Shimmick (SHIM) - 2024 Q2 - Quarterly Results

Shimmick Corporation Second Quarter 2024 Results Key Highlights and Recent Developments The company announced a major project settlement, completed an asset sale to reduce debt, and maintained a strong backlog of over $923 million - Reached a settlement agreement on a federal lock and dam project, resulting in a $33 million payment to the company and a recognized net loss of $30 million on the project[2][3] - Completed a sale-leaseback of the Tracy, California equipment yard for $20.5 million, with net proceeds of $17 million used to repay borrowings[3][4] - Backlog stood at over $923 million as of June 28, 2024, with over 80% attributed to Shimmick Projects[2] - The company continues to pursue litigation on the second of its two large Legacy Loss Projects, with a trial scheduled for later in the year[3] Transformation Plan Update The company is executing a transformation plan to increase its focus on the California water and critical infrastructure market - The transformation plan aims to create a more capital-light business focused on the California water and critical infrastructure market[4] - Strategic initiatives include increasing the number of estimators in California, reducing overhead in non-core areas, and renewing focus on supporting field operations[4] - Recently won the Delta Diablo contract for the Cogeneration System Replacement Project, highlighting the strategy to focus on higher-margin water projects[4] Financial Performance Analysis The company reported a significant revenue decline and a substantial net loss increase in Q2 2024, driven by a major project settlement Consolidated Financial Results Q2 2024 revenue decreased to $91 million while net loss increased significantly to $51 million, with Adjusted EBITDA turning more negative Q2 2024 vs Q2 2023 Financial Summary (Three Months Ended) | Metric | Q2 2024 (ended Jun 28) | Q2 2023 (ended Jun 30) | | :--- | :--- | :--- | | Revenue | $91 million | $155 million | | Gross margin | $(31) million | $(0) million | | Net loss attributable to Shimmick | $(51) million | $(10) million | | Adjusted EBITDA | $(40) million | $(2) million | | Diluted loss per share | $(1.83) | $(0.47) | YTD 2024 vs YTD 2023 Financial Summary (Six Months Ended) | Metric | YTD 2024 (ended Jun 28) | YTD 2023 (ended Jun 30) | | :--- | :--- | :--- | | Revenue | $211 million | $319 million | | Gross margin | $(47) million | $6 million | | Net loss attributable to Shimmick | $(85) million | $(20) million | | Adjusted EBITDA | $(64) million | $(3) million | | Diluted loss per share | $(3.16) | $(0.90) | Segment Performance Legacy Projects reported negative revenue and a significant gross loss due to a project settlement, overshadowing performance in other segments Q2 2024 Revenue and Gross Margin by Segment (in millions) | Segment | Revenue | Gross Margin | Gross Margin % | | :--- | :--- | :--- | :--- | | Shimmick Projects | $84 | $5 | 5% | | Foundations Projects | $8 | $(2) | (23)% | | Legacy Projects | $(2) | $(34) | 2195% | | Consolidated Total | $91 | $(21) | (23)% | - Shimmick Projects revenue decreased by $20 million YoY for the quarter, mainly from lower activity on existing jobs, partially offset by a new water infrastructure project[8] - Legacy Projects revenue was negative $2 million for the quarter, including a $23 million non-cash revenue adjustment to reflect the settlement amount on a large project[11] Key Operating Expenses and Other Income/Expense Items SG&A expenses remained flat, while equity in JVs swung to a loss and a gain was recognized on the sale of non-core assets - Selling, general and administrative (SG&A) expenses were approximately flat year-over-year[13] - Equity in unconsolidated joint ventures was a loss of $2 million, compared to earnings of $8 million in Q2 2023, due to a favorable subcontractor settlement in the prior year that did not recur[13] - Gain on sale of assets increased by $4 million, mainly from the sale of assets related to the non-core Foundations Projects[14] Backlog and Fiscal Year 2024 Guidance The company's backlog stood at $923 million, with FY2024 guidance projecting flat revenue for Shimmick Projects and a significant negative gross margin for Legacy Projects - Total backlog was $923 million as of June 28, 2024[16] - FY2024 Guidance for Shimmick Projects: Revenue to remain generally flat with gross margin between 4% and 9%[17] - FY2024 Guidance for Legacy Projects: Revenue of $55 to $65 million with a negative gross margin of (80%) to (90%) due to the project settlement and other cost overruns[17] Financial Statements The unaudited statements show a decrease in assets and a significant reduction in stockholders' equity due to the period's net loss Consolidated Balance Sheets Total assets decreased to $344.5 million, while stockholders' equity fell sharply to $0.4 million from $70.5 million at year-end 2023 Selected Balance Sheet Items (in thousands) | Account | June 28, 2024 | Dec 29, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,381 | $62,939 | | Total Current Assets | $208,825 | $257,458 | | Total Assets | $344,514 | $426,652 | | Total Current Liabilities | $265,979 | $271,253 | | Total Liabilities | $344,078 | $356,162 | | Total Stockholders' Equity | $436 | $70,490 | Consolidated Statements of Operations For Q2 2024, the company reported a net loss of $51.4 million on revenue of $90.6 million, driven by a negative gross margin Q2 Statement of Operations Highlights (in thousands) | Account | Three Months Ended Jun 28, 2024 | Three Months Ended Jun 30, 2023 | | :--- | :--- | :--- | | Revenue | $90,605 | $155,189 | | Gross margin | $(31,131) | $(457) | | Loss from operations | $(47,994) | $(10,384) | | Net loss | $(51,389) | $(10,311) | | Diluted loss per share | $(1.83) | $(0.47) | Consolidated Statements of Cash Flows Net cash used in operating activities was $78.8 million for the first six months, with financing activities providing $37.8 million in cash Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | June 28, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(78,848) | $(60,672) | | Net cash (used in) provided by investing activities | $(18) | $12,647 | | Net cash provided by financing activities | $37,834 | $29,045 | | Net decrease in cash | $(41,032) | $(18,980) | Non-GAAP Financial Measures The company's non-GAAP measures show an Adjusted Net Loss of $45.0 million and negative Adjusted EBITDA of $39.7 million for Q2 2024 Reconciliation of Net Loss to Adjusted Net Loss (Q2, in thousands) | Description | Three Months Ended Jun 28, 2024 | Three Months Ended Jun 30, 2023 | | :--- | :--- | :--- | | Net loss attributable to Shimmick | $(51,389) | $(10,300) | | Transformation costs | $2,608 | - | | Stock-based compensation | $969 | $523 | | Legal fees and other costs for Legacy Projects | $2,629 | $2,128 | | Other | $209 | $889 | | Adjusted net loss | $(44,974) | $(6,760) | Reconciliation of Net Loss to Adjusted EBITDA (Q2, in thousands) | Description | Three Months Ended Jun 28, 2024 | Three Months Ended Jun 30, 2023 | | :--- | :--- | :--- | | Net loss attributable to Shimmick | $(51,389) | $(10,300) | | Depreciation and amortization | $3,789 | $4,384 | | Interest expense | $1,496 | $575 | | Adjustments (Transformation, SBC, Legal, etc.) | $6,415 | $3,540 | | Adjusted EBITDA | $(39,689) | $(1,801) |