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01/10 03:48
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Fourth Quarter Revenue $104,000,000 (down from $138,000,000), a decrease attributed to lower activity on existing jobs and jobs winding down.
Full Year Revenue $480,000,000 (not explicitly compared year-over-year), with $80,000,000 from Schimmick projects (down from $85,000,000), due to lower activity on existing jobs.
Fourth Quarter Gross Margin on Schimmick Projects $2,000,000 (down from $9,000,000), decrease due to a $15,000,000 increase in cost of revenue and schedule extensions.
Fourth Quarter Legacy Project Revenue $18,000,000 (down from $46,000,000), decline as the company works to complete these projects.
Fourth Quarter Legacy Project Gross Margin -$12,000,000 (compared to -$8,000,000), negative margin due to continued impact of legacy projects winding down and additional legal fees.
Fourth Quarter Net Loss -$38,000,000 (compared to -$17,000,000), primarily due to a decrease in gross margin of $20,000,000.
Fourth Quarter Adjusted EBITDA -$27,000,000 (compared to -$9,000,000), reflecting increased costs and lower revenue.
Total Liquidity $100,000,000, indicating a strong liquidity position to support strategic priorities.
Backlog $822,000,000, with Schimmick projects representing 87% of the backlog, an improvement from 85%.
Full Year Adjusted EBITDA Guidance Expected between $15,000,000 and $25,000,000, indicating a recovery from previous losses.
Target Gross Margin for Schimmick Projects in 2025 Expected between 9% and 12%, aiming for improvement from current performance.
Target for Electrical Division Revenue Contribution Expected to grow from 15% of revenues today to over 30% by 2027.
Market Expansion: Schimmick Corporation is expanding its focus on delivering sustainable infrastructure solutions across four key end markets: water resources, climate resilience, energy transition, and technology and sustainable transportation.
Client Portfolio Diversification: The company aims to balance its client portfolio by continuing relationships with public clients while also targeting new clients in the utility, manufacturing, hyperscale, and industrial sectors.
Operational Efficiency: Improvements in SG&A costs are trending towards industry benchmarks, and the company is implementing upgrades to ERP and sales systems to enhance operational efficiency.
Backlog Management: The backlog stands at $822 million, with a focus on increasing backlog as a percentage of revenues while reducing risk through geographic diversification and alternative project delivery methods.
Strategic Shift: The company is shifting towards a balanced portfolio of collaborative and fixed-price delivery methods, aiming for a 50-50 balance by 2028.
Focus on Electrical and Technology Infrastructure: Schimmick plans to expand its electrical division, targeting growth from 15% of revenues today to over 30% by 2027.
Legacy Projects: Legacy projects continue to negatively impact financial results, with a reported gross margin loss of $12,000,000 in Q4 2024 due to cost overruns and legal fees.
Market Conditions: The company acknowledges the need to move quickly to replace revenues and margins from divested businesses amid competitive pressures and skilled labor shortages.
Regulatory Issues: Uncertainty in federal budget allocations and potential shifts in funding priorities under the current administration may impact project timelines and funding.
Supply Chain Challenges: The construction market is experiencing budget and time constraints, which may affect project execution and profitability.
Economic Factors: The company is focused on diversifying its client portfolio to mitigate risks associated with reliance on public sector clients, especially in light of changing economic conditions.
Labor Availability: While the West Coast labor market remains stable, there are challenges in attracting qualified labor for projects outside California and Washington.
Strategic Pillars: The strategy is designed around three strategic pillars: sustainable backlog, operational excellence, and people and culture.
Market Focus: Schimmick will expand its focus on delivering sustainable infrastructure solutions across four key end markets: water resources, climate resilience, energy transition, and technology and sustainable transportation.
Backlog Growth: The company aims to increase its backlog as a percentage of revenues while reducing its risk profile through geographic diversification and alternative project delivery methods.
Electrical Division Expansion: Schimmick plans to expand its electrical division to pursue projects independently, targeting growth from 15% of revenues today to over 30% by 2027.
Operational Improvements: Initiatives include upgrades to ERP and sales systems, risk management enhancements, and continued focus on rightsizing SG&A costs.
2025 Revenue Guidance: For the full 2025 fiscal year, Schimmick expects revenue from Schimmick projects to increase by 10% to 15%.
Gross Margin Expectations: Overall gross margin is projected to be between 9% and 12% for Schimmick projects, while legacy projects are expected to have a gross margin between negative 5% and negative 15%.
Adjusted EBITDA Guidance: Adjusted EBITDA for 2025 is expected to be between $15,000,000 and $25,000,000.
Backlog Status: The backlog remains strong at $822,000,000, with Schimmick projects representing 87% of this backlog.
Liquidity Position: Total liquidity at the end of fiscal year 2024 is $100,000,000, providing a solid foundation for strategic and operational priorities.
Total Liquidity: $100,000,000
Backlog: $822,000,000
Expected Revenue Growth for Schimmick Projects in 2025: 10% to 15% increase
Expected Adjusted EBITDA for 2025: Between $15,000,000 and $25,000,000
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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