Q3 2025 Shimmick Corp Earnings Call
Speaker #2: Safeguarding our communities from rising waters and extreme weather. Our strength comes from our people: craft workers, engineers, and leaders who take ownership in every task and self-perform the work that defines a project's success.
Speaker #2: Quality, safety, accountability, and a culture built on performance. Shimmick: Building the infrastructure that connects, powers, and strengthens our world. We make it.
Speaker #1: Welcome
Speaker #1: 2025 Financial Results. to Shimmick's Third Quarter All participants will be in a listen-only mode happen. until the question-and-answer session begins. As a reminder, this conference call is being recorded.
Speaker #1: If you have any objections, please disconnect at this time. I would now like to turn the call over to the investor relations team.
Speaker #3: you for joining us on today's conference Good afternoon, and thank call to discuss Shimmick's Third Quarter 2025 results. Slides for today's presentation are available on our website our investor relations section of call, management will make forward-looking statements based on current expectations www.shimmick.com.
Speaker #3: and assumptions which our subject to risk and uncertainties actual results could differ materially from our forward-looking statements if any of our incorrect. We identify the principal During this risk and uncertainties that may affect our performance and our reports and filings with the securities and exchange commission, which can also be website.
Speaker #3: We do not undertake a duty to update any forward-looking found on our investor relations statements. Today's presentation also includes references to key assumptions are non-GAAP financial measures.
Speaker #3: You should refer to the information contained in the company's Third Quarter Press Release for definitional information and non-GAAP measures to comparable GAAP financial measures.
Speaker #3: With that, it is reconciliations of historical your all y'all, Shimmick.
Speaker #4: Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Shimmick's CFO. I'm going to kick it off with our results for the third quarter and speak to our expectations for
Speaker #4: 2026. But before I go there, I would like to reiterate our go forward strategy,
Speaker #4: Complete non-core projects that have impacted our profitability over the last two business that play into our strengths and years, and implement operational talent and result in more predictable improvements that build on our existing consistent margins and lower CEO.
Speaker #4: GNAs as a percentage of revenue. We are confident that our disciplined execution of the strategy is going to perform at or above the industry year after year.
Speaker #4: And I'm pleased to report that we are making progress. Moving to our financial results, starting with revenue for the third quarter of allow us to have a company that a gross margin of $11 million 2025, we delivered revenue and an adjusted EBITDA of $4 last few quarters, the majority of our current business consists of our core Shimmick of $142 million with projects.
Speaker #4: million. Those we've won since becoming independent from our previous ownership. The remainder consists of non-core projects, which were awarded prior to that As I've mentioned over the transition, represents the types of projects we no longer pursue.
Speaker #4: Throughout 2025, we've been making progress towards replacing more of these non-core projects with new Shimmick projects as we complete them. Now, of 75% came from Shimmick projects, with a revenue of $107 the third quarter revenue, over million representing a 6% increase year over year.
Speaker #4: We also expanded our gross margin on Shimmick projects from prior years' third quarter by 67% on the continued operational We expect our core business to continue to generate higher margins as we continue to build our backlog.
Speaker #4: Our non-core projects' revenue was $35 million a reduction of $30 million from same quarter last year, improvements we've implemented this year. projects. We reflecting our continued progress with those time since the same period in achieved positive adjusted EBITDA for the first time this year, and the first 2024.
Speaker #4: So we can clearly see our financials. We also maintain a strong strategy come to fruition in our liquidity position in the third quarter, $48 million.
Speaker #4: The momentum we're seeing is a direct outcome of the strategic shift we implemented earlier this year, which focused on pursuing projects that align closely with our strengths, deepening client outcomes, and reinforcing partnerships to drive superior project operational discipline to boost both execution and employee engagement.
Speaker #4: Looking ahead, we're particularly encouraged by the continued strength in market conditions and our backlog next. We continue to see a large growth, which I'll touch on and expanding addressable market, segments where our expertise aligns with closely with long-term national priorities.
Speaker #4: In September, and particularly in critical infrastructure then in October again, we achieved a billion dollars in bidding volumes, a clear indication that our pipeline remains both active and robust.
Speaker #4: Our 12-month bidding outlook stands at over $9 billion demonstrating our disciplined pursuit strategy, but also the favorable nature of the market conditions. Water and electrical projects remain the most compelling opportunities, driven by ongoing investment in infrastructure, in turn driven by technology population patterns and the ever-growing need for clean water.
Speaker #4: Given our strong presence and expertise in water and existing and growing electrical capabilities, we expect to see more of our backlog shifting towards these two sectors over the next couple of quarters.
Speaker #4: Within that, we're seeing notable success and market, where significant funding population growth and infrastructure needs are creating a strong demand for our increasing opportunities in the Texas water services.
Speaker #4: resources have positioned us to capture a Our focused approach and our growing share of these opportunities. We view the West Coast and Texas as a key growth engine within our broader water strategy, and the momentum we're seeing there reinforces our confidence in the scale and durability of this market.
Speaker #4: We're also seeing strong momentum within our electrical segment, particularly across manufacturing and data center markets. Bidding activity in these areas has exceptionally strong, reflecting continued investment in large-scale industrial and technology infrastructure.
Speaker #4: It's no secret that investments in mission-critical infrastructure are continuing at a fast pace across the country, and we're seeing more and more of our pipeline consisting of opportunities in this market sector.
Speaker #4: We're actively pursuing a number of projects to ensure we target the right projects with the right risk profiles. Given the high-quality opportunities in the strength of the pipeline and the volume of active bids, the outlook for Q4 and Q1 of next year is strong. All of this activity reinforces the strength and diversification of our end markets and positions us well as we move into 2026.
Speaker #4: I'm pleased to share that our transformation is clearly hitting its stride. Over the past few quarters, we've space, and our teams are maintaining discipline, to seen meaningful progress in both the pace and the quality of our execution.
Speaker #4: And that progress is now shaping in our results. We are starting to see the new fruition. We achieved a book-to-burn ratio of shaping up to be promising.
Speaker #4: 1.7 in the third quarter marks a significant improvement from last quarter, and for the first time, we exceeded 1.0 in two years.
Speaker #4: During past quarters, I spoke about investments we're making in the sales side of the business, focusing on our core strengths while expanding our capacity to bid and win work consistently.
Speaker #4: This healthy backlog growth is a direct result of our strategy and is designed to fuel our growth into 2026. As a result, in the third quarter, we grew our backlog by over $100 million sequentially, and now it sits at $754 million, or 15% higher than in 2025.
Speaker #4: To highlight a few of the project awards that were added to our backlog in the third quarter of October, are the $116 million City of Modesto River project and the $51 million Belota Weir Modifications project.
Speaker #4: Both of these projects are located in California and are designed to improve water quality for the local communities, shore up flood resilience, and maintain environmental stewardship.
Speaker #4: Additionally, we've been awarded contracts for $60 million that added to our backlog in October. The $30 million City of Santa Monica Pier Bridge Replacement restores a shoreline and reflects our efforts to prepare the local infrastructure for the historic structure along the Los Angeles coastline to support the accelerating efforts leading up to the upcoming 2028 LA Olympics.
Speaker #4: We see a lot more opportunities as the preparations of the not more Olympics-related ramp up, with various projects region. The already in our pipeline throughout the $30 million Port of Seattle Terminal 18 Shore Power Project is an efficiencies at the port facilities while electrical project that improves operational reducing carbon emissions.
Speaker #4: other ports along the West Coast, and we expect more of these We projects as the ports continue their electrification journeys. And concluded, we've been selected as preferred bidder on projects totaling have performed similar projects for $169 million with projects that are predominantly in our core sectors of water and electrical construction.
Speaker #4: We are currently negotiating these contracts or waiting for award from clients, which we expect to happen in the fourth quarter. The steady increase in backlog provides lastly, after the third quarter greater visibility into future revenue and positions us well for continued growth as we move into 2026.
Speaker #4: All of this gives us confidence that the actions we've taken to strengthen the business are working. We are competing more effectively, delivering for our customers, and building a strong foundation for sustainable long-term performance.
Speaker #4: As we move forward, our focus remains on maintaining this momentum. Executing with discipline, converting backlog efficiently, and continuing to drive consistent profitable growth. Looking ahead, we feel confident about the trajectory we're on.
Speaker #4: We're seeing forward momentum in our business, and we will get stronger as we continue to capitalize on favorable market conditions and put the non-core work behind us.
Speaker #4: We will consistently execute our three-pronged strategy to achieve a growing, profitable, and dependable Shimmick in 2026 and in the future. With that, I'd like to turn to Todd, who will review our financials in more detail.
Speaker #2: Thank you, Ural, and thank you, to all of you, for joining us today. We're excited to share our third quarter results that really underscore our disciplined execution and operational improvements across the business.
Speaker #2: But before we jump into the numbers, I want to thank all of the talented men and women across Shimmick who continue to make it happen every day.
Speaker #2: The progress we've made so far this year would not be possible without your commitment and contributions. With that, let's jump into the third quarter results.
Speaker #2: And as a reminder, all comparisons made today will be on a year-over-year basis as compared to the same period in 2024, unless otherwise noted.
Speaker #2: Total revenue for the third quarter of 2025 was $142 million, a decrease of 15% compared to $166 million for the third quarter of '24.
Speaker #2: The year-over-year decrease was primarily the result of a one-time favorable claims settlement on our GGB project that contributed $31 million to revenue. In the third quarter of 2024, excluding this one-time GGB impact, our third quarter total revenue grew 5% year-over-year on a like-for-like basis.
Speaker #2: Shimmick project revenue for the third quarter of 2025 was $107 million up 5% compared to $101 million last year. The net increase in Shimmick revenue was driven by $25 million of revenue from new projects ramping up, partially offset by $19 million impact from projects that are winding down and experience lower burn during the quarter.
Speaker #2: Non-core project revenue for the third quarter of '25 was $35 million a decrease of 46% as compared to $65 million last year. The decrease as compared to the prior year period was driven by the favorable GGB claim settlement that I mentioned earlier.
Speaker #2: Gross margin for the third quarter of 2025 was $11 million. Down $1 million compared to the gross margin of $12 million for the third quarter of '24.
Speaker #2: The $1 million decrease was driven by the one-time GGB claim settlement, which contributed $11 million to gross margin in the third quarter of '24.
Speaker #2: Excluding the GGB settlement impact, the third quarter of '25 gross margin was $10 million, higher on a year-over-year like-for-like basis. Gross margin recognized on Shimmick projects was $10 million up $61% as compared to $6 million for the third quarter of '24.
Speaker #2: The $4 million increase in gross margin was driven by $8 million of gross margin from new projects ramping up, partially offset by a $4 million decrease in gross margin from those projects winding down.
Speaker #2: And that experienced lower burn during the period. Gross margin recognized on non-core projects was $1 million for the third quarter of '25. As compared to $6 million for the third quarter of '24.
Speaker #2: The $5 million decrease was driven by the favorable GGB claim settlement that occurred in the third quarter of '24. And as a reminder, these non-core projects continue to wind down to completion so no further gross margin will be recognized and, in some cases, there may be additional costs associated with these projects which are recognized in the period identified.
Speaker #2: G&A expense for the third quarter of '25 was $14 million. Down 5% or nearly $1 million as compared to the second quarter of '25.
Speaker #2: The favorable impact was driven by the continued execution of our transformation strategy. We reported a net loss for the quarter of $4 million as compared to a net loss of $2 million for the third quarter of '24.
Speaker #2: The $2 million difference was driven by a gain on the sale of assets of $17 million in the third quarter of '24, along with a decrease of $1 million in both gross margin and earnings from unconsolidated joint ventures.
Speaker #2: This was offset by the ERP asset impairment and associated costs of $16 million taken in the third quarter of '24, and an increase in other income and expense of $1 million.
Speaker #2: Adjusted EBITDA for the third quarter of '25 was $4 million. As compared to adjusted EBITDA of $30 million in the third quarter of '24.
Speaker #2: The $30 million was driven by the one-time favorable GGB project settlement and the ERP impairment was an add-back for the Q3 '24. Turning to the balance sheet, unrestricted cash and cash equivalents at the end of the quarter totaled $18 million.
Speaker #2: And availability under our credit agreements totaled $30 million. Resulting in total liquidity of $48 million. We feel comfortable that our liquidity ending the third quarter provides the capital needed to continue executing on our strategic and operational priorities.
Speaker #2: We booked new awards of $190 million during the third quarter and achieved a book-to-burn ratio of 1.7 times. At the end of the quarter, our total backlog was $754 million.
Speaker #2: Which is a sequential increase of over $100 million from the second quarter of 2025. And our backlog mix continues to improve with Shimmick projects now representing 86% of our total backlog to end the quarter.
Speaker #2: We are fully committed to winning the right way. One of the three pillars that define our growth strategy of building sustainable, risk-balanced backlog. Which centers around a disciplined approach to how we bid work, what work we bid, all while remaining focused on risk balance work that aligns with our strong self-reform capabilities.
Speaker #2: In our initial full year of 2025 guidance, we anticipated non-core projects would be approximately 10% of our total revenue. And we now expect non-core project burn to come in closer to 20% of our total revenue for the full year of '25.
Speaker #2: Which drives an unfavorable mix impact to our total gross margin. As I described on our call last quarter. Despite this negative mix impact, we remain confident in achieving our full year of '25 guidance.
Speaker #2: And we anticipate the full-year revenue to land in the higher end of the provided range, and adjusted EBITDA to land toward the lower end of the provided range.
Speaker #2: For the full year of 2025, we reaffirm our guidance. Communicated last quarter and expect to finish the year with Shimmick project revenue in the $405 to $415 million range with overall gross margin between 9 and 12%.
Speaker #2: Non-core project revenue in the range of $80 to $90 million, with a gross margin between negative 15% and negative 5%. Consolidated adjusted EBITDA is projected to be between $5 million and $15 million for the full year.
Speaker #2: With that, I thank you all for joining us on our call today and for your continued interest in Shimmick. And now back to you all.
Speaker #2: We are happy to report results from another quarter that advances Shimmick towards the goals we set. We are we now have more capability than ever to bid and win more work and have the processes in place to ensure we are bidding projects that are right for us that will drive consistent profits.
Speaker #2: As a result, our backlog is growing for the first time in a while and we see an ever-growing pipeline of opportunities, especially in the water and electrical fields.
Speaker #2: As 2025 comes to a close, we will continue to target backlog growth and strong margins. Achieved by healthy bidding activity, completion of non-core projects, and consistent execution driven by continuous operational improvements.
Speaker #2: As always, I want to thank the entire Shimmick team, our clients, and our industry partners for their support in our journey to create the Shimmick of the future.
Speaker #2: Operator, you may now open the line for questions.
Speaker #3: We will now move to our question and answer session. At this time, if you would like to ask a question, please click on the raised hand button, which can be found on the black bar at the bottom of your screen.
Speaker #3: You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will receive a message on your screen asking to be promoted to a panelist.
Speaker #3: Please accept, wait a moment, and once you've been promoted, you'll hear your name called and you may unmute your video and audio and ask your question.
Speaker #3: We'll pause a moment to assemble the queue. Your first question comes from the line of Aaron Sparhallor from Crate, Hallam, Capital Group. Please unmute your audio in your video and ask your question.
Speaker #3: Aaron is just connecting. We'll be one
Speaker #3: Aaron is just connecting. We'll be one moment. Yeah,
Speaker #4: hi you all and Todd, thanks for taking the questions. First, on Axia, you know, can you just kind of talk about how much of the pipeline or backlog that represents today and just how you're expecting growth there in the coming quarters?
Speaker #4: Maybe what end markets are driving that and just where you think that business can go as we look out for the next couple.
Speaker #4: of years. Yeah,
Speaker #5: that's a great question. Good to see you, Aaron. Yeah, so we're right now representing about 15, 16-ish percentage, like the mid-teens, a little bit higher maybe.
Speaker #5: But it's representing a growing percentage of what we're bidding on a kind of on a monthly basis. And the markets generally are we're continuing to focus on we're seeing a lot of electrification-related work.
Speaker #5: We see a lot of industrial electrical work, both on water treatment plants and in other manufacturing-type facilities. We're starting to really bid and price data center and mission-critical-type projects across the board on the electrical side.
Speaker #5: So we see I see a growth there because it's representing a lot higher volume of the bids that we're putting in. I think we're going to start to see an improvement on or an increase on the percentage on the backlog and then that will turn into the top line.
Speaker #5: Over time.
Speaker #4: Understood. And then maybe on data centers, just do you have some projects there? Maybe what markets are you seeing activity in and any kind of sizing and margin profile of those as we
Speaker #4: go with those? Yeah.
Speaker #5: Yeah, so Texas I talked about Texas. Texas has quite a few of those. So we're actively bidding in Texas. We're bidding in the Tennessee, Georgia area.
Speaker #5: And we're kind of following our kind of trusted clients to kind of where those projects are at and trying to fill the needs that they have.
Speaker #5: There's a big shortage and there's a lot of work in that arena right now. So we're pursuing multiple opportunities and hope to be successful on some of them and then start getting that into the
Speaker #4: Understood. And then maybe just last question on cash flow. Can you talk about some of the dynamics there in the quarter and maybe how you see that trending in the coming quarters and just longer term as we get through these legacy projects?
Speaker #5: Yeah, and I'll start and turn over to Todd as well. But yeah, so we're it's a it ebbs and flows. To some extent. And yes, we have a negative impact on the non-core legacy projects as we continue to get through those.
Speaker #5: We're still thinking we're going to be done at the end of 2026. So the impact will to some extent continue at a decreasing level.
Speaker #5: But part of the positive is that we as we get through an increase in our backlog and that translates into the top line, we're going to be able to generate cash that kind of offsets that impact and kind of over time we expect to be in a better and better position into
Speaker #5: 2026.
Speaker #1: Yeah, no, I think you pretty much covered
Speaker #1: it. 48 million of liquidity ending the second quarter. We're comfortable with that position. I mean, there's a lot of puts and takes that go into it.
Speaker #1: The business being lumpy as you know. So advanced payments, retention collection, claims, changes in AP. So there's a lot of noise in there, but I want to stay away from forecasting liquidity.
Speaker #1: But we're comfortable where we are.
Speaker #4: Understood. Thanks for taking the questions. I'll turn it
Speaker #4: over. Thank
Speaker #5: you,
Speaker #5: Aaron. Our next question comes from the
Speaker #3: line of Jerry Sweeney from Roth. Please unmute your audio and video and ask your
Speaker #3: question. Hey,
Speaker #6: guys. Good afternoon. Thanks for taking my call. Video. I got disconnected when I was jumping on to be elevated as a panelist. But did Aaron talk about guidance specifically?
Speaker #6: I think aiming for the lower end of the 5 to 15 million was sort of implied as a pretty strong fourth quarter, which does have some seasonality involved.
Speaker #6: So I wanted to see if we could unpack that a little bit in terms of what gives you confidence to hit the lower end.
Speaker #6: Is it just increasing margins in the backlog, increasing backlog in total, and just overall quality of work or what have you?
Speaker #5: Yeah, that's a great question. I think generally the bottom line of that is, yes, I agree it shows a strong fourth quarter. It's largely related to the new work starting to really kick in and those are obviously higher margin work.
Speaker #5: So it's starting to really offset the loss generating non-core projects much better as we go through each quarter. So I think that's where we're starting to see better results, even with the seasonality we expect to for those newer projects that are driving higher margins offset the lower margin work a lot better as we go forward.
Speaker #6: Got Got it. And then on you've talked a little bit about water and electrical being strong markets, but I think one of your strategies was to do more negotiated work and less bidding work.
Speaker #6: Just curious as to how that's coming.
Speaker #6: along. It's coming along well.
Speaker #5: We have as far as our bidding volume goes, it's a negotiated work. It's starting to become a lot bigger portion of that as we go forward as well.
Speaker #5: We are hoping to we have a couple of projects that are already in negotiation at the moment. So we're hoping to see that those go into backlog as well and we'll report on those as we go forward.
Speaker #5: And also just looking at the water and the electrical market, especially the electrical market, a lot more of those are already delivered by through negotiated contracts.
Speaker #5: And even when we're in a subcontractor specialty sub-position, it's still negotiated for the sub as well as the GC there. So I think the more electrical we get, that number is going to start to go up as well.
Speaker #6: It's a multi-year process to transition that more to negotiated work, correct?
Speaker #5: Yeah. 2027 is where we're going to really see benefits out
Speaker #5: of that effort. Do
Speaker #6: Do you target a certain percentage of your backlog to be negotiated work or any type of— I don't want to say guidance, but thought on where it potentially could fall out?
Speaker #5: Our goal is to get to 50%. I think that's a really good mix. Where you're really risk balanced at that point, you always want to have some of the fixed price work which drives higher revenues and faster burns.
Speaker #5: But you also want to balance that off with the lower risk negotiated contract. So if you can get to the 50/50 range, I think that's a very healthy place to
Speaker #5: be. Got it.
Speaker #6: Then maybe one more from me. The non-Shimmick work, I mean, had positive gross margins. Was that just a function of just where the quarter fell out or is that work?
Speaker #6: Do you have a little bit more visibility on that work and can some of those margins stay close to flat to slightly positive on a quarter basis?
Speaker #5: Yeah. I mean, yeah. So it's a couple of things where we're obviously getting through them and as you get to the ends of those projects, there's always some scope growth that plays into that loose ends to tie in and finishing out the contract.
Speaker #5: So some of that's related to kind of closing out those issues and negotiating additional revenue for that scope growth with the clients. So that's what drives it.
Speaker #5: But we still continue I think we're going to try to keep it even as we possibly can. But we still have some work to do throughout 26 to get that get those couple of projects
Speaker #5: done. Okay.
Speaker #6: I mean, it was a nice positive surprise, though. Anyhow, that's it for me. So I appreciate it. Thanks a
Speaker #5: Thank you,
Speaker #5: Jerry. There
Speaker #3: There are no more questions at this time. I'd now like to turn the call over to Yorel for closing remarks.
Speaker #5: Thank you. Again, we're pleased to report another consistent quarter that aligns with our plans. It aligns with our strategic planning. And we're looking forward to the next quarter, to the end of the year, and as well as a bright 2026 for Shimmick.