Good day and welcome to the Willdan Group Incorporated First Quarter 2015 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Nii Tetteh, Business Analyst. Please go ahead, sir.

Thank you. Good afternoon everyone and thank you for joining us to discuss Willdan Group's Financial Results for the first quarter ended April 3, 2015. With us today from management are Chief Executive Officer, Thomas Brisbin; Chief Financial Officer, Stacy McLaughlin; and Mike Bieber, Senior Vice President, Corporate Development. 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, which are not purely historical, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve certain risks and uncertainties, and it is important to note that the Company’s 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 filed for the year ended January 2, 2015. The Company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call. Willdan Group Inc disclaims any obligation and does not undertake to update or revise any forward-looking statements that made today. With that, I will now turn the call over to Chief Financial Officer, Stacy McLaughlin. Stacy?

Thanks, Nii. I’d like to add my welcome to those joining us on today’s call. In addition to GAAP financial results, we also provide non-GAAP financial measures that we believe enhance investors’ ability to analyze our business trends and performance. Our non-GAAP measures include revenue net of subcontractor costs and EBITDA. We believe revenue net of subcontractor cost allow us for an improved measure of the revenue derived from work performed by our employees. EBITDA is a supplemental measure used by Willdan to evaluate operating performance. GAAP reconciliations for both of these non-GAAP measures are included at the end of the earnings release we issued today. I’m pleased to share with you our strong financial results for the first quarter of 2015 and I’ll start with an overview of our income statement then our balance sheet and finally our guidance. Total contract revenue for the first quarter of 2015 increased 46.7% to $33.3 million from $22.7 million for the first quarter of 2014. In January, we made two acquisitions: 360 Energy Engineers and Abacus Resource Management Company. These acquisitions contributed $3.7 million in contract revenue for the first quarter of 2015. Willdan’s organic growth rate was 30% for the first quarter of 2015. From an organic standpoint, the increase in total contract revenue reflects greater demand for Willdan’s Energy Efficiency Services in the states of New York and California. By segment, revenue from Energy Efficiency Services grew 82.5% to $18.9 million. Engineering Services contract revenue increased 21.5% to $10.8 million. Revenue from Public Finance Services was $2.7 million and Homeland Security Services revenue was $0.9 million. Revenue, net of subcontractor costs, increased 35.2% to $25 million compared with $18.5 million for the year ago quarter. Historically, the first quarter has been our weakest quarter for revenue. This is especially true…

Thanks Stacy and good afternoon. And let’s start off with a question on or it’s a question investors may ask. And the question is, can we stay in this exceptional growth rate? I would now like to take a few moments to discuss why we can. We’re off to a good start for 2015 and I would like to reflect a bit on why Willdan is in a much better position and why I believe we will continue to grow. By position, I mean financial, marketplace, employees, customers, and then group of investors that are taking note us of where Willdan is headed. It was about 2008 that I spoke on a conference call that Willdan was not going to wait for the recession to end. We’re not going to wait it out until our base business of engineering for California studies returned to a robust days of subprime loans. We’re going to face the recession and are nearly 70% loss of business as the new reality. Given the new reality, as a new public company, Willdan have much to do. We decided to enter the Energy Efficiency market. Energy Efficiency is important to the nation for many reasons, political, economic, environment, and security and it’s not going away for many years to come. California has been a leader in energy efficiency and the rollout across the country was just beginning. Willdan elected to enter the Energy Efficiency business for several reasons. It was synergetic with our California customer base. It provided a diversification though as independent of the recession. It allowed for geographic expansion. It is a highly fragmented industry with a large growth potential and five. It played well with the technical expertise of the Willdan team. It was not a big stretch for engineers, scientists, and economists…

Thank you. [Operator Instructions] Our first question comes from Al Kaschalk with Wedbush Securities.

Good afternoon, Tom, Stacy.

Hi, Al.

Hi, Al.

A very, very strong performance in the quarter, one of you focus first quickly on the acquisition, I believe you’ve disclosed $4 million of revenue in the quarter, in terms of annualized contribution what was that on the trailing basis doing above $20 million, so is this about derived case in terms of the historical business for 2015?

Yes, we had 2.5 months of contribution Al and Q1 is typically the seasonal low quarter for these acquisitions just as it is in Willdan. The acquisitions tend to be a little more seasonal so $20 million is the right run rate approximately on an annual basis.

Thanks a lot. And then in terms of the integration seems like it’s going well, talk a little bit about the – to the expense you can about the calendar of business coming in based on the structures of the acquisitions and how you are progressing on that front?

There is a lot of activity right now, where 4 months, 3.5 months since the acquisitions and we’ve won six to seven new contracts already, we’ve got an active pipeline that pursuits, there’s probably 20 different pursuits focused on the east coast and the west coast. It’s a good cross selling effort and we already been successful. So it’s a good pipeline now.

Okay, great. Stacy, just a clarification on the commentary about guidance, I think you said EBITDA will grow better than the revenue growth rate. Are we talking 30% revenue growth on an organic basis of – if we took the midpoint so EBITDA would be much better than that but could you frame the – what type of number you folks have in mind?

We are trying to decide who should answer. Hang on a second.

And you can answer, I guess, not to give you free pass on this. But I mean 100% growth I think in this quarter here you did about a 100% growth of last year. So is that the type given the cost take out you have the type of work you were in, the margin performance, the other way to answer that I guess is net margin was about 4.5% in the quarter and I believe you’re tracking to get that towards to 6% to 7% overtime. But 2015 should be well above 5% from what I’m hearing.

Yes. Our calculation for the EBITDA growth is on an organic and acquisitive basis.

Okay. That’s really helpful.

I think that answered your first question. Did I answer all your questions?

Fair enough. No, I think you two actually going in the right level of – north of 5% in the net margin. And I’m going to focus on the two business opportunities. Tom, can you elaborate just on the microgrid side very interesting and exciting opportunity. But what type of ramp is that in terms of potential wins and they raised the contracts on that specific target area?

Okay. There is probably that I know 7 to 10 pilot programs in the country. Here in California there is – you see Irvine the Department of Power and Water has a little bit daily funded pilot programs fully vested on your San Diego has one. Those were three in California I’m aware of Air Force Academy, Illinois Institute of Technology. On the east coast, there is a few universities, one down in the South east that have DOE funding to experiment with this. But what – your question is how bigger are they? When are they’re going to start? What’s your finding it’s the microgrid is primarily focused on reliability. So if you get a fall through, lightening storm or whatever you quickly shift your power from one area to another and keep critical infrastructure going. So any type of hospital, operating room, data centers, anything of that sort doesn’t like power failures. Historically, they’ve got back up generation, going forward microgrid may – is a better answer because you can switch very quickly to other parts of the grid, storage wherever and get your power rather than in starting up generators. There is a cost those big generators. So this is being proven out now. The opportunities we are looking at it is the state of New York came out with something called New York price and initially they talked about 35 that’s called feasibility studies in the state of New York. So if you have come forward with an area in New York that needed a microgrid because they were suffering from outages, let’s say. And you proposed on that the first six studies there were $200,000 each, Willdan was avoided three of them. If this study proofs that a microgrid is feasible for that area. The state of New York is going to provide $7 million for the community which put the microgrid in. So if we win three to five or six of these and we are very, very good, just in New York we could have, hey, it would be fantastic so we had three of them want the completion. If they would give us the capabilities and expansion in the nation that pretty much accept for Illinois Institute Technology is leading. So is that answers your question Al.

Yeah, that’s helpful. And then just switching over real quick, obviously the draw that initially here in California and the what are the utility commentary but how about the ramp in that activity in the skills that’s you currently have or do you need to go out and provide fined additional skill sets for you to be providing services in that area, just a little bit more talk on that.

We are not going to go out and compete with the major infrastructure firms to convey water from the north to the south. When infrastructure upgrades may be preventing leaks or doing things at the municipal level, when that regulatory level comes down on our rate studies system, how to make people to pay for things through our financial group that’s where we’ll come in. We have those people in place. They’ve done this work before. So for us it’s a matter of when the states start to do something. We are not going to go chase in the big infrastructure, underground tunnels from north to south. We’ll only be effective when it comes to the cities.

But as you elaborated during your prepared remarks I think the message we should to be taking away is that the incremental business you’re picking up and what’s your focussed on and how the team focused on is driving a better marginal dollar level on your organic growth.

It is but I won’t say it’s due to the water situation.

No, no. Is that was more of a broader portfolio question about book of business here going after?

Yes.

Thank you.

Okay.

Our next question comes from J D Padgett with ALMAK Capital.

Hi, guys. Another great quarter, so congratulations on that. Just a couple of questions. In Q4 and Q1 did you have any acquisition related expenses that don’t continue?

There might have been some small ones but nothing material.

Like $20,000?

Okay, not on huge to call out?

Yes.

Okay and another question would be when we look at the acquisitions. Is there any purchase accounting impacts on their contributions right now? In terms of revenue or profit you can really?

The amortization related to the intangibles, the purchase price accounting is not finalized at this point. But the amortization related to backlog trade name and non-compete. That will be recorded.

But nothing that impacts your ability to recognize revenue full year or anything like that?

No.

Okay. And then I know the performance that you guys put out in the 8-K for the acquisition will back show them acquired companies are having a pretty substantial combined operating margin, 3 months to 9 months of last year. Is that something that sustainable or do you think they were kind of running their business to lean to really deal that grow and we need to reinvest in that or how do you look at that?

I don’t think they run in too lean. They were running at – they hit to almost become part of Willdan. We have a larger fringe benefit, we have a corporate estimated that inline with how they were running. They were run and run in lean it means where products are reducing by 6%, 7%.

Okay. And that just kind of within the contact of your corporate structure about the offset is then ability to drive synergy across both companies and so forth?

Correct.

How quickly do you think you could really move the revenue needle with that and the efforts in, what you are pursuing with the combined operations on the revenue side?

In that, they’re poised to grow considerably. So…

So just benefiting from your customer relationships and vice versa?

Vice versa, yes. I mean the part of the sale is that Willdan has to introduce them to our customer base, we have to close deals.

Right.

I mean, they can do fine on their own, both of them, they were doing fine.

Right.

To really benefit we need to provide customers to them. They have already helped us in winning jobs that we would not have won because of their resumes and past performance. So it’s just a little too early yet. I think I had written at one point that by the end of the year, we will have a pretty good handle on it. The projects – just the projects – if you look at a project from the timing, you know about the time that actually starts in this business, it’s 6 to 8 to 12 months. So we have to identify. We have to kind of down select, pursue and then the customer has to elect to go forward. So that’s a 6 – minimum 6 months to 12 months period of time.

So, there is kind of a sales cycle in there and hopefully by next year we’re really seeing the benefits of the synergies between companies?

And just – for your information as an investor, there we put a cumulative earn outs because we think that ramp will not happen year by year, and it will – I don’t want to say hockey stick, but it won’t happen in the first six months.

Right. Okay, is – you can’t share any of the criteria around the earn out, can you?

Actually, it’s all in the 8-K that was filed in January.

Does it talk about the hurdles?

Yes, I believe it does in actual detail also attached are the agreements, which has it as well.

That’s a lot of good late night reading.

I do say it was exciting.

And then I guess just the final question on Con Ed. I think you mentioned a follow-on contract that you might have received there that I don’t know the necessarily press release, but is there just opportunity for a continued follow on business in that respect because I think the scope of the initial contract was like a $50 million or something?

Yes, so you’re referring to the demand response portion, Brooklyn Queens load pocket comment I had.

Okay. And there is just additional business that you’ve been able layer on top of that with them as you prove yourself there?

Right. So they modified our existing contract to give us demand response type work rather than direct install. I should say rather than but it’s as a direct install approach to demand response that’s a better way to say it.

Okay. Perfect, thank you guys very much.

Thank you.

[Operator Instructions]

We’re waiting because we had a question come on late last time that we didn’t get to.

Okay, we’ll pause for just another…

We’ll give some extra seconds, so we don’t have that happen again.

Okay.

So, there are no further questions from the phone we can say operator…

No, it appears there are no further questions at this time. And I’d like to turn the conference back to Mr. Tom Brisbin for any additional or closing remarks.

Yes – so trying to tell me that – can you hear me, I know you can hear me. Thanks for your attention and interest in Willdan. We look forward to seeing some of you in coming weeks and keeping you posted on our achievements to this year. So thanks a lot.

This concludes today’s conference. Thank you for your participation.