Form 8-K Willdan Group, Inc. For: Mar 10

March 10, 2022 4:16 PM EST

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Exhibit 99.1

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Willdan Group Reports

Fourth Quarter Results and Provides 2022 Outlook

ANAHEIM, Calif. –March 10, 2022 – Willdan Group, Inc. (“Willdan”) (Nasdaq: WLDN), a provider of professional, technical and consulting services, today reported financial results for its fourth quarter and fiscal year ended December 31, 2021.

Fourth Quarter 2021 Summary

Consolidated contract revenue of $92.2 million
Net revenue* of $51.8 million
Net loss of $0.9 million, or $(0.07) per diluted share
Adjusted net income* of $6.0 million, or $0.47 per diluted share
Adjusted EBITDA* of $9.4 million

Fiscal Year 2021 Summary

Consolidated contract revenue of $353.8 million
Net revenue* of $201.5 million
Net loss of $8.4 million, or $(0.68) per diluted share
Adjusted net income* of $19.3 million, or $1.55 per diluted share
Adjusted EBITDA* of $27.5 million

2022 Financial Targets

Net revenue* growth of approximately 20%
Adjusted EBITDA* growth of approximately 50%
Adjusted Diluted EPS* growth of approximately 20%

*See “Use of Non-GAAP Financial Measures” below.

The financial targets above assume no change in the current economic environment and do not include the effects of any acquisitions that may take place during the year. Certain components of the financial targets provided are subject to quarterly fluctuations.

“We had a strong fourth quarter, well ahead of our internal plan, which provides us a nice ramp into the year,” said Tom Brisbin, Willdan’s Chairman and Chief Executive Officer. “All of our areas of business are currently improving, we have record levels of funded backlog, and we expect to achieve significant growth in revenue and earnings in 2022.”

Fourth Quarter 2021 Financial Results

Consolidated contract revenue decreased $4.7 million, or 4.8%, in the fourth quarter of fiscal year 2021, while Net Revenue increased $1.1 million, or 2.2%, in the fourth quarter of fiscal 2021 compared to the same period last year (see “Use of Non-GAAP Financial Measures” below). Lower construction management revenues were offset by increased revenues from the restarted LADWP program and higher engineering and consulting revenue. The shift in revenue mix accounts for an increase in gross profit margin to 37.7% of consolidated contract revenue for the fourth quarter of fiscal year 2021 compared to gross profit margin of 35.6% for the same period last year.


Net loss was $0.9 million, or $(0.07) per diluted share, for the fourth quarter of fiscal year 2021, as compared to net loss of $4.0 million, or $(0.33) per diluted share, for the same period last year. Adjusted Net Income (see “Use of Non-GAAP Financial Measures” below) for the fourth quarter of fiscal year 2021 was $6.0 million, or $0.47 per diluted share, as compared to Adjusted Net Income of $5.6 million, or $0.46 per diluted share, for the same period last year.

Adjusted EBITDA (see “Use of Non-GAAP Financial Measures” below) was $9.4 million for the fourth quarter of 2021 compared to $8.6 million for the same period last year.

Fiscal Year 2021 Financial Results

Consolidated contract revenue decreased $37.2 million, or 9.5%, in fiscal year 2021 compared to fiscal year 2020, primarily due to decreased contract revenues from our construction management activities and the impact of having one fewer week in fiscal 2021 as compared to fiscal 2020, partially offset by increased planning and advisory revenues including software licensing.

Despite the reduction in contract revenue, Net Revenue increased $7.0 million, or 3.6%, in fiscal year 2021 compared to fiscal year 2020, primarily due to changes in the mix of revenues.

The change in the mix of revenue sources allowed direct costs of consolidated contract revenue to decrease faster than the reduction in contract revenue resulting in a $6.5 million, or 5.0% increase in gross profit for the year.

Net loss was $8.4 million for fiscal 2021, as compared to a net loss of $14.5 million for fiscal 2020 due primarily to the increased net revenue and gross profit margin, along with lower operating expenses.

Adjusted EBITDA (see “Use of Non-GAAP Financial Measures” below) was $27.5 million for fiscal year 2021 compared to $28.1 million in fiscal year 2020.

Liquidity and Capital Resources

 

As of December 31, 2021, cash and cash equivalents totaled $11.2 million. Cash flows provided by operating activities were $9.8 million for fiscal 2021, as compared to cash flows provided by operating activities of $47.0 million for fiscal 2020. Fiscal 2020 cash flows were favorably impacted by the reduction in working capital requirements due to the program suspensions resulting from Covid-19 mandates. Cash flows in 2021 were impacted by increased demand for working capital related to the resumption of utility programs that were suspended in 2020 and start-up costs associated with certain new contract awards.

As of December 31, 2021, there was $99.0 million outstanding under our term loan credit facilities. We had no borrowings under our revolving credit facility with $50.0 million in available capacity. We also had a Delayed Draw Term Loan facility with $20.0 million available for draw upon satisfaction of certain covenants. As a result of forecasted increased working capital requirements related to our $781 million in California Investor Owned Utility Contracts and other organic growth, on March 8, 2022, we amended our credit agreement to, among other things, draw the remaining $20 million available under the Delayed Draw Term Loan facility and adjust certain covenants to ensure an adequate margin for compliance obligations through fiscal year 2022. We believe that we have adequate resources and liquidity to fund cash requirements and debt repayments for at least the next 12 months.

Fourth Quarter 2021 Conference Call

Willdan will be hosting a conference call related to fourth quarter earnings today, March 10, 2022, at 5:30 p.m. Eastern/2:30 p.m. Pacific. To access the call, listeners should dial 888-394-8218 approximately 10 minutes prior to the scheduled start time and enter confirmation code 4635283. The conference call will be webcast simultaneously on Willdan’s website at ir.willdangroup.com/events-presentations.

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A replay of the conference call will be available until March 24, 2022 by calling 888-203-1112 and entering confirmation code 4635283.

An Investor Report containing supplemental financial information can also be accessed on the home page of Willdan’s investor relations website.

About Willdan Group, Inc.

Willdan is a nationwide provider of professional, technical and consulting services to utilities, government agencies, and private industry. Willdan’s service offerings span a broad set of complementary disciplines that include electric grid solutions, energy efficiency and sustainability, engineering and planning, and municipal financial consulting. For additional information, visit Willdan's website at www.willdan.com.

Use of Non-GAAP Financial Measures

“Net Revenue,” defined as contract revenue as reported in accordance with GAAP minus subcontractor services and other direct costs, is a non-GAAP financial measure, Net Revenue is a supplemental measure that Willdan believes enhances investors’ ability to analyze Willdan’s business trends and performance because it substantially measures the work performed by Willdan’s employees. In the course of providing services, Willdan routinely subcontracts various services. Generally, these subcontractor services and other direct costs are passed through to Willdan’s clients and, in accordance with U.S. generally accepted accounting principles (“GAAP”) and industry practice, are included in Willdan’s revenue when it is Willdan’s contractual responsibility to procure or manage such subcontracted activities. Because subcontractor services and other direct costs can vary significantly from project to project and period to period, changes in revenue may not necessarily be indicative of Willdan’s business trends. Accordingly, Willdan segregates subcontractor services and other direct costs from revenue to promote a better understanding of Willdan’s business by evaluating revenue exclusive of subcontract services and other direct costs associated with external service providers. A reconciliation of Willdan’s contract revenue as reported in accordance with GAAP to Net Revenue is provided at the end of this press release. A reconciliation of targeted contract revenue for 2022 as reported in accordance with GAAP to targeted Net Revenues for fiscal 2022, which is a forward-looking non-GAAP financial measure, is not provided because Willdan is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty of predicting the subcontractor services and other director costs that are subtracted from contract revenues in order to derive Net Revenues. While subcontractor costs have increased recently, subcontractor costs can vary significantly from period to period. Subcontractor costs and other direct costs have been 43.8% and 43.0% of contract revenue for the quarter ended December 31, 2021 and fiscal year 2021 and 47.6% and 50.2% for the quarter ended January 1, 2021 and fiscal year 2020, respectively.

“Adjusted EBITDA,” defined as net income plus interest expense, income tax expense, stock-based compensation, interest accretion, depreciation and amortization, transaction costs and gain on sale of equipment, is a non-GAAP financial measure. Adjusted EBITDA is a supplemental measure used by Willdan’s management to measure Willdan’s operating performance. Willdan believes Adjusted EBITDA is useful because it allows Willdan’s management to evaluate its operating performance and compare the results of its operations from period to period and against its peers without regard to its financing methods, capital structure and non-operating expenses. Willdan uses Adjusted EBITDA to evaluate its performance for, among other things, budgeting, forecasting and incentive compensation purposes.

Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s costs of capital, stock-based compensation, as well as the historical costs of depreciable assets. A reconciliation of net income as reported in accordance with GAAP to Adjusted EBITDA is provided at the end of this press release.

“Adjusted Net Income,” defined as net income plus stock-based compensation, intangible amortization, interest accretion and transaction costs, each net of tax, is a non-GAAP financial measure.

“Adjusted Diluted EPS,” defined as net income plus stock-based compensation, intangible amortization, interest accretion, transaction costs, and deferred tax valuation, each net of tax, all divided by the diluted weighted-average shares outstanding, is a non-GAAP financial measure. Adjusted Net Income and Adjusted Diluted EPS are supplemental measures used by Willdan’s management to measure its operating performance. Willdan believes Adjusted Net Income

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and Adjusted Diluted EPS are useful because they allow Willdan’s management to more closely evaluate and explain the operating results of Willdan’s business by removing certain non-operating expenses. Reconciliations of net income as reported in accordance with GAAP to Adjusted Net Income and diluted EPS as reported in accordance with GAAP to Adjusted Diluted EPS are provided at the end of this press release.

Willdan’s definitions of Net Revenue, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS have limitations as analytical tools and may differ from other companies reporting similarly named measures or from similarly named measures Willdan has reported in prior periods. These measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP, such as contract revenue, net income and diluted EPS.

Forward Looking Statements

Statements in this press release that are not purely historical, including statements regarding Willdan’s intentions, hopes, beliefs, expectations, representations, projections, estimates, plans or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements regarding the impact of Covid-19 on Willdan’s business, Willdan’s ability to capitalize on increased energy efficiency spending in large markets and expected benefits from its acquisitions. All statements other than statements of historical fact included in this press release are forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the extent to which the Covid-19 pandemic and measures taken to contain its spread ultimately impact Willdan’s business, results of operation and financial condition, including the speed with which its various direct install programs for small businesses are able to resume normal operations following government mandated shutdowns and phased re-openings. It is important to note that Willdan’s actual results could differ materially from those in any such forward-looking statements. Important factors that could cause actual results to differ materially from its expectations include, but are not limited to, Willdan’s ability to adequately complete projects in a timely manner, Willdan’s ability to compete successfully in the highly competitive energy services market, Willdan’s reliance on work from its top ten clients; changes in state, local and regional economies and government budgets, Willdan’s ability to win new contracts, to renew existing contracts and to compete effectively for contracts awarded through bidding processes, Willdan’s ability to successfully integrate its acquisitions and execute on its growth strategy, Willdan’s ability to make principal and interest payments on its outstanding debt as they come due and to comply with financial covenants contained in its debt agreement, Willdan’s ability to obtain financing and to refinance its outstanding debt as it matures, and Willdan’s ability to attract and retain managerial, technical, and administrative talent. 

All written and oral forward-looking statements attributable to Willdan, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements and risk factors disclosed from time to time in Willdan’s reports filed with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K filed for the year ended January 1, 2021, as such disclosures may be amended, supplemented or superseded from time to time by other reports Willdan files with the Securities and Exchange Commission, including subsequent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Willdan cautions investors not to place undue reliance on the forward-looking statements contained in this press release. Willdan disclaims any obligation to, and does not undertake to, update or revise any forward-looking statements in this press release unless required by law.

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WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

    

December 31,

    

January 1,

2021

2021

Assets

Current assets:

Cash and cash equivalents

$

11,221

$

28,405

Accounts receivable, net of allowance for doubtful accounts of $1,115 and $2,127 at December 31, 2021 and January 1, 2021, respectively

 

67,211

 

53,104

Contract assets

 

59,288

 

62,426

Other receivables

 

6,267

 

6,405

Prepaid expenses and other current assets

 

4,972

 

5,564

Total current assets

 

148,959

 

155,904

Equipment and leasehold improvements, net

 

16,757

 

12,506

Goodwill

130,124

130,124

Right-of-use assets

15,177

20,130

Other intangible assets, net

52,713

64,256

Other assets

 

13,843

 

5,993

Deferred income taxes, net

16,849

14,111

Total assets

$

394,422

$

403,024

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

36,672

$

41,372

Accrued liabilities

 

35,680

 

34,455

Contingent consideration payable

10,206

12,321

Contract liabilities

 

13,499

 

7,434

Notes payable

 

15,036

 

14,996

Finance lease obligations

539

248

Lease liability

5,575

5,844

Total current liabilities

 

117,207

 

116,670

Contingent consideration payable

832

2,999

Notes payable

85,538

98,178

Finance lease obligations, less current portion

 

778

 

236

Lease liability, less current portion

10,768

15,649

Other noncurrent liabilities

78

128

Total liabilities

 

215,201

 

233,860

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.01 par value, 10,000 shares authorized, no shares issued and outstanding

 

 

Common stock, $0.01 par value, 40,000 shares authorized; 12,804 and 12,160 shares issued and outstanding at December 31, 2021 and January 1, 2021, respectively

 

128

 

122

Additional paid-in capital

 

167,032

 

149,014

Accumulated other comprehensive loss

(38)

(488)

Retained earnings

 

12,099

 

20,516

Total stockholders’ equity

 

179,221

 

169,164

Total liabilities and stockholders’ equity

$

394,422

$

403,024

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WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

Three Months Ended

Year Ended

December 31,

January 1,

December 31,

January 1,

    

2021

    

2021

2021

    

2021

Contract revenue

$

92,218

$

96,897

$

353,755

$

390,980

Direct costs of contract revenue (inclusive of directly related depreciation and amortization):

Salaries and wages

 

17,116

 

16,252

65,648

65,149

Subcontractor services and other direct costs

 

40,373

 

46,143

152,233

196,438

Total direct costs of contract revenue

 

57,489

 

62,395

217,881

261,587

General and administrative expenses:

Salaries and wages, payroll taxes and employee benefits

 

16,282

 

17,956

73,812

71,229

Facilities and facility related

 

2,523

 

2,484

9,896

10,481

Stock-based compensation

 

2,214

 

3,310

16,563

16,113

Depreciation and amortization

 

4,468

 

4,419

17,146

18,743

Other

 

8,115

 

12,051

27,148

29,054

Total general and administrative expenses

 

33,602

 

40,220

144,565

145,620

Income (Loss) from operations

 

1,127

 

(5,718)

(8,691)

(16,227)

Other income (expense):

Interest expense, net

 

(769)

 

(1,085)

(3,869)

(5,068)

Other, net

 

122

 

914

156

1,626

Total other expense, net

 

(647)

 

(171)

(3,713)

(3,442)

Income (Loss) before income taxes

 

480

 

(5,889)

(12,404)

(19,669)

Income tax (benefit) expense

 

1,370

 

(1,892)

(3,987)

(5,173)

Net income (loss)

(890)

(3,997)

(8,417)

(14,496)

Other comprehensive income (loss):

Net unrealized gain (loss) on derivative contracts

107

114

450

(92)

Comprehensive income (loss)

$

(783)

$

(3,883)

$

(7,967)

$

(14,588)

Earnings (Loss) per share:

Basic

$

(0.07)

$

(0.33)

$

(0.68)

$

(1.23)

Diluted

$

(0.07)

$

(0.33)

$

(0.68)

$

(1.23)

Weighted-average shares outstanding:

Basic

 

12,660

 

12,011

12,458

11,793

Diluted

 

12,660

 

12,011

12,458

11,793

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WILLDAN GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended

    

2021

    

2020

Cash flows from operating activities:

Net income (loss)

$

(8,417)

$

(14,496)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

 

17,146

 

18,743

Deferred income taxes, net

 

(2,738)

 

(5,209)

(Gain) loss on sale/disposal of equipment

 

(24)

 

(15)

Provision for doubtful accounts

 

102

 

1,330

Stock-based compensation

 

16,563

 

16,113

Accretion and fair value adjustments of contingent consideration

2,333

7,707

Changes in operating assets and liabilities, net of effects from business acquisitions:

Accounts receivable

 

(14,209)

 

3,070

Contract assets

 

3,138

 

35,498

Other receivables

 

138

 

(1,192)

Prepaid expenses and other current assets

 

828

 

577

Other assets

 

(7,849)

 

9,955

Accounts payable

 

(4,700)

 

7,372

Accrued liabilities

 

1,625

 

(34,509)

Contract liabilities

 

6,065

 

1,871

Right-of-use assets

 

(197)

 

210

Net cash (used in) provided by operating activities

 

9,804

 

47,025

Cash flows from investing activities:

Purchase of equipment and leasehold improvements

 

(8,500)

 

(5,076)

Proceeds from sale of equipment

46

17

Net cash used in investing activities

 

(8,454)

 

(5,059)

Cash flows from financing activities:

Payments on contingent consideration

 

(6,615)

 

(1,433)

Payments on notes payable

(1,909)

(205)

Payments on debt issuance costs

(327)

Proceeds from notes payable

 

2,074

 

1,140

Borrowings under term loan facility and line of credit

24,000

Repayments under term loan facility and line of credit

(13,000)

(42,000)

Principal payments on finance leases

 

(545)

 

(549)

Proceeds from stock option exercise

 

1,924

 

1,082

Proceeds from sales of common stock under employee stock purchase plan

 

2,655

 

2,224

Cash used to pay taxes on stock grants

(3,117)

(2,946)

Restricted Stock Award and Units

(1)

1

Net cash used in financing activities

 

(18,534)

 

(19,013)

Net increase (decrease) in cash and cash equivalents

 

(17,184)

 

22,953

Cash and cash equivalents at beginning of period

 

28,405

 

5,452

Cash and cash equivalents at end of period

$

11,221

$

28,405

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest

$

3,545

$

5,031

Income taxes

 

(1,616)

 

174

Supplemental disclosures of noncash investing and financing activities:

Other working capital adjustment

1,179

Equipment acquired under finance leases

1,376

467

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Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Revenue to Net Revenue

(in thousands)

(Non-GAAP Measure)

Three Months Ended

Year Ended

December 31,

January 1,

December 31,

January 1,

    

2021

    

2021

    

2021

    

2021

Consolidated

    

Contract revenue

$

92,218

$

96,897

$

353,755

$

390,980

Subcontractor services and other direct costs

40,373

46,143

152,233

196,438

Net Revenue

$

51,845

$

50,754

$

201,522

$

194,542

Energy segment

    

Contract revenue

$

76,407

$

81,784

$

286,384

$

324,178

Subcontractor services and other direct costs

40,239

44,566

146,269

186,824

Net Revenue

$

36,168

$

37,218

$

140,115

$

137,354

Engineering and Consulting segment

    

Contract revenue

$

15,811

$

15,113

$

67,371

$

66,802

Subcontractor services and other direct costs

134

1,577

5,964

9,614

Net Revenue

$

15,677

$

13,536

$

61,407

$

57,188

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Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted EBITDA

(in thousands)

(Non-GAAP Measure)

Three Months Ended

Year Ended

December 31,

    

January 1,

December 31,

    

January 1,

    

2021

2021

2021

2021

Net income (loss)

    

$

(890)

$

(3,997)

$

(8,417)

$

(14,496)

Interest expense

769

1,085

3,869

5,068

Income tax expense (benefit)

1,370

(1,892)

(3,987)

(5,173)

Stock-based compensation

2,214

3,310

16,563

16,113

Interest accretion (1)

1,473

5,648

2,333

7,707

Depreciation and amortization

4,468

4,419

17,146

18,743

Transaction costs (2)

13

43

179

(Gain) Loss on sale of equipment

13

(24)

(15)

Adjusted EBITDA

$

9,417

$

8,586

$

27,526

$

28,126


(1)Interest accretion represents the imputed interest and fair value adjustments to estimated contingent consideration.
(2)Transaction costs represents acquisition and acquisition related costs.

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Willdan Group, Inc. and Subsidiaries

Reconciliation of GAAP Net Income to Adjusted Net Income and Adjusted Diluted EPS

(in thousands, except per share amounts)

(Non-GAAP Measure)

Three Months Ended

Year Ended

December 31,

    

January 1,

December 31,

    

January 1,

    

2021

2021

    

2021

2021

Net income (loss)

    

$

(890)

$

(3,997)

$

(8,417)

$

(14,496)

Adjustment for stock-based compensation

2,214

3,310

16,563

16,113

Tax effect of stock-based compensation

(278)

(691)

(2,079)

(3,366)

Adjustment for intangible amortization

2,886

3,136

11,543

13,657

Tax effect of intangible amortization

(362)

(655)

(1,449)

(2,853)

Adjustment for interest accretion

1,473

5,648

2,333

7,707

Tax effect of interest accretion

(185)

(1,180)

(293)

(1,610)

Adjustment for transaction costs

13

43

179

Tax effect of transaction costs

(3)

(5)

(37)

Adjustment for deferred tax valuation

1,105

1,105

Tax effect of deferred tax valuation

Adjusted Net Income

$

5,963

$

5,581

$

19,344

$

15,294

Diluted weighted-average shares outstanding

12,660

12,011

12,458

11,793

Diluted earnings (loss) per share

$

(0.07)

$

(0.33)

$

(0.68)

$

(1.23)

Impact of adjustment:

Stock-based compensation per share

0.16

0.28

1.33

1.37

Tax effect of stock-based compensation per share

(0.02)

(0.07)

(0.17)

(0.29)

Intangible amortization per share

0.23

0.26

0.93

1.16

Tax effect of intangible amortization per share

(0.03)

(0.05)

(0.12)

(0.24)

Interest accretion per share

0.12

0.47

0.19

0.65

Tax effect of interest accretion per share

(0.01)

(0.10)

(0.02)

(0.14)

Transaction costs per share

0.00

0.02

Tax effect of transaction costs per share

(0.00)

Deferred tax valuation per share

0.09

0.09

Tax effect on deferred tax valuation per share

Adjusted Diluted EPS

$

0.47

$

0.46

$

1.55

$

1.30

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Contact:

Willdan Group, Inc.

Al Kaschalk

VP Investor Relations

Tel: 310-922-5643

[email protected]

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