Welcome to the Willdan Group Third Quarter 2022 Conference Call. I’ll now turn the call over to Al Kaschalk, Vice President of Investor Relations. You may begin.

Thank you, Missy. Good afternoon, everyone, and welcome to Willdan Group’s third quarter fiscal 2022 earnings call. Joining our call today are Tom Brisbin, Chairman of the Board and Chief Executive Officer; Kim Early, Chief Financial Officer; and Mike Bieber, President. The call today builds on our earnings release we issued after market closed today. You may find the earnings release and the Willdan investor report that accompanies today’s call in the Press Release and Stock Information section of our Investor Relations website on ir.willdan.com. Management will review prepared remarks, and then we 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, 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 December 31, 2021. 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. In addition to GAAP results, Willdan also provides non-GAAP financial measures that we believe enhance the investors’ ability to analyze the business trends and performance. Our non-GAAP measures include net revenue, adjusted EBITDA and adjusted EPS. I’ll now turn the call over to Tom Brisbin, Willdan’s Chairman and CEO.

Thanks, Al, and good afternoon, everyone. Our third quarter shows progress on many fronts. Revenue, earnings and cash flow were all up as projected. The business overall is good. All business units have gotten past the COVID and restart problems. We have factored in the delays on supply chain. We have collaborated well with Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Gas on the start-ups and negotiation of the California IOU programs. We are in discussions with Southern California Edison to address challenges with these contracts. We have proposed changes that will benefit SCE and Willdan and stakeholders to deliver energy savings. We are affirming our guidance for 2022 that net revenue growth would be greater than 10% and EBITDA margin would be greater than 10%. For the third quarter, we saw the inflection point that we’ve been waiting for, for the second half. Third quarter net revenue was up 8% over the prior year. EBITDA margin for the third quarter was 13.5%. Our organic net revenue growth rate was 8% in the third quarter, which is the sixth straight quarter for organic growth. Within the Energy segment, our energy consulting, engineering and design build businesses are contributing strong top-line revenue. E3 has doubled over the last three years and is working with many of the leading jurisdictions on the clean energy transition, which was given a boost by the Inflation Reduction Act. We are looking at how to create synergy with our cities, engineering practice and the clean energy transition. We have previously talked about the New York LL97, decarbonization plan for their 4,000 buildings. We are also working on Denver, Philadelphia and Boston, helping with decarbonization, primarily electrified clean heat. Our two largest utility contracts are doing well. Los Angeles Department of Water…

Thanks, Tom, and good afternoon, everyone. Gross revenue for the third quarter increased by 23.5% over the prior year’s Q3 to $121.4 million, while net revenue, net of some contractors, materials and other direct costs increased 8.2% to $58.9 million. The increased revenue included increases in construction management, California IOU programs and Engineering and Consulting revenues partially offset by lower revenues from direct install projects and software licensing. Gross profit for the third quarter of 2022 was $37.5 million or 30.9% of revenue compared to $38.1 million or 38.8% of revenue in the same period a year ago. The lower gross profit margin was primarily due to the higher mix of construction management revenues, lower software revenues and higher costs associated with the building of revenue backlog for new California IOU programs. G&A costs for the quarter were $38.3 million for Q3 of 2022, up 4.3% compared to the prior year, while gross revenues were increasing 23.5%. Interest expense was $1.4 million for the quarter compared to $937,000 a year ago due to an increase in average borrowings outstanding under our credit agreement and the higher average interest rates. The loss before income taxes was $1.5 million compared to income before tax of $600,000 for Q3 of 2021. The income benefit for Q3 of 2022 was $1.5 million compared to a tax benefit of $0.2 million for Q3 of 2021. The resulting net profit was $76,000 for the current quarter compared to a net profit of $840,000 reported for Q3 of 2021. Adjusted EBITDA was $8.0 million for the quarter compared to $10.1 million a year ago and the adjusted earnings per share was $0.42 for Q3 of 2022 compared to adjusted earnings of $0.53 per share in 2021. For the nine months to date, gross revenue increased 20.8% to…

[Operator Instructions] Okay, our first question is going to come from Chip Moore with EF Hutton. Chip, your line is open.

Good evening guys for taking the question. I hopped on a little late, so I apologize if you’ve covered some of this. But really been a lot of focus on the California IOU business, right, in recent history and nice to see some constructive resolutions there on implementation. But if I think about Willdan, the company is really about much more than just those contracts. Just curious maybe if you step back and think about the electrification opportunity, IRA some of those drivers over say, next three to five years, can you maybe just speak to how you’re uniquely positioned and really how you think about that opportunity and what it can mean for you?

We’re trying to decide who should answer that question, Chip. I’m pointing at Mike. He’s pointing at me.

Maybe both of you.

Well, I don’t know how much of the presentation that you heard, but yes, we think electrification is going to be the direction for many of the IOUs. And you’re right, California IOUs, when they pivot, I mean so far, we’ve seen a little from PG&E. We’re just getting a little started at SCE. We see within the state, there’s this kind of conflict between getting off of gas and getting into electricity for some of the IOUs. So New York has pivoted quite a bit. And I think the future will be both saving energy and electrifying. And so we’re getting early starts with some of the IOUs. And you’re right, we’ve been talking about very recently is our future really with just California IOUs because the strength of what Willdan has if you run through it – if you run through our work with cities electrifying, you run through our performance contracting group that’s doing work like NYCHA, large schools, universities, and what they’re trying to do is get off of gas and other fuels. And you go throughout all these other contracts, we’re going to see a lot of change and we’re pivoting really well. So thanks for the question, Chip. Did I miss anything?

No, I think that covers it. Good to hear you’re excited and like the position, and I would agree. I’ll hop in queue. But that’s helpful. Thanks.

I don’t know, is there a queue? Are there other questions?

I can’t see in the screen.

It doesn’t matter. Al?

[Operator Instructions]

That’s what I thought. There weren’t any more questions, Chip. In summary, we built revenue and earnings momentum in the third quarter. We successfully resolved the major issues with three of the four California IOUs to the mutual benefit of IOUs, Willdan and outside stakeholders. The rest of the company is performing well. I forgot the part about thanking you all. So thank you all. Once again, I want to take a moment to thank the entire Willdan team for their dedication and outstanding execution. I also want to recognize the ongoing support of our customers and long-term stockholders. I’d like to turn the call over to you Al, if there’s anything else.

That concludes our follow-up really.

Okay. This concludes your call. You may now disconnect.