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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 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.
Revenue For the third quarter of 2025, revenue was $142 million, a decrease of 15% compared to $166 million in the third quarter of 2024. The decrease was primarily due to a one-time favorable claim settlement on the GGB project in 2024, which contributed $31 million to revenue. Excluding this one-time impact, revenue grew 5% year-over-year on a like-for-like basis.
Shimmick Project Revenue Revenue for Shimmick projects in the third quarter of 2025 was $107 million, up 5% compared to $101 million in the same period last year. The increase was driven by $25 million from new projects ramping up, partially offset by a $19 million impact from projects winding down.
Non-core Project Revenue Revenue for non-core projects in the third quarter of 2025 was $35 million, a decrease of 46% compared to $65 million in the same period last year. The decrease was driven by the favorable GGB claim settlement in 2024.
Gross Margin Gross margin for the third quarter of 2025 was $11 million, down $1 million compared to $12 million in the third quarter of 2024. The decrease was due to the one-time GGB claim settlement in 2024, which contributed $11 million to gross margin. Excluding this impact, gross margin increased by $10 million year-over-year on a like-for-like basis.
Shimmick Project Gross Margin Gross margin for Shimmick projects in the third quarter of 2025 was $10 million, up 61% compared to $6 million in the same period last year. The increase was driven by $8 million from new projects ramping up, partially offset by a $4 million decrease from projects winding down.
Non-core Project Gross Margin Gross margin for non-core projects in the third quarter of 2025 was $1 million, compared to $6 million in the same period last year. The decrease was driven by the favorable GGB claim settlement in 2024.
Adjusted EBITDA Adjusted EBITDA for the third quarter of 2025 was $4 million, compared to $30 million in the same period last year. The decrease was due to the one-time favorable GGB project settlement in 2024 and the ERP impairment add-back in 2024.
Liquidity Total liquidity at the end of the third quarter of 2025 was $48 million, consisting of $18 million in unrestricted cash and cash equivalents and $30 million in availability under credit agreements.
Backlog Backlog at the end of the third quarter of 2025 was $754 million, a sequential increase of over $100 million from the second quarter of 2025. Shimmick projects now represent 86% of the total backlog.
New project awards: Added $116 million City of Modesto River Trunk pump station and $51 million Bellota Weir modifications projects to backlog, both in California, focusing on water quality and flood resilience. Also added $30 million City of Santa Monica Pier Bridge replacement and $30 million Port of Seattle Terminal 18 Shore Power project.
Market expansion in water and electrical sectors: Significant growth in Texas water market due to funding and infrastructure needs. Strong momentum in electrical segment, particularly in manufacturing and data center markets.
Operational improvements: Expanded gross margin on Shimmick projects by 67% year-over-year. Achieved positive adjusted EBITDA for the first time in 2025. Reduced G&A expenses by 5% quarter-over-quarter.
Strategic shift: Focused on projects aligning with strengths in water and electrical sectors. Shifted backlog composition to 86% Shimmick projects, reducing non-core projects. Achieved a book-to-burn ratio of 1.7, highest in two years.
Non-core projects impact: Non-core projects continue to negatively impact profitability, with gross margins on these projects being significantly lower or even negative. These projects also represent a higher-than-expected percentage of total revenue for 2025, leading to an unfavorable mix impact on overall gross margins.
Revenue decline: Total revenue for the third quarter of 2025 decreased by 15% compared to the same period in 2024, primarily due to the absence of a one-time favorable claim settlement from the prior year. This decline highlights the company's reliance on such settlements for revenue growth.
Operational risks in non-core projects: Non-core projects are winding down, but there is a risk of additional costs being recognized in future periods, which could further impact profitability.
Liquidity constraints: The company ended the quarter with $18 million in unrestricted cash and $30 million in credit availability, which may limit its ability to invest in growth initiatives or buffer against unforeseen financial challenges.
Competitive pressures in bidding: While the company has a robust bidding pipeline, there is a risk of not winning enough high-margin projects to sustain growth and profitability, especially given the competitive nature of the infrastructure market.
Economic and market uncertainties: The company’s future performance is tied to favorable market conditions and ongoing infrastructure investments, which are subject to economic and political uncertainties.
Execution risks: The company’s ability to convert its growing backlog into revenue and profits depends on disciplined execution, which remains a challenge given the complexity of projects and operational improvements still underway.
Market Conditions and Backlog Growth: The company is encouraged by the continued strength in market conditions and backlog growth. It achieved $1 billion in bidding volumes in September and October 2025, with a 12-month bidding outlook of over $9 billion. The company expects its backlog to shift more towards water and electrical projects in the coming quarters.
Water and Electrical Projects: The company anticipates significant growth in water and electrical projects, driven by ongoing infrastructure investments, population growth, and the need for clean water. Texas and the West Coast are identified as key growth areas, with increasing opportunities in the Texas water market and strong momentum in the electrical segment, particularly in manufacturing and data center markets.
Olympics-Related Opportunities: The company sees opportunities related to the 2028 L.A. Olympics, with projects already in the pipeline and ongoing preparations creating additional prospects.
Backlog and Revenue Visibility: The company achieved a book-to-burn ratio of 1.7 in Q3 2025 and grew its backlog by over $100 million sequentially, reaching $754 million as of October 3, 2025. This growth provides greater visibility into future revenue and positions the company for continued growth into 2026.
Full-Year 2025 Guidance: The company reaffirmed its full-year 2025 guidance, expecting Shimmick project revenue of $405 million to $415 million with gross margins between 9% and 12%. Non-core project revenue is expected to range from $80 million to $90 million, with gross margins between negative 15% and negative 5%. Consolidated adjusted EBITDA is projected to be between $5 million and $15 million.
Operational Focus and Strategic Execution: The company plans to maintain momentum by executing with discipline, converting backlog efficiently, and driving consistent profitable growth. It aims to achieve a growing, profitable, and dependable Shimmick in 2026 and beyond.
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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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