk to you again after Q3. Thank you.
Michael Bieber: Thank you. There are no further questions at this time. I would like to hand the floor back over to Mike Bieber for any closing comments.
Michael Bieber: Thank you all. To our customers, employees, and investors, thank you for your support, and we will talk to you again after Q3.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Mike Bieber: Thank you, Paul. To our customers, employees, and investors, thank you for your support, and we will talk to you again after Q3. Thank you.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: This is it. Bye-bye.
Speaker Change: Love it.