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01/10 03:51
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed several concerns: competitive pressures and regulatory uncertainties impacting project bids, supply chain challenges, and the lack of a shareholder return plan. While there are improvements in gross margins and reduced SG&A expenses, the company's financial guidance remains below expectations, with unclear management responses in the Q&A. The absence of a share buyback or dividend plan further weakens investor sentiment. Given these factors, a negative stock price movement is anticipated over the next two weeks.
Revenue $122,000,000 (up from $120,000,000, a 1.67% increase year-over-year). The increase was primarily due to revenue from new water and infrastructure projects ramping up, particularly the California Palisades fire cleanup project.
Gross Margin $5,000,000 (up from -$1,000,000, a significant improvement year-over-year). The increase was driven by $3,000,000 in gross margin from new water and infrastructure projects and $3,000,000 from the California Palisades fire cleanup project.
Legacy and Foundations Projects Revenue $29,000,000 (down from $30,000,000, a 3.33% decrease year-over-year). This decrease is attributed to the company winding down these projects.
Gross Margin from Legacy and Foundations Projects -$1,000,000 (improved from -$15,000,000 year-over-year). The improvement was due to the absence of cost increases related to time and design schedule extensions that occurred in the previous year.
SG&A Expenses $14,000,000 (down by $2,000,000 or 11% year-over-year). This reduction was a result of the continued implementation of Shimick’s transformational plan.
Net Loss -$10,000,000 (improved from -$33,000,000 year-over-year). The improvement was primarily due to a $21,000,000 increase in gross margin related to legacy projects.
Adjusted EBITDA -$3,000,000 (improved from -$24,000,000 year-over-year). This reflects the overall improvement in financial performance.
Total Liquidity $71,000,000 (composed of $16,000,000 in cash and $55,000,000 available under credit agreements). This liquidity position is deemed sufficient to support the strategic and operational plan.
Backlog $739,000,000 (with 90% from Chimich projects). This reflects a strong backlog composition, with a decrease in legacy projects from 20% year-over-year to 10%.
Electrical and Technology Driven Infrastructure Market Expansion: Shimick has seen multiple wins in the electrical and technology-driven infrastructure market, with expectations for this segment to grow from approximately 15% to 30% of the backlog by 2027.
Backlog Composition: As of the end of Q1 2025, Shimick's backlog was approximately $740,000,000, with 90% attributed to Chimich projects, indicating a strong focus on new projects since becoming independent.
Bidding Activity: In response to a slowdown in bidding, Shimick has increased its bidding frequency, nearly tripling bid activity since the last quarter, with expectations for higher bidding activity in Q2 and Q3.
Operational Improvements: Shimick has implemented operational improvements leading to better margins on Chimich projects, with gross margin increasing to $5,000,000 in Q1 2025 compared to a negative margin in the previous year.
Sales and Estimating Department Reorganization: Investments in reorganizing the sales and estimating departments have resulted in a robust proposal pipeline of approximately $2,000,000,000 for upcoming bids.
Strategic Pillars: Shimick has established three strategic pillars focusing on building a sustainable risk-balanced backlog, driving operational excellence, and investing in people and culture to support growth.
Competitive Pressures: There has been a slowdown in bidding for larger public projects due to uncertainty around funding streams and tariffs, impacting the ability to replenish and grow backlog.
Regulatory Issues: Uncertainty around funding availability has caused clients to pause project awards and bids, which could affect future project timelines.
Supply Chain Challenges: Rising prices due to tariffs could strain client budgets, potentially leading to downscaling or cancellation of future projects, particularly with public clients.
Economic Factors: The company is closely monitoring the fluidity of tariff policy, which could impact margins and project costs.
Legacy Projects: Legacy projects continue to wind down, and while losses are nominal, there may be additional costs associated with these projects that could affect financial performance.
Strategic Pillars: Implemented three strategic pillars: 1) Building a sustainable risk-balanced backlog with geographic diversification and collaborative delivery methods, 2) Driving operational excellence through system upgrades and improved risk management, 3) Investing in people and culture with new incentive programs and talent retention efforts.
Market Expansion: Focusing on electrical and technology-driven infrastructure market expansion, targeting a growth in share of backlog from 15% to 30% by 2027.
Bidding Activity: Increased bidding frequency, almost tripling bid activity since the last quarter, with expectations of higher bidding activity in Q2 and Q3.
Revenue Guidance: Expect Chimich projects revenue to increase by 10% to 15% for the year.
Gross Margin Guidance: Overall gross margin expected to be between 9% and 12%.
Legacy Projects Revenue: Expect revenue from legacy and foundation projects to be between $50 million and $60 million with gross margin between -5% and -15%.
Adjusted EBITDA Guidance: Expect adjusted EBITDA to be between $15 million and $25 million.
Backlog: Current backlog is approximately $740 million, with 90% from Chimich projects.
Shareholder Return Plan: The company has not announced any specific share buyback program or dividend program during the call.
The earnings call indicates a mixed financial performance with a decline in non-core project revenue and gross margin, despite some growth in Shimmick projects. Adjusted EBITDA fell significantly, and liquidity remains tight. The Q&A reveals management's reluctance to provide specific forecasts, causing uncertainty. While there is potential growth in data centers and a strategic shift towards negotiated work, these are long-term prospects. The lack of immediate positive catalysts and management's vague responses suggest a negative sentiment, likely leading to a stock price decline in the short term.
The earnings call revealed several concerns: competitive pressures and regulatory uncertainties impacting project bids, supply chain challenges, and the lack of a shareholder return plan. While there are improvements in gross margins and reduced SG&A expenses, the company's financial guidance remains below expectations, with unclear management responses in the Q&A. The absence of a share buyback or dividend plan further weakens investor sentiment. Given these factors, a negative stock price movement is anticipated over the next two weeks.
The earnings call highlights significant financial challenges, including a steep decline in revenue and gross margins, as well as a widening net loss. Despite optimistic guidance for 2025 and a strong liquidity position, the current financial performance is weak, and management's vague responses in the Q&A section fail to instill confidence. The lack of clarity on transitioning from low-margin legacy projects and the absence of a clear strategy to mitigate supply chain challenges further contribute to a negative outlook.
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