Shimmick (SHIM) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The company reported a net loss of $9.8 million for the quarter ended April 4, 2025, a significant improvement from the $33.3 million net loss in the prior-year period, driven by a substantial increase in gross margin to a positive $4.7 million from a negative $15.9 million, while total assets slightly decreased to $227.7 million, total liabilities increased to $270.3 million, resulting in a larger stockholders' deficit of $42.6 million, and net cash used in operating activities was $38.2 million Condensed Consolidated Balance Sheets As of April 4, 2025, the company had total assets of $227.7 million and total liabilities of $270.3 million, resulting in a total stockholders' deficit of $42.6 million, with cash and cash equivalents decreasing from $33.7 million to $16.3 million and long-term debt significantly increasing from $9.5 million to $31.4 million compared to January 3, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | April 4, 2025 | January 3, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $16,302 | $33,730 | | Total current assets | $135,762 | $141,000 | | Total assets | $227,677 | $233,864 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $210,422 | $230,264 | | Long-term debt, net | $31,398 | $9,478 | | Total liabilities | $270,318 | $268,538 | | Total stockholders' deficit | $(42,641) | $(34,674) | Condensed Consolidated Statements of Operations For the three months ended April 4, 2025, revenue was $122.1 million, a slight increase from $120.0 million in the prior-year period, with gross margin dramatically improving to $4.7 million from a loss of $15.9 million, leading to a net loss of $9.8 million, or ($0.28) per share, a substantial reduction from the $33.3 million net loss, or ($1.30) per share, in the same period last year Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended April 4, 2025 | Three Months Ended March 29, 2024 | | :--- | :--- | :--- | | Revenue | $122,110 | $120,043 | | Gross Margin | $4,696 | $(15,860) | | Loss from Operations | $(8,880) | $(31,791) | | Net Loss Attributable to Shimmick | $(9,770) | $(33,333) | | Basic & Diluted EPS | $(0.28) | $(1.30) | Condensed Consolidated Statements of Cash Flows For the first quarter of 2025, net cash used in operating activities was $38.2 million, primarily due to the net loss and unfavorable changes in working capital, specifically contract assets and liabilities, while net cash used in investing activities was minimal at $0.4 million, and net cash provided by financing activities was $21.9 million, driven by new borrowings, resulting in a net decrease in cash of $16.7 million for the period Cash Flow Summary (in thousands) | Activity | Three Months Ended April 4, 2025 | Three Months Ended March 29, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,184) | $(34,988) | | Net cash used in investing activities | $(438) | $(7,401) | | Net cash provided by financing activities | $21,907 | $6,718 | | Net decrease in cash | $(16,715) | $(35,671) | Notes to Condensed Consolidated Financial Statements Key notes detail revenue recognition, contract balances, joint ventures, and new debt agreements, with fixed-price contract revenue at $102.7 million, remaining performance obligations of $692 million, significant customer concentration in accounts receivable, and new credit and loan agreements increasing borrowing capacity, while a full valuation allowance against deferred tax assets resulted in a 0% effective tax rate Revenue by Contract Type (in thousands) | Contract Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Fixed-price | $102,685 | $113,065 | | Cost reimbursable | $19,015 | $6,505 | | Equipment and labor | $410 | $473 | | Total revenue | $122,110 | $120,043 | - The company had $692 million of remaining performance obligations as of April 4, 2025, with a weighted average life of 2.0 years[38] - As of April 4, 2025, two customers represented a significant concentration of accounts receivable, at 37.8% and 23.2% respectively[46] - Changes in contract estimates led to a net decrease in gross margin of $4 million for Q1 2025, primarily due to cost increases from delays and lower productivity[47] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant improvement in financial results to better performance on Shimmick Projects and reduced losses from Legacy Projects, which are being wound down, with revenue increasing by 2% to $122.1 million and gross margin improving by $20.6 million to a positive $4.7 million, while new financing through the ACF Credit Agreement and Ansley Loan Agreement increased total liquidity to $71 million, backlog stood at $739 million with 80% expected to be recognized within 24 months, and a remediation plan is underway for identified material weaknesses in internal controls Results of Operations The company's net loss decreased by $23.6 million year-over-year, from $33.3 million to $9.8 million, primarily driven by a $20.6 million improvement in gross margin, which resulted from a $14 million reduction in losses on Legacy and Foundations Projects and a $6 million increase in gross margin from newer Shimmick Projects, while selling, general, and administrative expenses also decreased by $1.8 million Revenue and Gross Margin by Project Type (in thousands) | Project Type | Metric | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | :--- | | Shimmick Projects | Revenue | $93,154 | $90,292 | $2,862 | | | Gross Margin | $5,267 | $(436) | $5,703 | | Legacy & Foundations | Revenue | $28,956 | $29,751 | $(795) | | | Gross Margin | $(571) | $(15,424) | $14,853 | | Consolidated Total | Revenue | $122,110 | $120,043 | $2,067 | | | Gross Margin | $4,696 | $(15,860) | $20,556 | - The $14 million improvement in Legacy and Foundations Projects' gross margin was primarily because significant cost increases for time and design-related schedule extensions identified in Q1 2024 did not recur in Q1 2025[123] - Selling, general and administrative expenses decreased by $2 million, mainly due to reduced salary, bonus, and legal expenses in Q1 2025 compared to Q1 2024[125] Non-GAAP Financial Measures The company uses Adjusted Net Loss and Adjusted EBITDA to evaluate core operating performance, with Adjusted EBITDA for Q1 2025 showing a loss of $3.0 million, a significant improvement from a loss of $24.1 million in Q1 2024, and Adjusted Net Loss also improving to a loss of $7.4 million from a loss of $29.4 million in the prior-year period, with adjustments including stock-based compensation, transformation costs, and legal fees for Legacy Projects Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss attributable to Shimmick Corporation | $(9,770) | $(33,333) | | Interest expense | 1,000 | 897 | | Depreciation and amortization | 3,460 | 4,410 | | Transformation costs | 715 | — | | Stock-based compensation | 1,790 | 998 | | Legal fees and other costs for Legacy Projects | (340) | 2,731 | | Other | 191 | 237 | | Adjusted EBITDA | $(2,954) | $(24,060) | Liquidity and Capital Resources As of April 4, 2025, the company had total liquidity of $71 million, consisting of $16 million in cash and available borrowings under its credit facilities, having entered into a new $15 million ACF Credit Agreement and a $15 million Ansley Loan Agreement during the quarter while terminating its previous Revolving Credit Facility, with net cash used in operations at $38.2 million driven by the net loss and working capital changes, and management believes existing cash flows and financing are sufficient to fund operations for at least the next twelve months - Total liquidity as of April 4, 2025 was $71 million, comprising $16 million in unrestricted cash and availability under the Credit Agreement ($44 million), ACF Credit Agreement ($11 million), and Ansley Loan Agreement ($0.1 million)[143] - In March 2025, the company entered into a new $15 million ACF Credit Agreement and a $15 million Ansley Loan Agreement, and terminated its previous Revolving Credit Facility[151][152][154] - Net cash used in operating activities was $38 million in Q1 2025, compared to $35 million in Q1 2024, driven by net loss and changes in contract-related assets and liabilities[156] Backlog As of April 4, 2025, the company's project backlog was $739 million, primarily composed of work for state and local agencies (70%) and consisting mostly of fixed-price contracts (84%), with 80% of this backlog revenue expected to be recognized within the next 24 months - Total project backlog was $739 million as of April 4, 2025[165] Backlog Breakdown as of April 4, 2025 | Breakdown by: | Category | Percentage | | :--- | :--- | :--- | | Customer Type | State and local agencies | 70% | | | Federal agencies | 13% | | | Private owners | 17% | | Contract Type | Fixed-price | 84% | | | Cost reimbursable | 16% | | Est. Recognition | 0 to 24 months | 80% | | | 25 to 36 months | 10% | | | Beyond 36 months | 10% | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a "smaller reporting company" under Exchange Act rules - The company is a "smaller reporting company" and is therefore not required to provide these disclosures[173] Item 4. Controls and Procedures Management concluded that as of April 4, 2025, the company's disclosure controls and procedures were not effective due to previously identified material weaknesses in internal control over financial reporting related to the overall control environment and specific financial processes, with a remediation plan in place including implementing new controls and engaging a third-party advisory firm, though it has not been fully tested for operating effectiveness - Management concluded that disclosure controls and procedures were not effective as of April 4, 2025, due to existing material weaknesses in internal control over financial reporting[178] - The material weaknesses relate to the lack of formal and effective controls over certain financial statement account balances and a lack of effective controls over the COSO principles (control environment, risk assessment, etc.)[179] - A remediation plan is underway, which includes designing and implementing new controls and engaging a third-party advisory firm to evaluate effectiveness. However, the remediation is not yet complete as the new controls require more time to be tested[181][182] Part II. Other Information Item 1. Legal Proceedings Information regarding legal proceedings is disclosed in Note 11 of the financial statements, where the company states it is subject to various claims and lawsuits in the ordinary course of business but no such matters are currently material to its financial statements - Details on legal proceedings are cross-referenced to Note 11 - Commitments and Contingencies in the financial statements[185] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors from the Form 10-K have been reported[186] Other Part II Items The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no mine safety disclosures for the period, and additionally, no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans, with a list of filed exhibits also provided - The report indicates "None" for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 4 (Mine Safety Disclosures)[187] - Item 6 provides a list of exhibits filed with the report, including amendments to credit agreements and officer certifications[188]