Q1 2025 Shimmick Corp Earnings Call
Today on today's conference call to discuss <unk> first quarter 2025 results slides for today's presentation are available on the Investor Relations section of our website Www Dot <unk> dot com. During this call management will make forward looking statements based on current expectations and assumptions which are subject.
The risks and uncertainties actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect.
We identified the principal risks and uncertainties that may affect our performance in our reports and filings with the Securities and Exchange Commission, which can also be found on our Investor Relations website. We.
We do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the company's first quarter press release for definitional information and reconciliations of historical non-GAAP.
Schimek: Measures to comparable GAAP financial measures with that it's my pleasure to turn things over to your all y'all Schimek CEO.
Speaker Change: Good afternoon, and thank you all for joining us on today's call I'm joined by Bob Yoder, <unk>, New CFO I'm excited to introduce thought on his first earnings call with Schimek Todd.
Todd: <unk> joins Schimek earlier last month and brings a proven track record of financial leadership and strong collaboration with operations in the construction industry over the course of his career. He has experience of other publicly traded companies has allowed them to align financial expertise with long term operational execution excellence, which is exactly what we're looking to do and are busy.
Speaker Change: Yeah.
And I want to thank Amanda Mobley, who served as interim CFO over the course of the last few quarters I'm excited that Amanda we'll continue our career at <unk> Chief Accounting Officer. She is an integral piece of our financial success path forward.
Speaker Change: <unk> all of that she is doing to ensure a smooth transition and partnership with tot.
Speaker Change: And with that let's get started I'm going to start by discussing our results for the first quarter and our progress on the strategy, we put in place at the end of 2024.
Speaker Change: The first quarter of 2025, we delivered revenues of 122 million with a gross margin of $5 million and adjusted EBITDA of negative $3 million.
Speaker Change: Of the first quarter revenues nearly 76% came from Schimek projects. These are the projects. We've won since we became an independent company after the previous ownership.
Speaker Change: We've seen improved margins less schimek projects since the last quarter as we put operational improvements in place and we are starting to trend towards the margins. We expect to see consistently as we continue to derisk our backlog.
Speaker Change: Our legacy and foundation projects, which are the projects dating back to previous ownership or were part of the ninth divested foundations business. We continue to good work in place and drawdown backlog and so only nominal losses this quarter.
Speaker Change: Our liquidity remains strong as we finished the first quarter with a total liquidity of $71 million.
Speaker Change: Overall, while we have more work to do we are encouraged to see more stability in our business and recording good trends towards our goals as we start to implement the new strategy, we put in place earlier this year.
Speaker Change: Okay.
Speaker Change: Our backlog at the end of the first quarter was approximately approximately $740 million composed of 90% Schimek projects, we have been seeing slowdown in bidding for larger public projects and beliefs uncertainty around funding streams in tariffs has been a key contributing factor this quarter, we have seen certain clients.
Speaker Change: Pause project awards and bids waiting for certainty around funding availability impacting our ability to replenish and grow our backlog that said this is already proving to be a brief pause and we expect bidding activity to activity to be higher than normal in Q2, and Q3 due to those past projects getting released a bit in <unk>.
Speaker Change: <unk>, we are starting to see clients accelerate their bid dates in anticipation of potential price increases due to the tariffs and trying to lock in prices before they go up.
Speaker Change: In response to the slowdown in bidding in Q1, we have increased our bidding frequency, which has translated to wins on smaller projects that we may have overlooked in the past, we almost tripled our bid activity since the last quarter and are seeing even higher levels of bidding in the second quarter.
Speaker Change: Several projects in negotiation execution base, which are expected to add to our backlog in Q2 of this year.
Speaker Change: We continue to make progress working down the exposure of legacy projects in the backlog as well at the end of the first quarter legacy projects only accounted for roughly 10% of the backlog down from 13% a quarter ago and 20% year over year.
Speaker Change: The investments we spoke about on the last call related to reorganizing our sales and estimating departments substantially increasing our bid volume and improving our win rates are starting to show some results in the second quarter.
Speaker Change: We have a robust proposal pipeline of roughly $2 billion of upcoming bids. We are confident that we are well positioned as the market for larger public projects comes back. However, we recognize the continued uncertainty in the market and although we are encouraged by the recent increased bidding activity. We are carefully watching this aspect of the business.
Speaker Change: Finally, I would like to discuss tariffs and their impact on our current backlog our existing projects are generally in mature stages and all of the materials that may have otherwise be impacted by tariffs are already under contracts with fixed prices, resulting in a minimal impact on our ongoing projects for.
New projects are disciplined bidding approach ensures that'd be passed price premiums to the customer as a result, we don't expect negative impacts to our margins due to tariffs. However in the longer term rising prices could strain client budgets and May result in downscaling, our cancellation of future projects due to funding shortages in particular with public.
Speaker Change: Clients. Meanwhile, we are continuing to see strong activity on the private side and we are in close contact with all of our clients watching for new developments.
Speaker Change: One area, where we have seen a pickup in activity as our electrical and technology driven infrastructure market expansion, where we saw multiple wins the core in this quarter and recently as we explained last quarter, we see electrical work, taking a larger share of most construction projects due to technological improvement.
Speaker Change: Along with growing needs in water transit data centers and other segments with the investments, we're making and estimating sales and operations. We expect electrical work to continue to grow and share of our backlog with a target of 30% by 2027 from approximately 15% today.
Speaker Change: I am excited about the progress we have made so far in 2025, we are executing on our plan.
Speaker Change: In our four key end markets water infrastructure climate resilience technology, and energy transition and sustainable transportation, leveraging our strong expertise and client relationships in these markets. The U S water infrastructure market remains robust and well funded driven by aging assets pollutant treatments in region.
Speaker Change: Water scarcity climate resilience as a growing field due to intensifying weather events with projects such as sea walls and flop mitigation gaining momentum there.
Speaker Change: The rise of AI and feel is fueling demand for data center infrastructure presenting opportunities for our water cooling and electrical capabilities. Despite some uncertainty in the energy sector. We continue to see investment in electrification and battery storage and have a strong pipeline of bids coming up.
Speaker Change: To support growth, we've implemented three strategic pillars at the beginning of this year building, a sustainable risk balanced backlog with geographic diversification and increased use of collaborate collaborative delivery methods driving operational excellence through system upgrades improved risk management and disciplined SG&A control.
Speaker Change: <unk> and investing in people and culture with new incentive programs clear career paths and talent retention efforts.
Speaker Change: Remain optimistic about 2025, aiming to grow backlog restore profitability and expand our addressable markets with that I'd like to turn to Todd who will review our financials in more detail.
Todd: Thank you Rob and.
Speaker Change: And thank you to those on the call for joining us today and for your interest in <unk>.
Speaker Change: To expand on your comments at the top of the call I joined <unk> with nearly two decades of public company experience with.
Speaker Change: With 15 of those years working with some of the most talented.
Speaker Change: In the construction industry in both finance and operations. This provides me with a unique perspective on what it takes to win in this business.
Speaker Change: You will hear me talk a lot about.
Winning the right way.
Which I will expand on in the future, but for now I will say in my guiding principles align lock step with the three pillars.
Speaker Change: <unk> has shared with you.
Speaker Change: <unk> has a rich history as an industry leader.
Speaker Change: And over the past months I've had the opportunity to meet many of the talented people across the business and have been key to <unk> strong reputation in the market past success and rich history.
Speaker Change: As we begin the next chapter of <unk> success and growth.
Speaker Change: Couldn't be more excited about the talented people with strong capabilities in the market opportunities. We have ahead of us.
Speaker Change: Let's jump into the first quarter all comparisons made today will be on a year over year basis as compared to the same period in 2024 for the first quarter of 2025, we recorded revenue of $122 million.
Speaker Change: Compared to $120 million from the prior year period.
Speaker Change: Revenue on Schimek projects was $93 million for the quarter as compared to $90 million a year ago.
Speaker Change: The increase in revenue was primarily the result of revenue from new water and infrastructure projects ramping up and the California Palisades fire cleanup project. This was partially offset by decreases from lower activity on existing projects as they continue to wind down.
Speaker Change: Gross margin recognized on <unk> projects in the first quarter was $5 million as compared to a negative $1 million and the margin recognized a year ago.
Speaker Change: The increase in gross margin was primarily the result of $3 million and gross margin from new water and infrastructure projects ramping up and $3 million in gross margin from the California Palisades fire cleanup project.
Speaker Change: Legacy and foundations projects revenue was $29 million.
Speaker Change: The first three months.
Speaker Change: Ended April 4th 2025, a decrease of $1 million as compared to the three months ended March.
Speaker Change: March 2009 to 2024 as the company works to wind down these projects.
Speaker Change: Gross margin from legacy and foundations projects was negative $1 million for the first three months.
Speaker Change: As compared to negative $15 million for the prior year quarter.
Speaker Change: This change was driven as a result of cost increases per time and design related schedule extensions identified during the first quarter of 2024, which did not reoccur during the first quarter of this year.
Speaker Change: As a reminder, these legacy projects continue to wind down to completion and no further gross margin will be recognized. Furthermore, in some cases, there may be additional costs associated with these projects, which will be <unk>.
Speaker Change: <unk> in the period.
Speaker Change: We also reported SG&A expenses of $14 million for the quarter down nearly $2 million or 11% versus the prior year quarter.
Speaker Change: This was driven as a result of continued implementation of <unk> transformational plan.
Speaker Change: Our net loss for the first quarter of 2025 was $10 million compared to a net loss of $33 million for the prior year period.
Speaker Change: Material improvement was primarily due to improvement in gross margin of $21 million related to legacy projects.
Speaker Change: First quarter, adjusted EBITDA was negative $3 million compared to negative $24 million in the prior year period.
Speaker Change: Turning to the balance sheet unrestricted cash and cash equivalents ending the first quarter totaled $16 million and availability under our credit agreements was $55 million, resulting in total liquidity of $71 million, we feel comfortable that our liquidity position ending the FERC.
Speaker Change: Quarter provides the capital needed to carry out our strategic and operational plan.
Speaker Change: Our backlog remains strong and with $739 million at the end of the first quarter.
Speaker Change: Mix of our backlog continues to improve as <unk> projects now represent 90% of the total backlog ending the first quarter. We are committed to winning the right way one of the three pillars that define our growth strategy is sustainable risk balanced backlog with.
Speaker Change: Centers around a disciplined approach to how we bid work while remaining focused on work that aligns with our core capabilities.
Speaker Change: We are pleased with our first quarter results and the momentum it provides us to start 2025.
Speaker Change: We grew our top line, while achieving significant improvement in our gross margin and SG&A.
Speaker Change: For the year over a quarter on a year over year basis.
Speaker Change: The results are a testament to the diligent work the team is doing to advance our strategy, which is centered around building sustainable backlog with a renewed focus on operational excellence and people and culture.
Speaker Change: While we continue to closely monitor the fluidity of tariff policy at this point, we are reaffirming our full year guidance and we expect to deliver results and our previously stated guidance ranges.
Speaker Change: We expect <unk> projects revenue to increase 10% to 15% with overall gross margin between nine and 12% we.
Speaker Change: We expect legacy project legacy projects and foundation projects revenue between $50 million and $60 million with gross margin between negative five and negative 15% as we complete these projects.
Speaker Change: And we expect to achieve adjusted EBITDA between $15 million and $25 million.
Speaker Change: With that I'd like to turn it over now to your raw for some closing remarks.
Speaker Change: Last quarter I stated our goal of making Schimek one of the nation's leading sustainable infrastructure companies I'm excited to see the progress we're making on several fronts to achieve this goal. Despite the uncertainties we experienced in Q1 at the macro level.
Speaker Change: <unk> structure strong backlog and an exciting pipeline of opportunities ahead of us in 2025.
Speaker Change: Our strategic initiatives, we are putting in place this year take hold I expect to see stronger financial outcomes over the next several years I want to express my appreciation to the entire <unk> team for their tireless efforts this quarter towards the great future. We are building for our company. Operator, you May now open the line for questions.
Speaker Change: We will now move to our question and answer session.
Speaker Change: At this time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen.
You may remove yourself from the queue at any time by lowering Johan.
Speaker Change: What have you over time, you will receive a message on your screen asking to be promoted to a panelist. Please accept wait a moment and once you have been promoted you will hear your name called and you may on mute your video and audio and ask your question.
Speaker Change: We will now pause a moment to allow the team together and assemble the queue.
Speaker Change: Okay.
Speaker Change: Your first question comes from the line of Orange <unk> from Craig Hallum.
Speaker Change: Amit your audio and video and ask your question.
Todd: Yeah, Hi, you're all on Todd Thanks for taking the questions.
Speaker Change: Maybe first for me can you just kind of talk about visibility into the guidance for the year on the Schimek projects, both on revenue and gross margin just given the performance in the first quarter and then maybe as part of that just kind of if you could elaborate on what youre seeing on the on the tariff side of things. It sounds like there was a brief slowed.
Todd: Down, but youre, starting to see things kind of pick back up.
Speaker Change: Can you just give a little more color there that'd be great.
Todd: Yes.
Speaker Change: Thanks, Aaron and good to see you, yes, So Schmidt Schmidt projects, we've seen some performance improvement in Q1, obviously software guidance is yet, but we are making changes and operational improvements and looking at the backlog and where the work.
Speaker Change: What we are we have to put in place the rest of the year, we're still feeling good about the guidance behalf.
Speaker Change: MS Schmidt project side as well as the legacy project side, there are still some some challenges there but were getting through them and I think the 90% Mark is.
Speaker Change: It was a pretty good milestone for us.
Speaker Change: We're really down to the to the end of it now for sure.
Speaker Change: For those projects and there's only a few of them really.
Speaker Change: And then just touching on the tariffs and I'll, let Todd chime in as well, but.
Speaker Change: We saw a brief pause and I think that's really related to just the uncertainty of it just a there was a lot of.
Speaker Change: A lot of uncertainty around where the funding streams bore and staff at the federal level as well as.
Speaker Change: Just just making sure they.
Speaker Change: Our clients are feeling good about the funding that it's still going to be there.
Speaker Change: That resulted in a few beds and SKU clients pausing their bid dates or pushing their bid days of contract awards, but we're seeing that right come right back as we see some stability now over the last month month and a half.
Speaker Change: And in fact like I mentioned in the.
Speaker Change: Earlier.
Speaker Change: There is there is a concern around prices going up with the tariffs and hey, let's get our get our bids as fast as we can.
Two log prices in a lot of these situate the a lot of these projects and we see we were starting to see a lot more activity than we had expected in Q2 because of that so that gets us pretty optimistic and then Todd maybe you can touch on tariff exposure, we have right now yeah, so tariffs right.
Speaker Change: The word does your these days.
Speaker Change: Really the way, we look at that as we break it down into EPC language.
Speaker Change: Our business tends to be a lot stickier.
Speaker Change: With three sometimes four year projects right.
Speaker Change: Alright, so so pricing.
Speaker Change: You can't pass that on to clients like you can in other than some other businesses. So we look at commodity.
Speaker Change: Commodity exposure.
We look at inflation equipment prices.
Speaker Change: And what we want to know is what exposure do we have to fixed price work and then what we call bought out so what percentage are we bought out on those exposures or committed.
Speaker Change: Do you mean do we already have those exposures locked in those commodities.
Speaker Change: Those items that could be impacted by inflation and so.
Speaker Change: Running through that analysis, we believe we're around 90%, 96% bought out on most of those exposures. So we see.
Speaker Change: With our existing backlog, we see that as a.
Speaker Change: Our minimal exposure at this time.
Speaker Change: Alright, thanks for the color there.
Speaker Change: And then maybe second can you just kind of you mentioned new awards and extensions that are pending.
Speaker Change: Can you just maybe quantify some of that and maybe give a little more detail have you seen them already here in the AR in the second quarter are they are they still to come.
Speaker Change: And then maybe just kind of a follow on with that I mean, I saw the palisades kind of was it because of good driver in the first quarter, maybe if you could just touch on that that project in Canada Central sizing contribution there.
Speaker Change: Yes that that project's ongoing so then.
Speaker Change: That's a cost plus so we recognize that as it goes so yes. That's part of that's part of what the activity, we're going to see in Q2 as well as like I like I mentioned, we have been.
Speaker Change: Ah projects that we were.
Speaker Change: Low bidder on.
Speaker Change: But again through that.
Speaker Change: Pause that I that I discussed earlier.
Speaker Change: They have not been awarded a be expect to see start to see them in Q2 and.
Speaker Change: We have we probably have the most busiest bidding activity.
Speaker Change: We've had a.
Speaker Change: While this may and June timeframe. So some of that May fall into Q2, some of them may not but.
Speaker Change: We're seeing we're seeing really really strong bidding activity along with certain contracts getting negotiated and then theres a few change or larger change orders support on the human side as well as the legacy contract side.
Speaker Change: We are working to the.
Speaker Change: Finalize with clients so generally.
Speaker Change: Positive.
Speaker Change: And I think most.
Speaker Change: Most positive part of it is this is a very high level of getting activity is extremely encouraging.
Speaker Change: It Hasnt been this way.
Speaker Change: Earlier in the year, so looking forward to it.
Speaker Change: Good and then you know maybe one more just on kind of capacity and liquidity. It sounds like you feel comfortable with liquidity you have I mean, just with what you've added on the estimating side and building out kind of the electrical piece of the business can you just talk about.
Speaker Change: What kind of revenue capacity or just the size of the business could support today and just any other investments you're looking to make in the business.
Speaker Change: Yeah, No. That's a great question. So we are we are comfortable with the liquidity.
Speaker Change: We behalf.
Speaker Change: <unk> largely completed a lot of those investments we brought on.
Speaker Change: It filled every all the positions that we had expected to fill except for two at this point and broad and really expanded.
Speaker Change: Sales in estimating team gives a civil open estimating team.
Speaker Change: And they are they're hard at work now.
Speaker Change: So we're.
Speaker Change: Very hopeful that we're going to see the benefits of that and honestly it's.
Speaker Change: The struck the overhead structure, we have right now <unk>.
Speaker Change: We can easily handle.
Speaker Change: 600, 700 $750 million a year.
Speaker Change: Without adding significant additional overhead.
Speaker Change: So assuming the worst.
Speaker Change: If we succeed in our in our <unk>.
Speaker Change: Efforts to increase our bid volume and win rates I think we can we have that excess capacity, especially on.
Speaker Change: The critical side in the water and electrical piece that not everybody has at this point I think assuming we can deliver on the sales side I think we have.
Speaker Change: We have some really good opportunity here rest of the year.
Speaker Change: Got it and then just maybe one last one I apologize, but you kind of talked about in the past potentially accelerating some of the legacy projects into 2025, I mean I see you kept the same guidance, maybe just an update there on that potential.
Speaker Change: Yes, we're trying.
Speaker Change: A couple of them.
Speaker Change: There are some good opportunities there I can't I can't say that I'm ready to declare them, yet, but we're working towards them, but at the same time towards the end of these projects, there's always a scope growth.
Loose ends to tie up in.
Speaker Change: The clients want certain things done in addition to the changeover to the contract so theres a bit of that as well that might push it again back out.
Speaker Change: The majority of the work we are working very hard to bring it back as forward as possible as much as we can.
Speaker Change: Alright, good thanks for taking the questions I'll turn it over.
Darren: Thanks Darren.
Speaker Change: Okay.
Euro: There are no more questions at this time I would now like to turn the call over to Euro for closing remarks.
Speaker Change: Thank you.
Euro: As we stated we are very excited for the rest of the rest of 2025 and what we've accomplished so far in the first quarter.
Euro: A lot of the operational sales are estimating and process improvements that we are we have put in place and we are continuing to put in place are starting to show good results.
Euro: And the our results in the first quarter a good initial indication of.
Euro: What's to come.
Euro: So we are we are very happy with our progress we have a very strong new management team with Tom joining as well.
Euro: And we see a.
Euro: A lot of opportunity.
Euro: 2002 2025 into 2026.
Euro: Even though we had faced some uncertainty this quarter.
Euro: We think that there is there is that we have that opportunity to turn that into a positive the rest of the year and delivered the results that we had.
Euro: <unk> provided guidance for earlier in the year.
Euro: For joining and thanks for your interest in <unk>.