Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shimmick Corp secured two significant projects in the first quarter, enhancing its project portfolio and demonstrating its capability in securing new business.
- The company has a robust pipeline of future work valued at approximately $1 billion, indicating potential for future growth and revenue generation.
- More than 75% of Shimmick Corp's work is generated from repeat customers, highlighting strong customer relationships and a reliable revenue base.
- Shimmick Corp is transitioning to a more asset-light, higher-margin business model, focusing on water infrastructure projects which are expected to benefit from increased federal funding.
- The company successfully entered into transactions expected to raise $39 million, enhancing liquidity and financial flexibility.
Negative Points
- Shimmick Corp reported a net loss of $33 million and an adjusted EBITDA loss of $24 million in the first quarter, indicating financial challenges.
- The company experienced negative gross margins due to cost overruns on legacy projects and additional legal fees, impacting profitability.
- Shimmick Corp is in the process of negotiating a waiver of default under its credit facility, reflecting potential issues with financial covenants.
- There was a significant decline in revenue from legacy and foundation drilling projects, contributing to the overall poor financial performance.
- The company faces ongoing challenges with labor shortages and price inflation, which could impact project costs and timelines.
Q & A Highlights
Q: How confident are you that you can close out the second quarter and your confidence in achieving the numbers that you prescribed in your financial statements?
A: (Steven Richards - CEO, Director Nominee) I'm highly confident, Jerry, it will be early in the quarter, so we're very comfortable with them.
Q: Confidence that things are turning around and you can achieve that guidance?
A: (Steven Richards - CEO, Director Nominee) We do. We feel that the projects kind of slow start ramping up and the costs like mobilization kind of lead the project cost side. And then we don't get a leverage recognition in that way until once the projects stabilize.
Q: Are there any other large issues percolating that we should be aware of when we're looking at 2Q or should we see an improvement in 2Q as internal improvement for the rest of the year?
A: (Steven Richards - CEO, Director Nominee) Let's stick with our guidance. We feel that we are back half weighted. So 2Q were early in 2Q, obviously, until we see that as being a continuing improvement and climbing the curve.
Q: Was the current state of the balance sheet impact your ability to go out big jobs. Will that be a headwind now?
A: (Steven Richards - CEO, Director Nominee) Let's see the I will work closely with our surety company. That's a big part of the stakeholder group that we work with. We look at this mid-cap covenant has been and something that we'll overcome quickly, just a timing issue for us.
Q: On your first on the legacy loss projects. Can you just give us an update there on how much work is still remaining on those couple of projects?
A: (Steven Richards - CEO, Director Nominee) Right now that in the quarter, the projects are nearing 80% completion. And so they're largely tracking with the high risk parts of the job are really behind us now, and we're looking forward to kind of the down return, whether it be the amount of labor on the jobs or if you will, that risk that remains So feel good about the trajectory and the teams in the field have accomplished huge milestones and getting to where they're at right now is nearing 80% level.
Q: It sounds like the pipeline, you're still expecting kind of back-half weighted for conversion there. But can you just you talk to that a little bit on the outlook, you know, for self-performing as much of these projects as you can given some of the supply chain and labor kind of issues.
A: (Steven Richards - CEO, Director Nominee) We are simply has always had a strong following of not only our superintendents, but the foreman and the craft that Paul, the performance that we've got a great network of craft that stays with the company. So feel good about being able to service the jobs that we need and get the craft and the need to complete the work from a pipeline standpoint, definitely are encouraged by the pipeline that's coming through.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
