Good day, ladies and gentlemen, and thank you for standing by for the Willdan Group, Inc. First Quarter 2014 Conference Call. [Operator Instructions] I would now like to turn the conference over to Nii Tetteh. Please go ahead.

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Willdan Group's financial results for the first quarter ended March 28, 2014. With us today from management are Chief Executive Officer, Thomas Brisbin; and Chief Financial Officer, Stacy McLaughlin. Management will review prepared remarks, and we will then open the call up to your questions. Statements made in the course of today’s conference call, 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 10 -- on Form 10-K filed for the year ended December 27, 2013, filed on March 25, 2014. The company cautions investors not to place undue reliance on the forward-looking statements made during the course of this conference call. Willdan Group, Inc. disclaims any obligation and does not undertake to update or revise any forward-looking statements made today. With that, I will now turn the call over to Chief Financial Officer, Stacy McLaughlin. Stacy?

Thanks, Nii. And I'd like to add my welcome to those joining us on today's call. In addition to GAAP financial results, we are providing non-GAAP financial measures that, we believe, enhance investors' ability to analyze our business trends and performance. Our non-GAAP measures include revenue net of subcontractor costs. We believe this allows for an improved measure of the revenue derived from the work performed by our employees. We also are providing adjusted EBITDA, which removes the impact of certain nonrecurring income and expense items from our operating results. GAAP reconciliations for both of these non-GAAP measures are included at the end of the earnings release we issued today. A brief overview of our financial results for the first quarter. Total contract revenue increased 6% to $22.7 million from $21.4 million for the first quarter of 2013. Engineering Services contract revenue increased 8.1% to $8.9 million for the quarter. Energy Efficiency Services grew 4.2% to $10.4 million due to an increase in the installation of energy efficiency measures. Revenue from Public Finance Services was $2.5 million, and Homeland Security Services was $945,000. Revenue, net of subcontractor costs, for the first quarter of 2014 increased 12% to $18.5 million compared to the first quarter of 2014. Direct costs were $13.2 million for the first quarter of 2014, compared with $12 million for the first quarter of 2013. The majority of the increase resulted from greater infrastructure costs related to self-performance by Willdan Energy Solutions. Adjusted EBITDA for the first quarter increased $900,000 to $1.5 million, from $600,000 for the same period in the prior year. General and administrative expenses for the first quarter declined 8% to $8.2 million, compared with the prior year period. Net income for the quarter was $1.3 million or $0.17 per share, which compares with net income of $399,000 or $0.05 per share for the first quarter of 2013. We reported cash and cash equivalents at March 28, 2014, of $12.7 million, which is an increase of $4.5 million from $8.1 million reported at December 27, 2013. Our primary sources of liquidity are cash generated from operations and the revolving line of credit with BMO Harris Bank. I'd now like to turn the call over to Tom. Thomas D. Brisbin: Thanks, Stacy. Good afternoon. I'm pleased to report on a solid quarter of financial and operational performance. It's only been about 45 days since our last call. Therefore, the update today will be brief, then I will open the call to questions. Beginning with engineering. We're well positioned in this business as cities are outsourcing more services, and we continue to benefit from the ongoing recovery of the residential housing market. As Stacy discussed, revenue from engineering grew 8.1% year-over-year. This increase is due, in part, to more services being provided under our contract with the City of Elk Grove. As I mentioned in the past, this is the largest staff outsourcing project in California. We see good potential in providing outsourced services in the city. Many cities downsized during the recession years and are now understaffed. We are benefiting from a steady flow of new contracts for a broad range of work, building safety, traffic engineering, planning, inspection and construction management. For example, we recently signed contracts with the cities of Tracy, Beaumont and San Bernardino for an array of state services. Most of our contracts with cities are small, and we've been adding Willdan staff in modest numbers at cities' outsourced positions. That said, these numbers add up, and we have already hired about 50 new employees since the beginning of the year. Also, as we previously discussed, we expect to have another large city under contract in the second half of 2014. Moving on to the California High-Speed Rail project, which we always get questions on. We don't have much new to report since our last call. We continue our initial work on this project. It's under a limited notice to proceed. We will be bidding on the next 2 segments of this project with our joint venture partner, Tutor Perini/Parsons, in June [ph]. We expect the next segment to be awarded sometime during the second half of this year. We also are looking for ways that will act to collaborate to capitalize on certain opportunities. For instance, our engineering team, along with our Homeland Solutions group, recently submitted a proposal to FEMA for a project aimed at helping cities reduce risk related to natural disasters. We expect to hear back on the proposal sometime during the second half of this year. We are confident. Overall, our engineering business is performing well. We expect this business will be a key revenue contributor in 2014. Now turning to our energy segment. Our first quarter revenue grew by 4% on a year-over-year basis. This is notable given the recompete and the split of the Consolidated Edison contract between Willdan and another consultant last April. In addition, we began self-performing our energy contracts. Our revenue growth from the energy segment was due primarily to energy efficiency measures from audits in New York and California. It's gratifying to report that our Con Ed -- this is our biggest one, is pleased with our work. We exceeded our goal during the first quarter in the number of kilowatt hours saved and expect to continue on this high run rate throughout the year. We recently won our first contract under the California Clean Energy Jobs Act, Prop 39, for energy savings programs in Southern California schools. As I have mentioned before, the State of California has allocated a lot of money, $2.5 billion over the next 5 years, and we expect to continue to pursue this work. As a final note on energy efficiency, I'd like to mention that we are again working with the New York power authority on a contract that had been inactive. This is a new assignment, provided under an existing contract, and a great example of an opportunity to grow this business. In our homeland solutions business, we continue to conduct the training under contracts for urban area security initiatives, states, cities and transit authorities. Also, as I mentioned last quarter, we have secured a key speaking role at the National Homeland Security Conference being held later this month. This is a premiere industry conference that addresses solutions of the nation's most pressing security concerns. Our financial services business is doing well, and we are making good headway on our efforts to diversify projects and expand it to new geographies. About 25% of our revenue from financial services is now outside of California. In looking at 2014, we see ample opportunities for growth through both organic growth initiatives and for strategic tuck-in acquisitions. We believe we are well positioned to capitalize on these opportunities given our strong balance sheet. We plan to manage expenses very carefully throughout the year. We expect 2014 to be even more profitable than 2013. Finally, I'd like to take this opportunity to thank our employees and clients as we celebrate Willdan's 50th anniversary later this month. This is an important milestone and a testament to our team's high-quality work and excellent client service. Our longevity positions Willdan for a long-term growth through our established relationships. I'd now like open the call to questions.

[Operator Instructions] And our first question comes from the line of Al Kaschalk with Wedbush Securities.

You mentioned -- I won't ask about the high-speed rail, given... Thomas D. Brisbin: Thanks, Al.

Can you talk, though, about the size of the energy and homeland security approach to FEMA on risk reduction? What... Thomas D. Brisbin: FEMA? Yes.

FEMA, yes. Sorry, maybe my pronunciation is not quite clear. But could you talk a little bit about that? Thomas D. Brisbin: That's a long-term contract. If we get on it, any natural disasters that occur in the western part of the United States we'll be doing engineering services on. So it's really a scalable thing. No disasters, no work; disasters, work. So I'm not going to predict a lot of disasters, but on average, there are 61 natural disasters in the United States per year where FEMA is called out. So we've got a pretty good chance to doing work on it, and I can't predict the revenue though. We're probably 6 months out, if we win, from actually signing a contract. Then there's 5 years after that. But it's a great contract to have if we get it, and we're in a good position to get it out.

Okay. What's the -- what are they looking for there? Engineering services, I mean, is it traditional Willdan services or... Thomas D. Brisbin: Yes. You go out -- let's say, it's a earthquake. Now, Willdan did a lot of work on earthquake damage assessment on Northridge when it happened, was that 15, 20 years ago? 20. So if you go out and do damage assessment, you fill out reports as to why there are failures, and FEMA reimburses. Your guys do all the work for FEMA, from an engineering perspective. If you have a fire and there's a -- housing burned down, we had a contract for state FEMA, where we help expedite permits so people could rebuild. We actually set up trailers on site so they could get their permits expedited and start rebuilding. So it's that kind of thing, Al.

All right, okay. Second, the balance sheet looks incredibly healthy, $30 million in market caps and cash. I think you mentioned something about strategic acquisitions. Could you give us an update on plans for growth given what you've done in terms of getting the business turned around? Thomas D. Brisbin: Yes. We'd like to use that cash on strategic acquisitions, small tuck-ins. Similar to what happened with the energy one, where we -- it was an $8 million a year business, and we grew it to about -- today it's $42 million -- I think it's $57 million. $57 million was reported, subcontractor costs for the real -- the real peak would have been around $40 million. So if we can take a company at about $8 million, grow it to $40 million in a relatively short amount of time, that's our objective. We look for those type of acquisitions.

And do you feel good about the pipeline visibility? Thomas D. Brisbin: Of tuck-in acquisitions? Or -- we have...

Yes, affordable tuck-in acquisitions. Thomas D. Brisbin: Yes.

Okay, all right. The final question I had was more -- it doesn't sound like there's been much change on the positive cadence about outsourcing by cities in your expectation to sign a second large one -- or your second large city outsourcing later this year. Can you add any color to that, timing-wise, size? What does that imply? Thomas D. Brisbin: I can't. I could tell you that, yes, it's good, but with cities, you'll never know what's going to happen. We're in a good shape. I expect it to happen, and it's just a matter of the city.

Is that more of, yes, we're looking at... Thomas D. Brisbin: It looks like we're not competing. It's just a matter of the city going forward and doing the higher end.

Great, okay. And then finally... Thomas D. Brisbin: Competition is over. We've won.

What's over? Thomas D. Brisbin: The competition to get that job is over. We've won.

I see. So now it's just a matter of the city to saying that they want to follow through what they said they're going to do. Thomas D. Brisbin: Right. That's as much color as I can give you.

Okay. And is that a -- but is that a June, a July 1 or October 1? Thomas D. Brisbin: 2 to 3 months out from now.

Okay, all right. I think that's all I had. Well, one more -- I, obviously, got to sneak one more in. On the profitability here, obviously, it was clearly very strong. How -- are we at a spot now where this is very sustainable? Thomas D. Brisbin: I bet Moira Conlon -- our IR consultant, if she's listening. I bet her this question would come up.

I hope you won. Thomas D. Brisbin: Well, it kind of came up and I won.

Okay. So -- but could you add just some color about your confidence in continuing 8 or 7 consecutive quarters of profitability, but more importantly... Thomas D. Brisbin: I was going to give this question to Moira to answer. We expect to continue to do well. Anything beyond that would be guidance, and we had a long talk about that. Thomas D. Brisbin: Thanks, Moira, if you're listening.

[Operator Instructions] And our next question comes from the line of Wyatt Carr with Monarch Bay.

Just a quick question. On the California Clean Energy Jobs Act, Prop 39 -- and you have the first job. Is that in, you're performing on it? Or is that one that is... Thomas D. Brisbin: We just have won it. We're not performing on it yet.

Okay. And of the funding in that act, how much of that has been actually let out? Thomas D. Brisbin: I don't know the answer to that question. If you want an estimate, I'd say probably 10%.

Okay. So there is still lots to come? Thomas D. Brisbin: There's a wag there, Wyatt.

Got you. The size of the large city that you have, I don't want the amount, but is it larger than your largest city, which is Elk Grove? Thomas D. Brisbin: Yes.

So that's a substantial contract. Has there been any pushback on the -- you increased your prices at the first of the year in the New York -- I think in the Con Ed business. Thomas D. Brisbin: Time out, Wyatt. Go back to your last question. You were referring to outsourced cities in your last question, not Prop 39, correct?

That's correct. Thomas D. Brisbin: My CFO and I just had our first disagreement.

We just wanted to make sure we're clear, Wyatt.

Yes. And I'm referring to cities like Elk Grove, where you're outsourced. Thomas D. Brisbin: By the way, I was right.

Right. Anyway, has there been any pushback on the price increases? Or has that -- have you continued to gain share in that Con Ed business? Thomas D. Brisbin: We did get increases in measures. It has helped tremendously. The fact that we are meeting our goals and exceeding our goals helps our negotiating position. Again, though, as Con Ed is listening, I can't say much more than, we're going to do our best. And I hope Con Ed hopes that we do make money on the contract, and we continue to. So I tell you we are performing well. And they like it, and they should let us make money.

Perfect. And on your EBITDA margins, obviously, you've improved. And is there still a room for improvement? I think you're at around 6.4%? Thomas D. Brisbin: Is that where we came in, 6.4%?

I think that's correct. Thomas D. Brisbin: Well, I don't have that in front of us, but we've to assume our margins. Is there room for improvement? A little bit, yes.

Okay. And in the finance services sector, did you pick up both in California and outside? Or -- you said something about 25%. Thomas D. Brisbin: Yes, I would say there's a little bit of pickup in California, but there's more outside. Because we're hiring key people in other states that can take our financial services outside of California.

Okay. And is that a vertical you're really focused on? I mean, it's a small vertical now, but it's a high-margin vertical, right? Thomas D. Brisbin: Yes. It's a vertical we're really focused on because the type of people we're picking out now are true financial consultants to the cities. And the cities, more than ever, throughout the United States, need advice on how to increase their revenues, given the fact they're all in dire need.

Okay, great. And the last question, and that is on California Rail. This got you into other areas, other rail companies, and -- have there been any additions in that, like Metrolink and other things? Thomas D. Brisbin: Well, I can tell you we've been on 2 jobs this year and lost. And that is not something you would want to report to a question like that, but it is our first shot at building our infrastructure group, and that's where we stand. So I'm just giving it to you straight. Now it's [indiscernible] like that in a couple of years, and we're hoping to make it this year with 1 good win.

Okay. Is -- with the magnitude of the work on the next -- I don't know what you'd call it, the next tranche of California rail that you're bidding would be similar to past work that you've done? Thomas D. Brisbin: No. From what I understand, there is 4 segments. We've bid on the first one. The winning bid was right around $1 billion. Then there are Segments 2, 3, 4 that were slightly to come out. They've combined Segment 2 and 3 into one bid, which were estimated to be each around $1 billion. So the next one that will come out in a combined, let's say, tranche, as you call it -- a banking term, I think. Not an engineering term, but -- so if you say Segment 2 and 3 will be combined, there should be about $1.8 billion to $2 billion for the next one. We're just priced to $1 billion on the first one, I believe, $1 billion. Whether or not they win or not, who knows? We hope so.

And our next question comes from the line of Dan Zev [ph] with Zev Capital [ph].

Just a rising tide, sort of, environment that you're operating in -- I mean, obviously, it is. But the question is, are you taking share from other competitors more than you have in the past? Thomas D. Brisbin: That's a good question. I would say it's a hard question to answer, quantitatively. Because everything we take, we compete with at least 10 other proposals. So if you go back on the rising tide that started in '96 that the entire country rode to 2006, that rising tide was so great that there weren't enough capabilities to supply the engineers to do the jobs. But over the past 7 years, that rising tide died so bad, that we did not lose the competition, we just lost to the market evaporating. So now the question is, we're going up again and there are still so many people out of work and fighting for jobs, I would say, right now, we are not -- although the rising tide is nice, we are still fighting for our lives for every job. I don't -- is there -- Dan, is it?

Yes. Thomas D. Brisbin: Does that answer your question, Dan?

It does, it does. And I... Thomas D. Brisbin: The rising tide is benefiting us. I mean, it's still a tough competitive world because there is -- there were so many people out of work. And there are still so many people looking for jobs, both at the one-man level up to the major companies. So I don't feel as though we're riding in the rising tide yet. I also would like to get back to the subprime loan bubble, get to those days.

And I guess following on that, what is your long-term, board-level read, 5-year plan? How big do you have to get? How many acquisitions you have to do? Are you going to sell the company at some point? I mean, is this an industry where you can just keep fighting for business and doing this for several years? Or is there an end game? Thomas D. Brisbin: If I could discuss that on the phone, I would, but I can't. Our job is to increase earnings for the shareholders quarter-to-quarter for as many years as we can and as big as we can. That's the end game.

Can you discuss the cash flow situation, which was very strong in the first quarter? Can we expect cash to continue to rise if earnings are positive? Thomas D. Brisbin: Well, yes.

So there -- in other words, there is not going to be any downward adjustments in the working capital situation from that first quarter moving forward? Thomas D. Brisbin: I'll let me CFO answer that one. Are you saying will cash go down?

I'm saying will cash go up if you make -- if you have net income? Thomas D. Brisbin: Dan, I think with a good job, with receivables, cash should go up, yes.

Ladies and gentlemen, that does conclude today's question-and-answer session. I would now like to turn the call over to management for any closing remarks. Please go ahead. Thomas D. Brisbin: Well, I'd like to thank all of you for participating on our call today and for your continued interest in Willdan. And thank you, and have a great day. And remember it's our 50th year in business. So congratulations to all the employees and clients who are listening. Thanks.

Ladies and gentlemen, that does conclude the Willdan Group, Inc. First Quarter 2014 Conference Call. You may now disconnect.