SHIM - Earnings call transcript Q1 2024 | Shimmick Corporation Common Stock

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to Shimmick's First Quarter 2024 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, [ Anthony Rasmus ] with Investor Relations at Shimmick. Please go ahead, sir.

Unknown Executive

you Shimmick's us First thank call today's and discuss to Quarter afternoon, for on joining conference Good XXXX results. presentation website today's section for are the on Slides Investor of our www.shimmick.com. available Relations

incorrect. our that will also if to principal do During this filings affect expectations assumptions, key any our materially may Actual of are reports risks which from forward-looking uncertainties. are based to and in could Exchange on our can and a update the performance which and Investor uncertainties risks make statements. be and We subject Securities results duty and forward-looking conference current not undertake statements We with our our identify on any Relations management the Commission, call, differ website. found forward-looking assumptions statements

also non-GAAP includes to references presentation financial Today's measures.

to quarter first of comparable refer the should and press non-GAAP release the GAAP financial information in reconciliations definitional measures to information measures. historical contained company's You financial for

it's turn that, pleasure to to CEO. it my Steve Shimmick's With Richards, over

Steven Richards

Anthony, and call. afternoon, all Nordhagen, Devin you everyone, CFO. Shimmick's thank good joined by today's I'm joining for Thanks, and

As the of under with noted earlier of release press of one waiver lenders facility. process our a our negotiating are we credit in default our today, earnings in issued

Form do on we XXb-XX the on Form with prescribed file Securities not XX-Q result, a extension our the As Exchange by file to deadline to expect quarterly Commission. an report and and expect

our do currently expect first based to which its results, on While are result we are quarter management information, results. to XXXX in the revision not our completes subject first available internal quarter review, waiver changes to as

quarter our results. finalized registered public independent accounting Our not has also XXXX its of review first firm

We $XX of in million net due and first loss of operations of first delivered adjusted experienced million with to projects challenged Projects. a quarter million. down winding the were commencing Our of revenues XXXX an $XXX short-term Legacy EBITDA results of delays combination and the loss new quarter $XX

our transaction last projects, AECOM on breakdown to results. detail did of sales results that we between provide that will transaction. Legacy sale a more started the and provide of both call, these breakdown As AECOM the we'll specifically related projects Projects, after Devin Shimmick began before

weaker overall to primarily and quarter, our a in Legacy gross as subset the note, first Loss experienced as from margin continue defined Projects, contract as was additional modification of cost fees in well of the of pursuit project However, legal related Projects that owners. order to overruns Legacy recoveries those

is into recognized recognized overall our not we incurred loaded. expected explanation note specific of changes a the these the Loss loss of complete In If for in XX-K. to projects. cost the to cost estimated those a as indicate the flows current business, loss, from gross amount the contracts life for to to Loss our important project Projects, on have the estimate of period in we margin is the of the in and that the on Legacy is Legacy fixed-price complete expected period memory refresh your complete entire over cost additional and have the provided our are It any summary, treatment actually To detailed front-end Projects, change accounting thus and the cost further the loss estimate revenue.

expected yet $XX We gross Shimmick in million revenue Projects we quarter were to time. slightly costs incurred quarter, not for the Project year million Legacy orders. the continue have received down of this work as $XX that with margins at backlog change the negative last from down

backlog. Regarding

backlog. backlog, represented by Although the seen end At near-term we Legacy we Projects the of quarter, of to converting timing versus Projects, project due with Projects encouraged first we've the our the our Shimmick are and Shimmick headwinds Projects. experiencing issues Legacy cost progress over remain XX%

overall our $X of remains as the pipeline approximately the billion first of at quarter. end Additionally,

a upgrades accommodate ditch secured acres of box irrigation the report of land Francisco for XXXX. Shimmick pleased to California. projects Sunol plant, storm Southwest first Stockton, the secured electrical near system. in treatment as In at over treatment construct Shimmick a will east and ozonation water quarter of of through I'm future new water X new drain cover that drainage ] support to an the subcontract rail San Stockton, XX,XXX [ the new to Shimmick to Bay addition advanced new function

and install generator building multiple at new electrical building an large including and systems being nitrogen oxygen facilities, Here, will ozone Shimmick facility. a liquid electrical and

responsive first generated work repeat be associated long-term allows to XX% this of our pipeline pipeline robust increases have quarter expect personnel grow for for we ] a than of from an estimating water. work. late programs [ in and demand growing to to customers More which funding We projects. had and continue of the future alongside the of work, funding predictable, to public public customers, federal in is We flow and

second at proceeds to the transactions a the close intend agreement MidCap. We we which end, to closing. of facility Subsequent California, of expected these we our to purchase consideration with in drilling for the repay net credit our under transactions XXXX. intent for and the of approximately million, assets Tracy, of leaseback are asset expect Both total both receive quarter a approximately $XX facility in our letter a quarter of of fiscal existing to an sale use into borrowings to million million foundation of to transaction equipment raise $XX expected sale entered for $XX.X

while business, core expenditure requirements. to the In water enhances are capital addition, slowing foundation which drilling annual assets, liquidity lowering our not our

that years more market and a is skills a use of in-sourcing higher-margin significant X becoming technical duration. water-focused projects asset-light, make reality that Corp. with company projects average vision targeting Shimmick in

shortages a published While was infrastructure as XXXX in ]. to and the identified GovWin headwinds, labor price by a modernizing industry industry inflation, including continues recently face hotspot water report [

than and to American services. Works Water any faster to U.S. is the invest of reported, meet XX-plus The to over state the year plus water additional last as from includes demand law Association, revolving years other bipartisan trillion economy. $X investment, population announced grow the sectors, needs demand Shimmick $XX the infrastructure increasing previously forecasted turn, in funds. The from the for According growing to million infrastructure next in work an $X.X for billion this a needs

Shimmick disaster flooding, identified demand and spot which for Another drives driving prevent required services. or hot mitigate hurricanes, demand the is storms, response, damage severe to droughts from further for infrastructure

geographic infrastructure these expected California in to demand identified For is hotspots, Spending on core XXXX peak infrastructure both to the showing to and analysis, spending [ in modernizing funding quarter and respectively, with state, core IIJA one with come. the the the of increased in by strong strengthen second segment sewer disaster According was a water of first year-over-year and vendor, as Shimmick's fourth still ] largest response, water market. S&P was Shimmick's gain. XX.X% combined markets, increase Global's

expected spending in California robust. infrastructure Additionally, to is remain

water will and water, technology to city's the A pump implementing next to million Turning North another sustainable the on facility, $XXX water slide. and wastewater Shimmick ocean. imported the also station supply, the providing highlighting of safe I'd a treatment recycled into the reduce is reduce high-profile spend to jobs. discharge California. time new in water City treatment dependence which one our and facility San purify Diego, water like pure

of mechanical electrical most Shimmick a activities the working on is in-source and the has work just more. including over of on biological exterior and the halfway progressing the being every and elements reverse facility, and sophisticated project, and HVAC including complete example level This conduit, with our little the facility. We're of installing day. is the does now is rooms, delivered and osmosis for and fire treatment Treatment ozone electrical the concrete is that team carbon another technologies has areas equipment, of equipment, finished schedule protection, integrating highly been installed. activated

discuss the turn I'd call financial results. that, with our will And like Devin who to over to

Devin Nordhagen

All comparisons Steve. to made will basis compared be Thanks, the in on a period year-over-year XXXX. same today

revenue quarter. of of gross as and $XX again, revenue the million for to We primarily year $X For loss legacy negative drilling in net compared period, million and for margins had the the of in million legacy decline result a largely year $XXX compared in revenue of to loss we reported first in the foundation the result prior $XXX million period, of as foundations. a a the net a prior quarter,

of compared a First million in was to loss a period. $XX of $X million quarter the adjusted EBITDA loss prior year

after change jobs while gross in The out primarily the $X ramping compared of was our first contracted factoring decline revenue revenue result jobs noncore and $X of million. tied winding In negative to to costs orders. of pending million increase XXXX, The Project primarily and to timing in new the those jobs quarter, the $X up. $XX gross a down projects, to increased margin million was the margin result Shimmick million foundations

As earlier, agreement the foundation projects XXXX, sell during year. down the and noted quarter in remaining we'll the by of second Steve of to an has winding into be company assets any our entered work the noncore

projects the reporting the be XXXX. company for will year, revenue the to decline related will during separately As revenue these

Revenue margin and $X decline 'XX, margin $XX 'XX X and multiple of for on winding timing months million gross The Gross QX subcontract 'XX, and the recognized by down. respectively. $XX was negative recognized QX 'XX ended and projects was projects of million million million on in multiple the million million. Foundation's of QX was in decreased million revenue Foundation's and revenue $X projects cost was ended million margin jobs $XX gross in result a the the down. and Legacy the result of for $X decline to contracted to $XX jobs compared negative respectively. months XXXX to X timing overruns jobs winding QX The $XX

that as As these legacy a which as cost of legal experienced recoveries complete define owners. continue primarily results project subset to legacy additional projects and impacted cost loss the by projects from recognized from the contract overruns Steve well this loss were modifications pursuit these our have as estimated projects fees order explained, in we projects. to and expected subset, of we On

to be no there with loss recognized the additional costs may wind down legacy in associated cases, gross recognized be in will and all projects projects, to these be completion, which these some further As will continue margin period.

$XX the these for and QX ended million ended 'XX 'XX negative QX 'XX, and recognized Legacy QX months $X million on for Loss negative respectively. Projects the margin Projects recognized million was and $XX million the QX X Gross respectively. Revenue was months X 'XX, and on Loss Legacy $XX

opportunities has compliance pursue credit with quarter actively all MidCap. to to in covenants The offset for loss costs. of existing continue these put our facility out the us the We with

in as alternative waiver and MidCap with the process are We arrangements well negotiating with as financing lenders. pursuing other amendment of a potential

unable discussions, result the within our are of ongoing report prescribed quarterly to we these deadline. As XX-Q Form file on a

that XXb-XX Securities will Form For of commission. file with Exchange we the see additional information, you the extension and

with the between be we in assuming back XX, margin. XXXX reflects projects some Legacy our full I'd resolution and XX, grow year after million the fiscal the December towards to our for our as noncore of X% to to XXXX, execution margin work negative our gross off XX%, XXXX, margin. guidance trending Projects. XX% will over X% with efforts for like the excluding Projects weighted half believe the revenue fiscal turn expect now backlog successful to ending Legacy it margin with to range of by gross trending results that, operational strong ending strategy, XX%, MidCap, and gross of improving For our to foundations as $XX pipeline, the of quality growth continued our end additional revenue XX% lower Projects robust in We Shimmick's for revenue for of XX% execution lower to Steve with our well on December end remarks. XXXX. With the further for gross our The decrease X% towards range that to to year momentum

Steven Richards

core advance conclusion, unusual off Projects the costs these take Devin. see positioned recognition nature opportunities correct and start-up Shimmick of year not accrue In continued unchanged. reinforce will start-ups as revenue work the we our and ongoing in backlog. Loss strategy more confident in for project faster to term to the encouraged to to Projects first Thanks, the our balanced completion. market It's the over new then in itself progress through slow ahead. It believe be projects quarter and become We're start working Legacy be Shimmick to as are by made than that short continues the that remains progresses. as We the advantage important collection challenges favorably sizable is earnings for project business project

with coupled team transform strategic as of our shift minimizes we companies. Operator, efforts infrastructure low-cost M&A well potential for the growth. margin, and one our We higher to work open margins Our now again you for towards want thank risk water for America's their vertical a once enhanced activity integration portfolio, Shimmick into tireless us questions. best line positions and to may

Operator

[Operator Instructions].

question first Gerry we The ROTH from of Capital. Sweeney have comes

Gerard Sweeney

that your On the you quarter confidence second remarks confident [indiscernible] are sale the you in numbers of the can in the close you prescribed in equipment, how achieving that and that your

Steven Richards

Highly in quarter. confident, the Gerry. It will early be

comfortable that. we're toward So very

Gerard Sweeney

challenge. you can about Obviously, Okay. and we And achieve in guidance rest went that and question, of similar turning QX did that as this confidence are Again, better you talk your was through year you getting a the place. things kept around guidance.

Steven Richards

then kind and of projects we start feel get kind way. the We of recognition ramping slow in a into cost mobilization of cost lot up don't project that do. that mentioned I side like lead earnings in We that the --

and the example, often of mentioned with and example, an activities, with that project, the Elsener recognition look construction good improves pace and revenues. now a we going And that a We've the to catching past, and we're run, well field in with margin got place, one earnings the stabilize so from up so project, is the as once the standpoint the moving with team recognition we've [ revenues. in ] keeping in projects for at cost

Gerard Sweeney

of large a through go obviously, we're quarter, should we improvement rest any QX then looking we into we see bit now, second Or issues was As and in challenge. further year? be at should percolating aware quarter the when XQ? of Are into the there improvement an XQ that the other a we're little the

Steven Richards

are Let's back stick we with weighted. half our guidance. that We feel

XQ, early in as improvement So and the that curve. so in XQ, continuing we being we're climbing obviously, see a

feel good we it. So about

Gerard Sweeney

change? profit. change you at a that positive -- orders, some change orders. at I collecting period some it. Are And cadence to Change Did it Obviously, gross is actually think that become of orders? hit Got actually the going point? some net

Steven Richards

that of activities to got on all so we've Devin Yes. But the legacy orders team what in as anything complete in uncommon materials we timely change want project place ready gets lag some add of that to this. of can know remarks, things. there. not end, his in and but a that negotiate change is and I contract newer add change in have smaller to in One a he the only if not basis order and you don't it about the we're when a execution. we've that good are some paper an got towards administration some of to can see to those projects, our But mentioned couple seeing excellent projects. Devin, that's we and go feel orders, timeful kind our of

Devin Nordhagen

it No, I pretty think covers that good.

our I jobs. the price as the firm most in of changeovers, mentioned think, with lag fixed before, are we've jobs,

and the have to order and the cost And change go and get work so costs. follow to procedures then through with contract those the we to incur the oftentimes, tied the client

Gerard Sweeney

to a impact your Got Will that the jobs? currency headwind? sheet it. go ability the to out and Does balance bid be

Steven Richards

issue No. closely for a covenant something big I work group at overcome -- company, We that's surety that just see this our of look timing the with being MidCap quickly, that part we a we'll we work as with. stakeholder us.

we've at for us, real pursue pursue. are sale can I go that leaseback anything. done really so want sheet mentioned with strengthening And we fact, work business our so and to sales the don't to liquidity look I for as that balance we that foundation's the And and the positive see in the we our things improve and transactions our and then things

Operator

Aaron The have next Spychalla from of Craig-Hallum. question we comes

Aaron Spychalla

on and Projects. First, a kind there? positive of on potential projects? resolution the of How Loss the sheet just potential couple Legacy update far kind an as kind of on to much Can there? remaining what's get as work you give us of outlook And still claims is just the balance those

Steven Richards

tracking at high completion, now, kind the the labor end turn, it job forward to jobs parts Yes. they're behind XX% if looking of of you and are really with that that downward of remains. whether largely and projects risk quarter, the risk of the so we're nearing the on Right us the now, be amount a or, are the will,

to good nearing don't I feel will, really order about XX% that settlements. So Aaron, about me. a trajectory can the in clarify the teams -- have this the huge they're balance you think But and getting sheet if now able what's that change at the milestone accomplished for to field the, right we're Devin, for in the where talk, at you the level. to

Devin Nordhagen

right, Steve. that's No,

Aaron Spychalla

And of can kind market. you about, just of All of labor like then in self-performing talk still out you're it for of the you But that a sounds pipeline, confident this the there. these supply to given right. for kind back little back half in year? like seems the of bit you issues in much conversion of the the as can projects expecting availability projects weighted It chain just outlook some these half that you're still and talked as

Steven Richards

We craft the only a that has performance. the are. of and had the follow not our superintendents always following strong foreman Shimmick but

network stays craft we've a the with of great So got that company.

encouraged finish about that to caught good into through. able a that. the feel From operations estimate So you new go we work. more by I standpoint, members that pipeline work we briefly, the coming mentioned the and we that need We're and feel can need the my that run to so remarks complete -- good we you're that craft have fact, get jobs our it in to service in and to office adding they being about that's pipeline team back our that to back win. estimating we the definitely work as bring real and work, we're team bid even may

good feel it. how we're good attacking We the work. our feel we about about So base and resource

Aaron Spychalla

right. PFAS, opportunity about moving that a there? size All given timing just can EPA And little guys and how talk recent on look of Anything kind on forward? you you just you ruling kind of potentially for could the that bit, then think

Steven Richards

the waiting by we're some that their We're Yes, design assignments, still we're of get of kind encouraged so and watching firms outcome. for major that.

that to to calls treated. needed be past in local I've mentioned very PFAS groundwater where kind or specific source of our be that going I of driven the to to it's in think some regionally It's area. is that

So we to have sometimes we're to smaller them going the forms. see an track opportunity, and but in geographies opportunity to that come we're those in

And those, larger competitive looking work these are scope that. maybe that so of kind so a become that we're more in some of opportunities we of kind measuring for PFAS of

Some the have. smaller contractors of of the ones that layer to don't of have overhead the go kind tend that kind local to we

So little it's -- but a what bigger opportunity, looking we forward need is to the now. right

Aaron Spychalla

guidance then still gross targets going thinking margin from longer-term there. for those kind And right. still type of of kind kind low double-digit, mid-teens just on you broke of kind you over appreciate of margin to just time maybe me. Shimmick how things of margin the and talk gross still? can you projects potentially the But Are out a All forward last kind standpoint? I

Steven Richards

We do. our We've maintained discipline.

$XXX to at kind that work Shimmick. my are that maybe range, then go looking on margins. we they'll What work. the in $XX think can that's for That's complicated we average say, self-perform work see least and fill elements to of a quarter, wise I I backlog is need work, X-year in the team XX% our dive you'll completely companies, and duration use early not million Some million of their of to

discipline the And we're formula, seeking our margins new so haven't on it's our changed definitely and that we're for this really maintaining work.

Operator

reached you we of us. our Ladies and This have the gentlemen, question-and-answer joining today's conference. Thank session. end concludes for

lines. disconnect now may You your

Shimmick Corporation Common Stock (SHIM) 13 May 242024 Q1 Earnings call transcript