8-K: Shimmick Corp. Announces Q4 and Fiscal Year 2024 Results: Revenue Declines, Transformation Plan Shows Promise

Shimmick Corp. reports a revenue decrease for Q4 and FY2024, but highlights improved liquidity and a strategic shift towards water infrastructure projects.

Summary

• Shimmick Corporation announced its financial results for the fourth quarter and fiscal year ended January 3, 2025.
• The company reported Q4 revenue of $104 million, including $80 million from Shimmick Projects, and full-year revenue of $480 million, including $356 million from Shimmick Projects.
• Shimmick's liquidity stood at $100 million as of January 3, 2025, reflecting positive outcomes from the Transformation Plan implemented in 2024.
• A new $15 million credit agreement was entered into on March 12, 2025, replacing the MidCap Revolving Credit Facility.
• The company recognized a net loss of $38 million and an Adjusted EBITDA of $(27) million for Q4 2024, primarily due to Legacy Projects.
• The backlog as of January 3, 2025, is over $822 million, with over 87% being Shimmick Projects.
• For fiscal year 2025, Shimmick expects Shimmick Projects revenue to increase by 10% to 15%, with an overall gross margin between 9% and 12%.
• Legacy and Foundations Projects revenue is projected to be between $50 million and $60 million, with a gross margin between (5)% and (15)%.
• Adjusted EBITDA for 2025 is expected to be between $15 million and $25 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company highlights improved liquidity and a strategic shift, the financial results show significant losses and revenue decline. The forward-looking guidance offers some optimism, but the challenges remain substantial.

Positives

• Liquidity improved to $100 million due to the Transformation Plan.
• New $15 million credit agreement provides additional financial flexibility.
• Backlog is strong at over $822 million, with a focus on Shimmick Projects.
• 2025 guidance anticipates revenue growth in Shimmick Projects and positive Adjusted EBITDA.
• Project wins in target markets provide a head start for the new strategy.

Negatives

• Net loss of $38 million and negative Adjusted EBITDA of $(27) million for Q4 2024.
• Overall revenue decreased from $138 million to $104 million in Q4 2024 compared to Q4 2023.
• Gross margin was negative at $(21) million for Q4 2024.
• Legacy Projects continue to negatively impact financial results.
• Equity in loss of unconsolidated joint ventures was $(4) million.

Risks

• Continued losses from Legacy Projects could further impact profitability.
• Inability to accurately estimate risks, requirements or costs when bidding on or negotiating a contract.
• Dependence on subcontractors and suppliers of materials.
• Marketplace competition.
• Commodity products price fluctuations and inflation (and actions taken by monetary authorities in response to inflation) and/or elevated interest rates.

Future Outlook

For fiscal year 2025, Shimmick expects Shimmick Projects revenue to increase 10% to 15%, with overall gross margin between 9% and 12%. Legacy Projects and Foundations Projects revenue is expected to be between $50 million and $60 million with gross margin between (5)% and (15)%. Adjusted EBITDA is projected to be between $15 million and $25 million.

Management Comments

• Ural Yal, Chief Executive Officer of Shimmick, stated that he has been impressed with the technical expertise, capabilities, and commitment of the staff and the company's strong market relationships and reputation since joining in December 2024.
• Ural Yal believes Shimmick has a great opportunity for sustained growth in the near and mid-term.
• Ural Yal is looking forward to a strong 2025 for the company.

Industry Context

Shimmick is positioning itself as a leader in water infrastructure, aligning with increasing demand for resilient and sustainable infrastructure solutions. The company's focus on water, energy, climate resiliency, and sustainable transportation reflects broader industry trends.

Comparison to Industry Standards

• Comparing Shimmick's performance to companies like AECOM (prior to the sale of the business), Fluor, or Jacobs, which also operate in the infrastructure sector, reveals that Shimmick's revenue decline and losses are significant.
• However, the focus on water infrastructure aligns with a high-growth area, potentially offering better long-term prospects compared to companies heavily invested in other sectors.
• The backlog of $822 million is a positive indicator, but its conversion into profitable revenue will be crucial for future success.

Stakeholder Impact

• Shareholders will be concerned about the net losses and revenue decline.
• Employees may be affected by the company's transformation plan and focus on new projects.
• Customers can expect a continued focus on water infrastructure and related services.
• Suppliers and creditors will be monitoring the company's financial stability and ability to meet obligations.

Next Steps

• Shimmick will host an investor conference call on March 13, 2025, at 5:00 pm EST.
• The company plans to focus on growing Shimmick Projects revenue and improving project performance.
• Shimmick intends to complete Legacy and Foundations Projects and transform the company to shift our strategy to meet the nations growing need for water and other critical infrastructure and grow our business.

Key Dates