Willdan Group (WLDN) Q2 FY26 earnings call: guidance and Q&A

Inquired about the ramp-up of the LADWP project in Q2, its expected progression in H2, and how the new $110M contract expansion impacts the overall project outlook.

Management stated the project was already ramping up and the expansion adds significant scope. The exact ramp-up for the additional $110M is uncertain for H2 2026, but it will continue through Q3 and into Q4/early 2027. They were conservative in their outlook due to this uncertainty, but the project has strong potential to make LADWP their largest customer in 2027.

“The big question is, as you mentioned, how does it ramp up? We probably could have been even more aggressive with our outlook if we knew the answer to that, but it is going to ramp up through Q3, the balance of Q3, and we've got to think run into Q4 and probably the early part of 2027, we don't really know at this point.”

asked by Andrew Scutt · answered by Michael Bieber

Asked if cross-selling with Burton is bi-directional or focused on one approach (Willdan services to Burton clients or vice versa).

Cross-selling with Burton is bi-directional. Willdan is providing new services to Burton's large clients, and Burton's HVAC capabilities are being integrated into Willdan's utility programs on both East and West Coasts.

“With Burton, it's definitely bi-directional. We've been in to see several of their large clients, and there's opportunities to provide new Willdan services to some of those existing relationships.”

asked by Andrew Scutt · answered by Michael Bieber

Inquired about the drivers behind geographic expansion beyond California and New York, specifically if it's data center driven, and how they expand into new states.

Geographic diversification is largely driven by data center development across the country. Willdan has established permanent offices/hubs in new locations like Florida, Georgia, North Carolina, Kentucky, and Texas in the last 18 months. Data centers are creating project opportunities in states like New Mexico, Montana, and Utah, allowing them to gain experience and hire locally.

“The data centers are all over the country, coast to coast. So it's giving us the opportunity to gain experience and hire people around the country where we didn't have as much of a presence, especially in sort of the breadbasket, the middle part of the country, those Midwestern states.”

asked by Timothy Moore · answered by Michael Bieber

Asked about trade-offs in accepting new projects for new customers versus servicing existing long-tenured customers, and if they are experiencing labor shortages.

They have dedicated teams for commercial and utility customers, allowing for parallel focus. While labor is tight for experienced professionals and salaries are increasing, they have not experienced labor shortages in either area and continue to hire.

“We have not seen what I'll call labor shortages on either of those areas, but labor is tight. I'll say that for the experienced superstar, prices are certainly going up, salaries are going up, and we continue to hire.”

asked by Timothy Moore · answered by Michael Bieber

Noted the significant Q2 beat on revenue, EBITDA, and EPS, but a less sizable raise in full-year guidance, questioning if there's a lack of visibility or excessive conservatism.

Management acknowledged being conservative, primarily due to uncertainty around the exact ramp-up speed of the LADWP project and a couple of other projects over the next 6 months. They stated that Q3 and Q4 should be robust, potentially similar to Q2, but Q2 benefited from some acceleration of utility programs and performance contracting.

“We scratched our heads on this one a little bit because we don't know how quickly LADWP will ramp up over the next 6 months. That was the biggest variable that we looked at.”

asked by Steven Wahrhaftig · answered by Michael Bieber

Asked for clarification on the 0% effective tax rate guidance for FY26, given the 179D benefit expires in June, implying a 15-20% tax rate in H2, and why not guide for a negative tax rate if benefits continue.

The 179D benefit for P&L purposes expires at the end of June, applying only to projects started before then. Therefore, H2 will have a positive income tax expense (15-20%). The continued benefit mentioned is from a cash flow standpoint, as the deferred tax assets from 179D deductions will mean no cash tax payments to the government for years, despite a positive P&L tax rate in H2.

“from a P&L standpoint, there's -- that benefit expires at the end of June... So you're right, the second half of the year is going to have a positive income tax expense... The tax benefits we're saying that are going to carry forward is from a cash standpoint.”

asked by Steven Wahrhaftig · answered by Creighton Early