Good day, and welcome to the Willdan Group fourth quarter and fiscal year 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Al Kaschalk, VP, Investor Relations. Please go ahead, sir. Thank you, Jenny. Good afternoon, everyone, and welcome to Willdan Group's fourth quarter and fiscal year 2021 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 close today. You may find the earnings release and the investor report that accompanies today's call in the press release and stock information section of our investor relations website at ir.willdangroup.com. 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. 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 and Form 10-K filed for the year ending January 1, 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 investors' ability to analyze business trends and performance. Our non-GAAP measures include net revenue, adjusted EBITDA, and adjusted EPS. Tom, I'll turn the call over to you. Thanks, Al, and good afternoon, everyone. We continue to build post-COVID momentum. The fourth quarter and the year delivered results well ahead of our internal estimates. We see positive signs that the initial impacts of COVID are behind us. As stated previously, all our contracts have restarted, and access to customers is open in all geographies we serve. I would like to repeat that no contracts were canceled and revenue only moved out in time. Looking back at the year, we adapted well to the virtual work environment. As a services firm, our employees found many benefits working from home. We anticipate most of our customers will be back in their offices over the next few months. We also expect our employees to return to a hybrid model. Our current challenge is ramping up the California IOU contracts. There are three key points I would like to make to help investors understand Willdan's position coming out of this pandemic. We have a record backlog of approximately $1.5 billion. We look at this simply as 3 years of work. Thus, we conclude that winning work is not the priority for many parts of this of the organization. The priorities are ramping up, growing organically, executing, and collecting the money fast enough to offset the capital needs of organic growth. The second point is how will the customers respond post-COVID to energy efficiency? We think we have a pretty good idea at this point. The really small businesses are struggling, and for the most part, utilities are looking on how to help them. Our largest energy efficiency contract, Los Angeles Department of Water and Power, LADWP, serving the Los Angeles area, is now exceeding the weekly pre-COVID revenue. Simply stated, we are doing more now than before COVID. This tells us that the commercial customers are buying energy efficiency. We expect to ramp this contract more throughout the year because we have excess budget that was not spent during COVID. The third point is we have an all-time high headcount of 1,560 people, which is a 15% increase. At the same time, we only had 4% organic growth for the year. Thus, we have ramped up in personnel to deliver the California programs. As planned, substantial revenue will not follow into the second half of 2022. Looking at the rest of the operations, engineering, consulting, construction management, they are all well-positioned for 2022. We do expect, as Kim will point out, as previously stated, that 2022 has a ramp throughout the year, mainly because of this late start and the ramping of the California contracts. In summary, we have the work and proof that the customers are buying energy efficiency. We also have all the people, the processes, the tools, the knowledge, and the experience to execute the contracts. We expect about 20% organic growth in 2022. Looking a little deeper, the market for reducing carbon continues to grow. Electrification, that being converting carbon fuels to electric, is growing. The loads due to electrification and electric vehicles will be increasing for the utilities. Thus, demand for energy efficiency will continue to be strong. As an example, we are starting on a New York City Housing Authority facility. This $90 million three-year design build contract reduces infrastructure-related carbon in New York City. This new first of its kind program introduces innovative electrification measures to specifically lower the carbon footprint and improve existing infrastructure in public housing. Willdan's technical approach was selected competitively above all others and has application across the United States. We've also started the two-year $75 million design build project for facility improvements for the Pueblo County School District 70. Willdan will provide engineering and construction management to update 19 schools and four district buildings. In 2022, we expect our construction management revenue to double, approximately $70 million-$150 million. We have also gained ground in the IOU market. We were awarded a five-year $24 million energy efficiency program for a large Mid-Atlantic investor-owned utility. We beat a major competitor to grow into this new geographic territory. We have also won an expanded recompete with National Grid in New York. Our programs have not been immune to the disruption in the supply chain and overall cost inflation. In terms of procurement, we have seen delivery schedules extended. From a cost inflation perspective, we expect to see salary inflation as well as higher materials and equipment costs. The latter we expect to recover. We are building this potential disruption into our delivery schedules. The last two years of COVID have felt very stagnant. Most of our efforts have been on surviving and adapting. 2021 demonstrated we are emerging stronger. Our position in the clean energy space is strong. Our dominance in New York, California, and the progressive carbon states is strong. We expect this year and the future years to be our best years. We have been working many years to build the foundation of Willdan. Our team of people and diverse capabilities is exciting to watch. The growing opportunities in this clean energy disruption is accelerating. Willdan is well-positioned. COVID is behind us, and now back to the business of growing the company. Thank you to our employees and shareholders for their perseverance and tenacity over the last two years. I will now turn the call over to Kim to discuss our financial results. Kim? Thanks, Tom, and good afternoon, everyone. Our Q4 results were strong, continuing the recovery begun in Q3 of this year. While gross revenue for the fourth quarter declined by 4.8% from $96.9 million to $92.2 million, net revenue, net of subcontractors, materials, and other direct costs, increased 2.1% to $51.8 million versus $50.8 million in Q4 of 2020. The divergent directions for gross and net revenue are a result of a shift in the mix of revenue. The increased revenue from LADWP was offset by lower construction management revenue. The decline in construction management revenue is a result of prior project completions earlier in the year, not yet being offset by the startup of new projects, despite the robust backlog of new contracts. Gross profit for Q4 of 2021 was unchanged from Q4 of 2020 at $34.5 million, though the gross profit margin was slightly better at 37.7% versus 35.6% in 2020 due to the change of mix of revenue. G&A costs for the quarter were $6.6 million, or 16.5% lower than a year ago, declining from $40.2 million to $33.6 million for Q4 of 2021. This was driven primarily by lower stock compensation and lower interest accretion charges related to contingent consideration adjustments made in Q4 of 2020. The lower G&A expense was a primary driver for the turnaround in income before income taxes from a loss of $5.9 million in Q4 of 2020 to income of $500K in Q4 of 2021. A $1.1 million non-cash adjustment to our deferred tax valuation reserve related to certain state-taxed NOLs caused income tax expense to exceed pre-tax income for the fourth quarter, creating a net loss of $900K compared to a loss of $4.0 million in the same period of 2020. For the quarter, adjusted EBITDA increased by 9.7% to $9.4 million or 18.2% of net revenue, compared to $8.6 million or 16.9% of net revenue a year ago. Our adjusted earnings per share were $0.47 per share for Q4 of 2021, compared to $0.46 per share in 2020. For the year, gross revenue declined 9.5% from $391 million to $354 million, but net revenue increased by 3.6% from $195 million to $202 million in fiscal 2021. The change in the mix of revenue sources again accounts for the differing trajectories of gross and net revenue. The mix of revenue also accounts for the improvement in gross profit margin when compared to the same period in 2020. Gross profit in 2021 increased 5% to $135.9 million, or 38.4% of gross revenue, versus $129.4 million, or 33% of gross revenue a year ago. G&A costs for the year were essentially flat at $144.6 million versus $145.6 million in 2020, with higher salaries and wages being offset by lower facility and other expenses. The higher gross profit and flat G&A expenses were the primary drivers behind a 41.9% reduction in the reported net loss from a $14.5 million loss in fiscal 2020 to an $8.4 million loss in fiscal 2021. Excuse me. As a result of an increase in various deductions and credits, our effective tax rate was a credit 32.1% versus 26.3% in 2020. Adjusted EBITDA for 2021 was $27.5 million compared to $28.1 million a year ago. Adjusted earnings per share were $1.55 compared to $1.30 in 2020. The changes in our balance sheet and cash flow from a year ago reflect the changing mix of revenues, the impact of the restart of the LADWP program, the startup of the new California IOU programs, and continued debt reduction. Cash provided by operations was $9.8 million for the year. Capital expenditures were $8.5 million for the year, primarily for software development and IT-related equipment. Scheduled principal payments on our term loans and earn out payments resulting from successful acquisition performance comprised the majority of the $18.5 million used in financing activities. On March 8, we amended our credit agreement with our five-bank consortium to better match our expected cash flows and related covenant metrics with our expected growth-related working capital needs in 2022. Under the terms of the amendment, we've drawn the remaining $20 million available under the delayed draw term loan facility, leaving the full $50 million line of credit available to support liquidity and expected growth during the year. Kim Early, get you a glass of water. Thank you. Kim dropped out on us. Hang on a second. Does that help? Yeah. The amendment also adjusts our covenants to ensure an adequate margin for compliance obligations throughout the end of fiscal 2022, when the amendment provides for a return to the covenants under the original credit agreement. We're pleased with the support and cooperation of our banking partners as we prepare for our expectations of substantial growth in fiscal 2022. Looking ahead to fiscal 2022, we're expecting net revenue and adjusted earnings per share to grow by approximately 20% over 2021 and adjusted EBITDA to grow by about 50%. We estimate our effective tax rate will be approximately 25% for the year, and weighted average shares outstanding will average 13.4 million. We expect the year to start slowly in Q1 and continue to ramp in each subsequent quarter as we ramp up the new utility programs and expand construction management activities. We expect the first half of the year to provide about 25% of the full year earnings as revenues trail costs under the new programs, and 75% of the earnings to be realized in the second half of the year. We expect that ramp to continue into and throughout fiscal 2023 and beyond on the strength of the contracted backlog. Operator, we're now prepared to answer questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you're on speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask questions. We will go first to Moshe Katri of Wedbush. Hey, thanks, guys. Nice quarter. Good to hear from you. Just to confirm, we're gonna have a bit more than usual of a back-end loaded year. Can you talk a bit about the costs associated with ramping some of the new contracts? How will that kind of impact margins during the first half? You have a lot of staff, I guess, still getting deployed or deployed here that came on board. Maybe talk a bit about wage inflation and how that actually factored in some of the contracts that you have in terms of the ability to recoup some of that. Thanks. Sure, Moshe. I'll start. This is Mike. Kim, you fill in where I miss something. First, Tom mentioned we have hired about 200 people in last year and now are at full strength to do the work that we have lined up for 2022. All of those people have been hired, so they, we already know what the cost is. There's not future cost risk we take in 2022 on labor because we've already hired those people. That's first. Second, we're carrying, you know, roughly 150 people to operate the California utilities, and we did approximately $1 million of revenue last year. Obviously, that cost doesn't cover those types of people. That cost is gonna go with us. Throughout the first half of the year, the minimal contribution in Q1, a little more revenue in Q2, but the big contribution is in Q3 and Q4. That schedule is aligned with our contracts that we've signed with these California IOUs. They have very specific delivery schedules and milestones in them. We've built our forecast for 2022 around those milestones in those contracts. There's not a lot of subjectivity or mystery about them at this point. We're well underway, and we're pleased with the way things are ramping up. Does that answer your question? Yeah. Just to confirm, any sort of recruiting costs that will actually let you ramp in 2022, it's already been factored in the P&L at this point? Yes, it has. Correct. We don't expect substantial hiring from this point forward. We have the people on staff we need. Understood. Do you measure attrition within your current staff? Has that been changing in any way? It has. We monitored it, and like a lot of companies, it did go up somewhat in 2021 and 2022, 2020 and 2021, the two COVID years. That was consistent with all of the industry data that we looked at. In spite of that attrition, we replaced all of those people and added 200 more. Okay. Where are we at the attrition level right now? Voluntary was coming down. Last I saw, it was around 15% voluntary. If you have any further questions, please, rejoin the queue at this time. We'll go next to Craig Irwin of Roth Capital Partners. Good evening, and thanks for taking my questions. Can you maybe clarify for us in your guidance what you expect this year as far as revenue from the California IOU contracts that you signed, you know, in the last 18 months? How much of Willdan's 2022 guidance is from these contracts? Yeah. At the gross revenue level, that'll be approximately $50 million. Okay. Understood. You're pretty clear about the higher costs of the startup of this business. How do we gauge confidence, or how do we gain external confidence that this theme of higher costs will taper down? This is something we've been talking about, I think, for two years now, higher costs. I know COVID was a horrible thing for everybody to deal with. But what gives you the confidence that we'll see the execution on higher costs becoming less high costs, in the back half of the year? I'll try to take that, Craig. Two primary costs to our business that we'll separate. We'll talk about labor and then equipment and materials. The labor costs now we've already defined for the business. We know what that is going in. We didn't know necessarily in Q3 or even in early Q4 of last year, but now we do. We factored that into guidance, and you see that flowing through most of the Q4 results, actually. That's the labor, that's the largest component. Second largest component, of course, is equipment and materials. Those costs have risen, depends on what you're doing, anywhere from 5% to as high as 15%-20%. The costs in general have been able to be passed through our business onto the customer. We've been able to do that. We have not seen margin erosion at the project level thus far. What has happened, though, is the second part, which is supply chain duration delays. We think that I would say that as a percent complete basis, we would be 10% or so ahead of where we are right now, were we not waiting on equipment to be delivered at our project sites around the country. That's the biggest change that has occurred. It's the delay of materials that we install on job sites at this point. Does that answer your question? Completely. Last question, if I may. Many of your shareholders own the stock for more than $1 billion in additional work that's expected to be awarded over the next couple of years both in California and in other markets. Your leadership as far as your very healthy share that you took of the IOU work for California energy efficiency. What would have you maybe bid differently on this work, this scope of work that's in front of us, what would have you bid differently, maybe to pursue higher natural margins? Or at this point, is there nothing that you would change as far as the way that you are chasing the broader longer-term opportunity? Well, I would love to tell you what we would change, but we would be telling our competitors what we negotiated. There wasn't a lot of negotiating room. There were variables, let's call it, that the state, the PUC, the utilities had said, "You know, we need to meet this number, and if you don't meet this number, then." It came in at the TRC primarily, total resource cost. We have to put in measures that are cost-effective is what that's saying. There wasn't a lot of negotiating around this. Tom, usually the public utility commissions, right? When you do E&C work and things do not attain the profit profile that is forecast, you go back and get change orders, right? This is done regularly. Some transmission line companies are more liberal in their pursuit of change orders. They bid more aggressively on the price up front and then go for change orders. Others bid higher and are known to bid higher and are not very frequently in front of the commission asking for change orders. Is there an opportunity for us maybe to see remediation on the profitability of these projects with change orders, given that, you know, things are obviously tracking, you know, below what was generally expected when all this work was let out to bid? Yeah, we have seen the utilities talk about change order may be the wrong word, but changing the contract terms because of COVID. What we've done is we're kind of sampling the market in some of these contracts and showing and proving that. Let's take the real small business. They are just not interested in energy efficiency. There is room for renegotiation when you can prove to the utility that the world has changed. The utilities are coming to the table saying the world has changed. Does that answer your question, Craig? Well, you know, Willdan is a very special company, right? Your execution in energy efficiency is highly unique, and you're committed to the success of what the California Public Utilities Commission has set as far as some pretty aggressive goals, that reach beyond some underperformance in the utilities over the last many years. You know, this special status of Willdan is something as a company, either public or private, there's a legitimate expectation that you can earn a minimum level of profitability on your contracts. You know, it seems like, you know, with the guidance maybe just being a little bit lighter than most we're looking for, that would be a very clear and fair thing to get in front of the commission with, given that they want people to actually bid on the next round of work instead of refusing to do it and let them go back to the dysfunctional model that they were using to execute so-called energy efficiency in the past. I mean, do you follow my logic? You know, I'm just looking for potential ways to get the recourse where some serious effort and engagement from one of the leading experts is compensated fairly. It doesn't seem like that with the guidance that you shared with us today. The guidance. I remember I was right with you until you said the guidance we shared with you. Profit outlook for 2022. You mean you think the margin should be higher? You think the revenue should be higher? What are you saying? I think the margins are tracking below where they should be. There's probably frictional costs below the margin line that are probably not included in the contract that should have been in the first place. The startup costs really need to be carried as a burden by the utilities because that is a functional piece of the total equation. You know, if California is committed to the success of their energy efficiency programs, they need to take a holistic view. You know, they've got the best guy in the market working on this. You know, the profitability is not what many people would believe fair natural profitability should be, given that you're carrying on your P&L the expense of these employees on startup when, you know, there should be not the impact of dilution, but maybe break evens or modest profit ahead of, you know, a very large scope of work that has to get done. I mean, there's a lot that they really wanna see you do that I know you're gonna do a great job on. You follow my logic? Oh, yeah. We love startup costs, but this contract didn't include it, so we gotta include it in our price that we gave them, and we have to deliver. What we're working on, Craig, is we're just getting started. Once we deliver, I think our voice will get stronger, and we'll have a better negotiating position. Do you wanna add anything to that? I'm trying to. No, the other thing, Craig, is that the way the programs are actually designed and the way they were bid, the volume of revenue we can claim in the first part of the year is very low, not covering our costs. Margins pick up substantially as that volume comes up. We don't have a margin problem when we hit even close to the run rates that these programs will perform over the few years and even in the back half of this year as we're ramping up. Remember that, as Kim pointed out, $50 million in revenue is one-third of the average volume we have to have on these projects over the next four years. We're gonna have a substantial ramp even in 2023. We just were unable to convince them to pick up the startup costs. That's the way they were designed. There hasn't been anything that we didn't expect, or that was, you know, out of the design of the programs as we signed the contracts. We just need more volume. That's time. I mean, we're behind. We're behind because of COVID. We're behind because of California was delayed. We started, and the world did not start. We'll catch it up. Thank you, Mr. Irwin. If you have any further questions, please rejoin the phone queue. We'll go next to Chip Moore of EF Hutton. Good evening. Thanks for taking the question. Guys, I wanted to follow up that one on the California IOU revenues. $50 million in 2022, you know, to your point, about a third of the average volume over the next four years. That implies a pretty significant step-up, obviously, in the coming years. Are there any limiting factors we need to sort of what's a realistic figure for 2023, if you will, that you could hit if everything's humming? Yeah, Chip. In 2023, the number will be between $150 million and $200 million in revenue from the California IOU program contracts, something like that. That's set forth in the goals of the contracts. Got it. Okay. Just a couple minor ones from me. You talked about LADWP. You know they have some unused funds from when that program shut down. Any way to think about potential magnitude, and would that be potential upside? Yeah. It is. I don't know if this is a public number, so I'm not gonna give. We know the number. There's more than $100 million of additional unspent money. How about that? They've given us all the numbers. They have recently expanded the scope that we're serving, and we continue to look with the customer at ways to expand the program so that we can fully expend the dollars they have in the contract and have charged the public for. The customer's supportive in doing that, and so there is potential upside there. Yeah. Okay. None of that is in the guide. None of that is in the guidance, correct? Yeah. Okay, just one last one. IA software, right? I think you were talking about $10 million for the year. Is that, you know, where it came in and are you expecting sort of similar for this year? Yeah. They were a little above that, Chip. I think they were closer to $11 million for the year. They had an outstanding 2021. We would expect that number to grow, frankly, in 2022. The pipeline of opportunities for software is very good. Even into Q1, Q2, I think we'll sign some new licenses and bring in some new customers. Looks good. Got it. Okay, no, that's helpful. Appreciate it. Thanks, guys. As a reminder, please press star one if you would like to ask a question at this time. We'll go next to Marc Riddick of Sidoti. Hi, good evening. I wanted to touch on a couple of things. First of all, I appreciate the guidance provided. As far as the visibility, I wanted to touch a little bit on that because it seems as though with all the pieces that you've kind of mentioned there, it seems as though overall visibility for you is meaningfully improved over the last three to six months. From that vantage point, is there any kind of swing factor that you're looking at that is still, you know, a bit iffy to you as to how you're looking at numbers going forward? Not just around the 22 guide, but specifically, is there any particular issue that you're looking at as a major swing factor to what you're currently expecting? No, there's not, Mark. I would say that we've never been in this position before. We've booked, I won't say all, but this is the overwhelming majority of work that we need to book this year, and we've never been in a stronger position. We've never been in as strong a position as like this. It's unusual. It's not only this year, it's throughout 2023 and even in 2024. It's all about execution right now. It's really not about winning work. We've never been in this position before, very good. Excellent. The extra piece, and I appreciate you mentioning some of the supply chain constraints on sort of where you are on timing and things like that. I was wondering if there were any meaningful or any visible impacts from Omicron that slowed things down as well as far as operations? Supply chain has slowed certain projects, especially when you're delivering more complex equipment like custom-built boilers, chillers, large gear for universities and hospitals. That type of equipment is being delayed. We're working closely with our customers. As I mentioned, we might be, you know, 10% or so ahead on those projects on average. We didn't have those types of delays. The customers are understanding. It has not resulted in cost escalation, though, for that complex equipment. Okay. Any Omicron impacts? Those are abating. I can't think of any that were substantial in Q4. Okay. All right. I appreciate it. Thank you. We will go to our next question from Richard Eisenberg of Piper Sandler. Hi. Good afternoon. Yeah. Richard, could you speak a little louder? Yeah. Can you hear me now? Yes, sir. Yeah. Since you expect in 2023 for the contribution from California to increase between $150 million and $200 million, isn't it logical to assume that you should make more than $3 in EPS in 2023? That's a long way to wait for guidance. You can apply your logic. We're not gonna give guidance that far in advance. We told you where the revenue is expected to go, but that's where we'll leave it. Okay. Okay, thank you. Thank you. With no further questions in the queue, I would now like to turn the call back over to Tom Brisbin for any additional or closing comments. I'd just like to thank all our investors, employees who are on the phone, and we'll see you again next quarter. Thanks a lot. This concludes today's call. Thank you for your participation. You may now disconnect.