Willdan (WLDN) Q2 EPS Surges 173%

Willdan Group (WLDN 0.69%), an energy services and engineering firm focusing on modernizing power grids and improving energy efficiency, posted much higher-than-expected results for its second quarter of fiscal 2025. The company released its earnings on August 7, 2025, reporting adjusted earnings per share (EPS) of $1.50 (non-GAAP), more than double the analyst consensus of $0.70 (non-GAAP). Contract revenue (GAAP) reached $173.5 million, up 23.0%, also surpassing expectations. This outperformance prompted leadership to raise full-year financial guidance for net revenue, adjusted EBITDA, and adjusted diluted EPS. The quarter was highlighted by broad-based growth, new contract wins, and rising profitability, despite ongoing costs for integrating recent acquisitions.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Growth Drivers

Willdan Group is a specialist in energy infrastructure and engineering consulting. Its core business helps utilities, government agencies, and commercial clients improve energy efficiency, manage complex power needs, and comply with regulatory standards.

The company’s growth relies on strong demand for power grid upgrades, solutions for data center energy demands, and support for long-term sustainability goals. Willdan’s success is tied to several focus areas: rapid responses to market trends in energy and electrification; expanding through both organic growth and acquisitions; navigating policy shifts affecting clean energy; and maintaining technical talent for delivering large, complex projects. Its ability to offer specialized services and attract complex, multiyear contracts with governments and regulated utilities is central to its long-term prospects.

Quarterly Highlights: Performance, Achievements, Strategy

Willdan reported across-the-board improvement in all major financial metrics. Net revenue (non-GAAP) rose 31.1%, with both organic expansion and acquisition-fueled growth making an impact. Particularly notable were gains in the core Energy segment, which represented about 74% of net revenue (non-GAAP). Meanwhile, engineering and consulting services also contributed to growth.

The company booked several new large contracts during the period, including a $30 million award from the City of Fairfield, a $20 million deal with National Grid (contract award disclosed in Q1 FY2025), and sizable wins for public education infrastructure. Willdan expects a significant ramp in work later in the year, especially with the delayed rollout of a multiyear Los Angeles Department of Water and Power contract. Management indicates that meaningful revenue contribution from this contract is expected to begin in Q4 FY2025. The company expects this program to become one of its largest contributors in future quarters.

Operating leverage—a measure of how efficiently a firm converts revenue growth into profits—improved sharply. Adjusted EBITDA, which is earnings before interest, taxes, depreciation, and amortization and is often used to gauge cash performance, climbed 70.7% (non-GAAP). Margin gains were helped by lower pass-through subcontractor costs and a better mix of in-house work, with Subcontractor outlays fell to 44.7% of contract revenue for the first six months of FY2025, compared to 46.3% for the same period in FY2024. This put Willdan’s profitability well above many rivals in energy consulting.

The quarter also reflected trends that shape the broader energy services market. Demand from data centers and AI-driven infrastructure produced a spike in commercial client work, now on track to make up 15% of revenue for FY2025—double last year’s share. The customer mix for FY2025 is forecast to include 44% from state and local governments and 41% from utility contracts, supporting a recurring revenue stream.

Management raised its financial guidance for FY2025, increasing targets for net revenue (non-GAAP) to $340–$350 million, adjusted EBITDA (non-GAAP) to $70–$73 million, and adjusted diluted EPS (non-GAAP) to $3.50–$3.65 per share to reflect these results and healthy market demand. The new outlook stands at $340–$350 million in net revenue (non-GAAP), $70–$73 million in adjusted EBITDA, and adjusted diluted EPS of $3.50–$3.65. No new acquisitions are required to meet the forecast, which factors in operating 15.1 million diluted shares and a 16% effective tax rate assumption.

Acquisition activity continued to alter Willdan’s balance sheet. The company closed several deals that expanded geographical reach and technical expertise, funding this partly through increased borrowing. Goodwill on the balance sheet—accounting for the premium paid for future growth from acquisitions—rose by $41.4 million since FY2024 year-end (GAAP).

Looking Forward: Guidance and Risks to Watch

Management sharply lifted expectations for FY2025 following the strong quarter. As of August 7, 2025, guidance calls for net revenue (non-GAAP) of $340–$350 million, adjusted EBITDA (non-GAAP) of $70–$73 million, and adjusted diluted EPS (non-GAAP) between $3.50 and $3.65. These revised goals mark a double-digit percentage increase versus the prior outlook. The forecast does not rely on further acquisitions this year and builds on growth from multiyear utility and government accounts, as well as the full rollout of new programs in the second half of the year.

While prospects appear strong, there are issues for investors to watch. Integration of acquisitions, the potential for equipment supply chain delays or tariff-driven cost spikes, and fluctuations in large contract ramp-up could challenge results. Subcontractor costs—though declining as a percent of revenue (44.7% for the first six months of FY2025, 46.3% for the same period in FY2024, and 47.6% for FY2024)—remain significant. Cash flow from operations held steady year over year for the first six months of FY2025, while liquidity stepped down following heavy acquisitions. Willdan Group does not currently pay a dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.