PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section provides Shimmick Corporation's unaudited condensed consolidated financial statements and related explanatory notes Condensed Consolidated Balance Sheets This table presents the company's financial position, detailing assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheets (In thousands) | ASSETS | July 4, 2025 | January 3, 2025 | | :-------------------------------- | :----------- | :------------ | | Cash and cash equivalents | $21,393 | $33,730 | | Restricted cash | 1,274 | 2,065 | | Accounts receivable, net | 46,536 | 42,988 | | Contract assets, current | 57,748 | 46,603 | | Prepaids and other current assets | 13,377 | 15,614 | | TOTAL CURRENT ASSETS | 140,328 | 141,000 | | Property, plant and equipment, net | 14,669 | 19,132 | | Intangible assets, net | 5,379 | 6,667 | | Contract assets, non-current | 5,737 | 23,517 | | Lease right-of-use assets | 22,371 | 24,232 | | Investment in unconsolidated joint ventures | 13,990 | 19,016 | | Other assets | 509 | 300 | | TOTAL ASSETS | $202,983 | $233,864 | | LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | CURRENT LIABILITIES | | | | Accounts payable | $57,069 | $46,475 | | Contract liabilities, current | 53,906 | 102,524 | | Accrued salaries, wages and benefits | 28,856 | 28,950 | | Accrued expenses | 39,777 | 38,556 | | Short-term debt | 3,811 | — | | Other current liabilities | 11,335 | 13,759 | | TOTAL CURRENT LIABILITIES | 194,754 | 230,264 | | Long-term debt, net | 32,562 | 9,478 | | Lease liabilities, non-current | 15,520 | 15,987 | | Contract liabilities, non-current | 172 | 113 | | Contingent consideration | 4,919 | 4,686 | | Other liabilities | 4,518 | 8,010 | | TOTAL LIABILITIES | 252,445 | 268,538 | | STOCKHOLDERS' DEFICIT | | | | Common stock | 353 | 343 | | Additional paid-in-capital | 46,691 | 43,353 | | Retained deficit | (96,506) | (78,211) | | Non-controlling interests | — | (159) | | TOTAL STOCKHOLDERS' DEFICIT | (49,462) | (34,674) | | TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $202,983 | $233,864 | Condensed Consolidated Statements of Operations This table outlines the company's financial performance, detailing revenue, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations (In thousands, except per share data) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Revenue | $128,402 | $90,605 | $250,512 | $210,648 | | Cost of revenue | 120,273 | 121,736 | 237,687 | 257,639 | | Gross margin | 8,129 | (31,131) | 12,825 | (46,991) | | Selling, general and administrative expenses | 15,041 | 18,723 | 29,409 | 34,891 | | Total operating expenses | 15,041 | 18,723 | 29,409 | 34,891 | | Equity in (loss) earnings of unconsolidated joint ventures | (187) | (1,854) | 539 | (1,591) | | Gain on sale of assets | 4 | 3,714 | 70 | 3,688 | | Loss from operations | (7,095) | (47,994) | (15,975) | (79,785) | | Interest expense | 1,313 | 1,496 | 2,313 | 2,393 | | Other (income) expense, net | (42) | 1,899 | (152) | 2,545 | | Net loss before income tax | (8,366) | (51,389) | (18,136) | (84,723) | | Income tax expense | — | — | — | — | | Net loss | (8,366) | (51,389) | (18,136) | (84,723) | | Net income (loss) attributable to non-controlling interests | 159 | — | 159 | (1) | | Net loss attributable to Shimmick Corporation | $(8,525) | $(51,389) | $(18,295) | $(84,722) | | Net loss attributable to Shimmick Corporation per common share Basic | $(0.25) | $(1.83) | $(0.53) | $(3.16) | | Diluted | $(0.25) | $(1.83) | $(0.53) | $(3.16) | Condensed Consolidated Statements of Stockholders' Deficit This table details changes in the company's equity, including common stock, additional paid-in capital, and retained deficit Condensed Consolidated Statements of Stockholders' Deficit (In thousands, except share data) | | Common Stock Shares | Common Stock Amount | Additional Paid-in-Capital | Retained Deficit | Non Controlling Interests | Total Stockholders' Deficit | | :-------------------------- | :------------------ | :------------------ | :------------------------- | :--------------- | :------------------------ | :-------------------------- | | Balance as of April 4, 2025 | 34,331,514 | $344 | $45,155 | $(87,981) | $(159) | $(42,641) | | Net (loss) income | — | — | — | (8,525) | 159 | (8,366) | | Issuance of common stock | 916,910 | 9 | 8 | — | — | 17 | | Stock-based compensation | — | — | 1,528 | — | — | 1,528 | | Balance as of July 4, 2025 | 35,248,424 | $353 | $46,691 | $(96,506) | $— | $(49,462) | | | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Retained Earnings (Deficit) | Non Controlling Interests | Total Stockholders' Equity | | :-------------------------- | :------------------ | :------------------ | :------------------------- | :-------------------------- | :------------------------ | :------------------------- | | Balance as of March 29, 2024 | 25,738,857 | $257 | $25,578 | $13,204 | $(921) | $38,118 | | Net loss | — | — | — | (51,389) | — | (51,389) | | Issuance of common stock | 7,971,062 | 80 | 12,658 | — | — | 12,738 | | Stock-based compensation | — | — | 969 | — | — | 969 | | Balance as of June 28, 2024 | 33,709,919 | $337 | $39,205 | $(38,185) | $(921) | $436 | | | Common Stock Shares | Common Stock Amount | Additional Paid-in-Capital | Retained Deficit | Non Controlling Interests | Total Stockholders' Deficit | | :-------------------------- | :------------------ | :------------------ | :------------------------- | :--------------- | :------------------------ | :-------------------------- | | Balance as of January 3, 2025 | 34,271,214 | $343 | $43,353 | $(78,211) | $(159) | $(34,674) | | Net (loss) income | — | — | — | (18,295) | 159 | (18,136) | | Issuance of common stock | 977,210 | 10 | 20 | — | — | 30 | | Stock-based compensation | — | — | 3,318 | — | — | 3,318 | | Balance as of July 4, 2025 | 35,248,424 | $353 | $46,691 | $(96,506) | $— | $(49,462) | | | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Retained Earnings (Deficit) | Non Controlling Interests | Total Stockholders' Equity | | :-------------------------- | :------------------ | :------------------ | :------------------------- | :-------------------------- | :------------------------ | :------------------------- | | Balance as of December 29, 2023 | 25,493,877 | $255 | $24,445 | $46,537 | $(747) | $70,490 | | Net loss | — | — | — | (84,722) | (1) | (84,723) | | Issuance of common stock | 8,216,042 | 82 | 12,793 | — | — | 12,875 | | Stock-based compensation | — | — | 1,967 | — | — | 1,967 | | Distributions to non-controlling interests | — | — | — | — | (173) | (173) | | Balance as of June 28, 2024 | 33,709,919 | $337 | $39,205 | $(38,185) | $(921) | $436 | Condensed Consolidated Statements of Cash Flows This table summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :---------------------------------------------------- | :---------------------------- | :----------------------------- | | Cash Flows From Operating Activities | | | | Net loss | $(18,136) | $(84,723) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | Stock-based compensation | 3,318 | 1,967 | | Depreciation and amortization | 6,709 | 8,199 | | Equity in (earnings) loss of unconsolidated joint ventures | (539) | 1,591 | | Return on investment in unconsolidated joint ventures | 2,798 | 421 | | Gain on sale of assets | (70) | (3,714) | | Other | 445 | 1,478 | | Changes in operating assets and liabilities: | | | | Accounts receivable, net | (3,548) | 5,659 | | Contract assets | 6,635 | 7,996 | | Accounts payable | 10,593 | (24,508) | | Contract liabilities | (48,618) | (3,963) | | Accrued salaries, wages and benefits | (94) | 1,699 | | Accrued expenses | 1,220 | 5,176 | | Other assets and liabilities | (2,700) | 3,874 | | Net cash used in operating activities | $(41,987) | $(78,848) | | Cash Flows From Investing Activities | | | | Purchases of property, plant and equipment | (892) | (7,595) | | Proceeds from sale of assets | 118 | 11,037 | | Unconsolidated joint venture equity contributions | — | (3,460) | | Return of investment in unconsolidated joint ventures | 2,825 | — | | Net cash provided by (used in) investing activities | 2,051 | (18) | | Cash Flows From Financing Activities | | | | Borrowings on credit and loan agreements | 56,558 | 54,200 | | Repayments on credit and loan agreements | (28,329) | — | | Net repayments of Revolving Credit Facility | — | (14,675) | | Other | (1,421) | (1,691) | | Net cash provided by financing activities | 26,808 | 37,834 | | Net decrease in cash, cash equivalents and restricted cash | (13,128) | (41,032) | | Cash, cash equivalents and restricted cash, beginning of period | 35,795 | 63,910 | | Cash, cash equivalents and restricted cash, end of period | $22,667 | $22,878 | | Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets | | | | Cash and cash equivalents | $21,393 | $22,381 | | Restricted cash | 1,274 | 497 | | Total cash, cash equivalents and restricted cash | $22,667 | $22,878 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Business and Organization Shimmick Corporation, founded in 1990, operated as a regional infrastructure contractor before being acquired by AECOM in 2017. In January 2021, it became an independent company, and in November 2023, completed its initial public offering (IPO), listing on Nasdaq under 'SHIM' - Shimmick Corporation completed its initial public offering (IPO) in November 2023, and its stock is listed on the Nasdaq Capital Market under the symbol "SHIM"26 Note 2. Basis of Presentation and Summary of Significant Accounting Policies The financial statements are unaudited, prepared in conformity with GAAP and SEC rules, and include normal recurring adjustments. Certain disclosures are condensed or omitted. The company is evaluating the impact of new accounting pronouncements, ASU No. 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively - The company is evaluating the effects of ASU No. 2023-09 (Income Taxes: Improvements to Income Tax Disclosures), effective for annual periods beginning after December 15, 2024, and ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 20263334 Note 3. Revenue, Receivables and Contract Assets and Liabilities This note details revenue disaggregation by contract and project types, contract balances, and the impact of estimate revisions on gross margin Revenue Disaggregated by Contract Types (In thousands) | Contract Type | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :-------------- | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Fixed-price | $102,589 | $82,313 | $205,274 | $195,379 | | Cost reimbursable | 25,559 | 7,876 | 44,574 | 14,381 | | Equipment and labor revenue | 254 | 416 | 664 | 888 | | Total revenue | $128,402 | $90,605 | $250,512 | $210,648 | Revenue Disaggregated by Project Types (In thousands) | Project Type | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------- | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Shimmick Projects | $112,619 | $83,689 | $205,773 | $173,981 | | Non-Core Projects | 15,783 | 6,916 | 44,739 | 36,667 | | Total revenue | $128,402 | $90,605 | $250,512 | $210,648 | Contract Balances (In thousands) | | July 4, 2025 | January 3, 2025 | Change | | :---------------------------------------------------------------- | :----------- | :-------------- | :----- | | Costs and estimated earnings in excess of billings on uncompleted contracts | $57,748 | $46,603 | $11,145 | | Retainage receivable | 5,737 | 23,517 | (17,780) | | Total contract assets | 63,485 | 70,120 | (6,635) | | Billings on uncompleted contracts in excess of costs and estimated earnings | (20,383) | (50,490) | 30,107 | | Forward loss reserve | (33,695) | (52,147) | 18,452 | | Total contract liabilities | (54,078) | (102,637) | 48,559 | | Net | $9,407 | $(32,517) | $41,924 | - Revisions in contract estimates resulted in net decreases in gross margin of $5 million and $9 million for the three and six months ended July 4, 2025, respectively, primarily due to cost increases related to delays and lower productivity on a federal lock and dam Non-Core Project44 Note 4. Joint Ventures and Variable Interest Entities This note provides financial information for consolidated and unconsolidated joint ventures, including their performance and related party transactions Consolidated Joint Ventures Financial Information (In thousands) | | July 4, 2025 | January 3, 2025 | | :---------------- | :----------- | :------------ | | Current assets | $10,470 | $11,063 | | Total assets | $10,470 | $11,063 | | Current liabilities | $44,216 | $63,512 | | Non-current liabilities | 3,295 | 2,433 | | Total liabilities | $47,511 | $65,945 | | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------- | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Revenue | $4,091 | $3,354 | $12,229 | $7,358 | Unconsolidated Joint Ventures Financial Information (In thousands) | | July 4, 2025 | January 3, 2025 | | :------------------ | :----------- | :------------ | | Current assets | $48,153 | $60,738 | | Non-current assets | 6,708 | 9,573 | | Total assets | $54,861 | $70,311 | | Current liabilities | $25,032 | $28,351 | | Total liabilities | $25,032 | $28,351 | | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Revenue | $12,651 | $11,169 | $31,469 | $31,625 | | Cost of revenue | 13,579 | 17,894 | 31,599 | 38,825 | | Gross margin | $(928) | $(6,725) | $(130) | $(7,200) | | Net loss | $(928) | $(6,725) | $(130) | $(7,200) | Related Party Revenue from Unconsolidated Joint Ventures (In thousands) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------- | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Revenue | $168 | $255 | $440 | $733 | Accounts Receivable, Net from Unconsolidated Joint Ventures (In thousands) | | July 4, 2025 | January 3, 2025 | | :---------------------- | :----------- | :------------ | | Accounts receivable, net | $2,058 | $2,098 | Note 5. Property, Plant and Equipment and Intangible Assets This note details the net balances and depreciation/amortization of property, plant and equipment, and intangible assets Property, Plant and Equipment, Net (In thousands) | | July 4, 2025 | January 3, 2025 | | :------------------------------------------ | :----------- | :------------ | | Building and land | $171 | $171 | | Machinery, equipment, and vehicles | 51,967 | 51,227 | | Office equipment, software and construction in progress | 6,876 | 6,876 | | Property, plant and equipment, gross | 59,014 | 58,274 | | Accumulated depreciation | (44,345) | (39,142) | | Property, plant and equipment, net | $14,669 | $19,132 | Depreciation Expense (In thousands) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Depreciation expense | $2,519 | $3,079 | $5,306 | $6,778 | Finite-Lived Intangible Assets, Net (In thousands) | | July 4, 2025 | January 3, 2025 | | :---------------- | :----------- | :------------ | | Trademark | $3,786 | $4,543 | | Customer contracts | 1,593 | 2,124 | | Total | $5,379 | $6,667 | Estimated Aggregate Remaining Amortization (In thousands) | Year | Amortization Expense | | :--- | :------------------- | | 2025 | $1,289 | | 2026 | 2,577 | | 2027 | 1,513 | | Total | $5,379 | Note 6. Debt This note outlines the company's debt structure, including new credit agreements, loan facilities, and recent amendments Total Debt Outstanding, Net (In thousands) | | July 4, 2025 | January 3, 2025 | | :-------------------------- | :----------- | :------------ | | Credit Agreement | $11,140 | $11,503 | | ACF Credit Agreement | 14,384 | — | | Ansley Loan Agreement | 14,499 | — | | Unamortized debt issuance costs | (3,650) | (2,025) | | Total debt, net | $36,373 | $9,478 | - The Credit Agreement was amended on August 8, 2025, to permit concurrent amendment to the Revolving Credit Facility and waive specified noncompliance regarding non-bonded contracts, providing borrowing capacity up to $60 million54 - The company entered into an ACF Credit Agreement on March 12, 2025, providing a $15 million commitment with interest at adjusted term SOFR plus 4.50%, subject to a 2.0% floor57 - The company entered into an Ansley Loan Agreement on March 31, 2025, providing $15 million borrowing capacity with a 12.50% annual interest rate, secured by certain equipment5859 Note 7. Income Taxes This note explains the company's income tax position, including the 0% effective tax rate and the impact of a full valuation allowance - The effective tax rate was 0% for the six months ended July 4, 2025, and June 28, 2024, due to a full valuation allowance offsetting deferred tax provisions from current year losses6263 - A valuation allowance of $175 million and $170 million was recorded as of July 4, 2025, and January 3, 2025, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized67 - The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, retroactively reinstates 100% bonus depreciation, which could materially impact future income tax expense but will be fully offset by the valuation allowance68 Note 8. Stock-Based Compensation This note details stock-based compensation expense, unrecognized compensation, and activity for stock options and restricted stock units - Total stock-based compensation expense was $3 million for the six months ended July 4, 2025, compared to $2 million for the six months ended June 28, 202471 Stock Option Activity (Six Months Ended July 4, 2025) | | Number of shares | Weighted average exercise price per share | Weighted average grant date fair value | Weighted average years of remaining contractual term | | :-------------------------- | :--------------- | :-------------------------------------- | :----------------------------------- | :------------------------------------------------- | | Outstanding as of January 3, 2025 | 3,337,150 | $1.26 | $0.66 | 6.3 | | Exercised | (1,245,867) | 1.26 | 0.66 | — | | Forfeited & expired | — | — | — | — | | Outstanding as of July 4, 2025 | 2,091,283 | $1.26 | $0.66 | 5.8 | | Exercisable as of July 4, 2025 | 2,091,283 | $1.26 | 0.66 | 5.8 | Unvested Restricted Stock Units Activity (Six Months Ended July 4, 2025) | | Number of shares | Weighted average grant date fair value | | :------------------------ | :--------------- | :----------------------------------- | | Unvested as of January 3, 2025 | 2,617,110 | $2.88 | | Awarded | 590,252 | 1.47 | | Forfeited | — | — | | Vested | (602,433) | 2.44 | | Unvested as of July 4, 2025 | 2,604,929 | $2.66 | Note 9. Earnings Per Share This note presents the computation of basic and diluted earnings per share, noting the antidilutive effect of certain securities Computation of Basic and Diluted EPS (In thousands, except per share data) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Net loss attributable to Shimmick Corporation | $(8,525) | $(51,389) | $(18,295) | $(84,722) | | Numerator for basic and diluted EPS | $(8,525) | $(51,389) | $(18,295) | $(84,722) | | Denominator for basic EPS - weighted average shares | 34,635 | 28,086 | 34,471 | 26,817 | | Effect of dilutive securities: | | | | | | Employee stock options | — | — | — | — | | Restricted stock units | — | — | — | — | | Dilutive potential common shares | — | — | — | — | | Denominator for diluted EPS - adjusted weighted average shares and assumed conversions | 34,635 | 28,086 | 34,471 | 26,817 | | Basic earnings per common share | $(0.25) | $(1.83) | $(0.53) | $(3.16) | | Diluted earnings per common share | $(0.25) | $(1.83) | $(0.53) | $(3.16) | Note 10. Leases This note provides details on lease costs, lease assets, lease liabilities, and weighted average lease terms and discount rates Lease Expenses (In thousands) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Operating lease cost - Cost of revenue | $2,236 | $2,397 | $4,493 | $4,749 | | Operating lease cost - Selling, general and administrative expenses | 262 | 245 | 524 | 550 | | Finance lease cost - Amortization of right-of-use assets | 258 | 66 | 287 | 133 | | Finance lease cost - Interest on lease liabilities | 10 | 6 | 43 | 14 | | Short-term lease cost | 159 | 100 | 247 | 182 | | Total lease cost | $2,925 | $2,814 | $5,594 | $5,628 | Lease Assets and Liabilities (In thousands) | | July 4, 2025 | January 3, 2025 | | :-------------------------- | :----------- | :------------ | | Operating lease assets | $20,988 | $24,232 | | Finance lease assets | 1,383 | — | | Total lease assets | $22,371 | $24,232 | | Current Operating lease liabilities | $5,734 | $6,571 | | Current Finance lease liabilities | 322 | — | | Total current lease liabilities | $6,056 | $6,571 | | Non-current Operating lease liabilities | $14,446 | $15,987 | | Non-current Finance lease liabilities | 1,074 | — | | Total non-current lease liabilities | $15,520 | $15,987 | Weighted Average Remaining Lease Term and Discount Rate | | July 4, 2025 | January 3, 2025 | | :------------------------------------ | :----------- | :------------ | | Weighted average remaining lease term (in years): | | | | Operating leases | 4.2 | 4.3 | | Finance leases | 2.7 | — | | Weighted average discount rate: | | | | Operating leases | 7.0% | 6.9% | | Finance leases | 8.8% | — | Note 11. Commitments and Contingencies This note outlines the company's commitments, including joint venture liabilities, potential liquidated damages, and significant legal proceedings - In May 2025, a lawsuit was filed against Shimmick and 10 other defendants by the Pipefitters Union, alleging $4.7 billion in damages for violations of the California False Claims Act related to improper work assignment and apprenticeship rules on 27 projects. Shimmick denies the claims, and the potential loss is not yet estimable80 - The company obtains surety bonds for construction contracts and indemnifies third-party bonding companies for losses, granting them a security interest in accounts receivable, contract assets, and contract rights82 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operational results, liquidity, and capital resources Overview Shimmick Corporation is a leader in turnkey infrastructure solutions, specializing in water, energy, climate resiliency, and sustainable transportation. The company has a long history in complex water projects and became an independent entity in 2021 after being sold by AECOM, followed by an IPO in November 2023 - Shimmick is an industry leader in delivering turnkey infrastructure solutions across water, energy, climate resiliency, and sustainable transportation, with a focus on critical infrastructure projects87899091 Our History and Initial Public Offering Shimmick, founded in 1990, was acquired by AECOM in 2017 and then became an independent company in January 2021. It completed its initial public offering (IPO) on November 16, 2023, raising approximately $19 million in net proceeds, and its common stock is listed on Nasdaq under 'SHIM' - Shimmick completed its IPO on November 16, 2023, issuing 3,575,000 shares at $7.00 per share, generating approximately $19 million in net proceeds95 Key Factors Affecting Our Performance and Results of Operations This section discusses key factors influencing the company's performance, including seasonality, backlog, competitive bidding, cost control, and joint venture risks - Revenue is typically lowest in Q1 and highest in Q3 due to seasonal weather conditions impacting productivity and project schedules98 - Backlog is an uncertain indicator of future revenue and earnings, as contracts are often cancelable, and estimates may prove inaccurate, potentially leading to delays or non-realization of expected revenue99 - The company competes for new contracts through competitive bids and 'best value' proposals, focusing on highly technical or specialized scopes of work to gain a pricing advantage and better risk management103 - Controlling project costs (payroll, equipment, materials) and SG&A expenses (including new public company costs and stock-based compensation) is crucial for profitability105107 - Participation in joint ventures involves sharing expertise, risk, and resources, with liabilities often being joint and several, and requires significant upfront investments108 How We Assess Performance of Our Business The company evaluates business performance using key financial metrics such as revenue, gross margin, SG&A expenses, joint venture equity, and net loss - Performance is assessed based on Revenue (recognized over time), Gross Margin (revenue minus contract costs, including full loss recognition for fixed-price contracts), Selling, General, and Administrative Expenses, Equity in (Loss) Earnings of Unconsolidated Joint Ventures, and Net Loss109110111112113 Results of Operations This section provides a detailed comparative analysis of the company's financial results for the reported periods Three Months Ended July 4, 2025 compared to the Three Months Ended June 28, 2024 This section compares the company's financial performance for the three months ended July 4, 2025, against the prior year period Selected Financial Data (Three Months Ended, In thousands, except percentage data) | | July 4, 2025 | June 28, 2024 | $ Change | % Change | | :------------------------------------------ | :----------- | :------------ | :------- | :------- | | Revenue | $128,402 | $90,605 | $37,797 | 42% | | Cost of revenue | 120,273 | 121,736 | (1,463) | (1)% | | Gross margin | 8,129 | (31,131) | 39,260 | (126)% | | Selling, general and administrative expenses | 15,041 | 18,723 | (3,682) | (20)% | | Loss from operations | (7,095) | (47,994) | 40,899 | (85)% | | Net loss | $(8,366) | $(51,389) | $43,023 | (84)% | | Net loss attributable to Shimmick Corporation | $(8,525) | $(51,389) | $42,864 | (83)% | Revenue and Gross Margin by Project Type (Three Months Ended, In thousands, except percentage data) | | July 4, 2025 | June 28, 2024 | $ Change | % Change | | :---------------- | :----------- | :------------ | :------- | :------- | | Shimmick Projects | | | | | | Revenue | $112,619 | $83,689 | $28,930 | 35% | | Gross Margin | $14,919 | $4,570 | $10,349 | 226% | | Gross Margin (%) | 13% | 5% | | | | Non-Core Projects | | | | | | Revenue | $15,783 | $6,916 | $8,867 | 128% | | Gross Margin | $(6,790) | $(35,701) | $28,911 | (81)% | | Gross Margin (%) | (43)% | (516)% | | | | Consolidated Total | | | | | | Revenue | $128,402 | $90,605 | $37,797 | 42% | | Gross Margin | $8,129 | $(31,131) | $39,260 | (126)% | | Gross Margin (%) | 6% | (34)% | | | - The $29 million increase in Non-Core Projects gross margin was primarily due to the settlement of a claim on a large Non-Core Loss Project, which included a revenue reduction in the prior year that did not reoccur121 Six Months Ended July 4, 2025 compared to the Six Months Ended June 28, 2024 This section compares the company's financial performance for the six months ended July 4, 2025, against the prior year period Selected Financial Data (Six Months Ended, In thousands, except percentage data) | | July 4, 2025 | June 28, 2024 | $ Change | % Change | | :------------------------------------------ | :----------- | :------------ | :------- | :------- | | Revenue | $250,512 | $210,648 | $39,864 | 19% | | Cost of revenue | 237,687 | 257,639 | (19,952) | (8)% | | Gross margin | 12,825 | (46,991) | 59,816 | (127)% | | Selling, general and administrative expenses | 29,409 | 34,891 | (5,482) | (16)% | | Loss from operations | (15,975) | (79,785) | 63,810 | (80)% | | Net loss | $(18,136) | $(84,723) | $66,587 | (79)% | | Net loss attributable to Shimmick Corporation | $(18,295) | $(84,722) | $66,427 | (78)% | Revenue and Gross Margin by Project Type (Six Months Ended, In thousands, except percentage data) | | July 4, 2025 | June 28, 2024 | $ Change | % Change | | :---------------- | :----------- | :------------ | :------- | :------- | | Shimmick Projects | | | | | | Revenue | $205,773 | $173,981 | $31,792 | 18% | | Gross Margin | $20,186 | $4,134 | $16,052 | 388% | | Gross Margin (%) | 10% | 2% | | | | Non-Core Projects | | | | | | Revenue | $44,739 | $36,667 | $8,072 | 22% | | Gross Margin | $(7,361) | $(51,125) | $43,764 | (86)% | | Gross Margin (%) | (16)% | (139)% | | | | Consolidated Total | | | | | | Revenue | $250,512 | $210,648 | $39,864 | 19% | | Gross Margin | $12,825 | $(46,991) | $59,816 | (127)% | | Gross Margin (%) | 5% | (22)% | | | - The $44 million increase in Non-Core Projects gross margin was primarily due to a claim settlement and the non-recurrence of cost increases for time and design-related schedule extensions experienced in the prior year136 Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures, Adjusted Net Loss and Adjusted EBITDA, used to assess core operating performance Adjusted Net Loss Reconciliation (In thousands) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Net loss attributable to Shimmick Corporation | $(8,525) | $(51,389) | $(18,295) | $(84,722) | | Transformation costs | 725 | 2,608 | 1,440 | 2,608 | | Stock-based compensation | 1,528 | 969 | 3,318 | 1,967 | | Legal fees and other costs for Non-Core Projects | 1,434 | 2,629 | 1,094 | 5,360 | | Other | 42 | 209 | 233 | 446 | | Adjusted net loss | $(4,796) | $(44,974) | $(12,210) | $(74,341) | Adjusted EBITDA Reconciliation (In thousands) | | Three Months Ended July 4, 2025 | Three Months Ended June 28, 2024 | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------ | :---------------------------- | :----------------------------- | :---------------------------- | :----------------------------- | | Net loss attributable to Shimmick Corporation | $(8,525) | $(51,389) | $(18,295) | $(84,722) | | Interest expense | 1,313 | 1,496 | 2,313 | 2,393 | | Income tax expense | — | — | — | — | | Depreciation and amortization | 3,249 | 3,789 | 6,709 | 8,199 | | Transformation costs | 725 | 2,608 | 1,440 | 2,608 | | Stock-based compensation | 1,528 | 969 | 3,318 | 1,967 | | Legal fees and other costs for Non-Core Projects | 1,434 | 2,629 | 1,094 | 5,360 | | Other | 42 | 209 | 233 | 446 | | Adjusted EBITDA | $(234) | $(39,689) | $(3,188) | $(63,749) | Liquidity and Capital Resources This section analyzes the company's liquidity position, capital expenditures, and cash flow activities - As of July 4, 2025, total liquidity was $73 million, consisting of $21 million in cash and cash equivalents and $51 million and $1 million availability under the Credit Agreement and ACF Credit Agreement, respectively158 Total Debt Outstanding, Net (In thousands) | | July 4, 2025 | January 3, 2025 | | :-------------------------- | :----------- | :------------ | | Credit Agreement | $11,140 | $11,503 | | ACF Credit Agreement | 14,384 | — | | Ansley Loan Agreement | 14,499 | — | | Unamortized debt issuance costs | (3,650) | (2,025) | | Total debt, net | $36,373 | $9,478 | Cash Flows Analysis (In thousands) | | Six Months Ended July 4, 2025 | Six Months Ended June 28, 2024 | | :------------------------------------------ | :---------------------------- | :----------------------------- | | Net cash used in operating activities | $(41,987) | $(78,848) | | Net cash provided by (used in) investing activities | 2,051 | (18) | | Net cash provided by financing activities | 26,808 | 37,834 | | Net decrease in cash, cash equivalents and restricted cash | (13,128) | (41,032) | | Cash, cash equivalents and restricted cash, beginning of period | 35,795 | 63,910 | | Cash, cash equivalents and restricted cash, end of period | $22,667 | $22,878 | Backlog This section provides an overview of the company's backlog, disaggregated by customer type, contract type, and expected recognition period - As of July 4, 2025, the company had a backlog of $652 million, with over half of these projects in strategic target markets aligned with its strategic plan181 Backlog by Customer Type (As of July 4, 2025) | Customer Type | Percentage | | :-------------- | :--------- | | State and local agencies | 70% | | Federal agencies | 12% | | Private owners | 18% | | Total backlog | 100% | Backlog by Contract Type (As of July 4, 2025) | Contract Type | Percentage | | :-------------- | :--------- | | Fixed-price | 84% | | Cost reimbursable | 16% | | Total backlog | 100% | Estimated Backlog Recognized (As of July 4, 2025) | Recognition Period | Percentage | | :----------------- | :--------- | | 0 to 24 months | 85% | | 25 to 36 months | 5% | | Beyond 36 months | 10% | | Total backlog | 100% | Off-Balance Sheet Arrangements The company's off-balance sheet arrangements primarily involve joint venture liabilities, where each partner is typically jointly and severally liable for performance guarantees. The maximum potential amount of future payments under these guarantees cannot be estimated due to various uncertainties - In joint ventures, each partner is usually jointly and severally liable for performance guarantees, meaning the company may be liable for the entire risk, but the maximum potential amount of future payments cannot be estimated due to various factors184 Critical Accounting Estimates The preparation of financial statements requires management to make estimates and judgments that affect reported amounts. The company evaluates these estimates and assumptions on an ongoing basis, and there have been no significant changes to its critical accounting estimates from those reported in its Form 10-K - There have been no significant changes in the company's critical accounting estimates from those reported in its Form 10-K186 Emerging Growth Company and Smaller Reporting Company Shimmick is an "emerging growth company" (EGC) and a "smaller reporting company" (SRC), which provides exemptions from certain SEC reporting requirements, such as auditor attestation, nonbinding advisory votes on executive compensation, and reduced financial disclosures. The company has elected to use the extended transition period for complying with new or revised accounting standards - Shimmick qualifies as an "emerging growth company" (EGC) and a "smaller reporting company" (SRC), allowing it to take advantage of scaled disclosures and exemptions from certain reporting requirements187189 - The company has elected to use the extended transition period for complying with new or revised accounting standards, which may result in financial statements not being comparable to companies that comply with public company effective dates188 Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to Shimmick Corporation as it qualifies as a "smaller reporting company" under the Exchange Act - This item is not applicable as Shimmick Corporation is a "smaller reporting company"190 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, with a remediation plan underway - As of July 4, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting195 - Material weaknesses relate to the design and operation of internal control over financial reporting, including lack of formal and effective controls over certain financial statement account balances and COSO principles196 - Management is executing a remediation plan, which includes designing and implementing new entity-level, information system general, and financial reporting and business process controls, and engaging a third-party advisory firm198199 PART II. OTHER INFORMATION This section provides additional information not included in the financial statements, such as legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 11 – Commitments and Contingencies, within the unaudited condensed consolidated financial statements - Legal proceedings information is detailed in Note 11 – Commitments and Contingencies202 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 the risk factors disclosed in the Form 10-K203 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - None204 Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - None204 Item 4. Mine Safety Disclosures There are no mine safety disclosures required for the period - None204 Item 5. Other Information During the fiscal quarter ended July 4, 2025, no directors or executive officers adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1(c) trading arrangements during the fiscal quarter ended July 4, 2025204 Item 6. Exhibits This section provides a comprehensive list of all exhibits filed as part of this Form 10-Q Exhibits Filed | Exhibit Number | Description | | :------------- | :---------- | | 10.1 | Amendment No. 6 to Credit, Security and Guaranty Agreement, dated August 8, 2025 | | 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) | | 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) | | 32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 | | 32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File |
Shimmick (SHIM) - 2025 Q2 - Quarterly Report