Shimmick Corporation

Greetings and welcome to the SHMIC's fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Neil Sikka, with Investor Relations at Chimic. Thank you. You may begin.

Good morning, and thank you for joining us on today's conference call to discuss Chimic's fourth quarter and fiscal year 2023 results. Slides for today's presentation are available on the Investor Relations section of our website, www.chimic.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ material from our forward-looking statements if any of our key assumptions are incorrect. We identify the principal risks and uncertainties that may affect our performance in our reports and filings with the Securities and Exchange Commission, which can also be found on our investor relations website. We do not undertake a duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. With that, it is my pleasure to turn the call over to Steve Richards, Chimix CEO.

Good morning, and thank you all for joining us on today's call. I am joined by Devin Nordhagen, CIMIC's CFO. As a reminder, and for those of you who are new to our story, CIMIC is a leading water infrastructure company that provides solutions across the entire water spectrum. We focus on two key areas, water treatment and water resources, which include dams, reservoirs, flood protection, and other infrastructure. CIMIC operates in a strong, vibrant, and underserved market. Infrastructure construction saw nearly 20% year-over-year increase in spending during Q4 2023. The strongest spending increase was in the combined water and sewer segment of a 23% year-over-year gain. Healthy growth remained consistent, signaling that the Infrastructure Investment and Jobs Act funds are flowing and are having an impact. Spending on infrastructure construction is expected to strengthen further as funds from the IJA continue to flow through to projects which is expected to provide significant stimulus to the infrastructure construction segment over the next decade. The water segment specifically is benefiting from the allocation of federal funds. Nearly $15 billion was set aside to assist with lead pipe removal and replacement, and billions more was set aside for water storage, sanitation, and clean water drinking water grants. In February 2024, the Biden administration announced an additional $5.8 billion in funds from the IJA to be split among 22 states for water infrastructure projects. CIMIC's pipeline reflects this growth in the infrastructure market. We have identified approximately $4 billion in priority opportunities through the end of 2024. We believe that while double-digit growth is likely not sustainable, the overall demand for water solutions will remain high or the long-term due to water scarcity and other macroeconomic drivers. For the fiscal year 2023, we delivered revenue of $633 million, a net loss attributable to Shemek Corporation of $3 million, and an adjusted EBITDA of $30 million. To provide a better perspective on our financial results and how the strategy we have implemented is progressing, we'll be speaking to results today on a bifurcated basis between Shemek projects and legacy projects. SHMIC projects are projects that SHMIC started after the AECOM sales transaction. Since becoming an independent company, SHMIC has shifted our focus to water infrastructure and other critical infrastructure, which you will see is reflected in our backlog portfolio. Legacy projects are projects that started prior to the AECOM sales transaction and that we assumed in the sales transaction. Several of these are large, complex, multi-year projects that have experienced cost overruns. Longer term, these projects will decline as a significant portion of our business and be replaced by newer strategic projects. With that context, in 2023, SHMIC project revenue grew to $434 million, a 24% increase compared to 2022. Importantly, we grew SHMIC gross margin by $5 million for the year. Legacy project revenue decreased by $114 million to $199 million, reflecting a 37% decrease when compared to 2022. Our backlog, which we view as a key differentiator versus our competitors, continues to be strong. SHMIC finished 2023 with a backlog of $1.1 billion. We've reported an 18% increase specifically in SHMIC projects backlog during fiscal year 2023. We continue to have a robust pipeline of future work, which we expect to grow alongside increases in federal funding and a growing demand for water. More than 75% of our work is generated from repeat customers. Public customers and associated public funding allow for a predictable long-term flow of programs and projects. We secured several notable water projects for state and federal governments in 2023. Turning to the next slide as an example, CEMIC won a major $217 million water treatment plant expansion for the Elsinore Valley Municipal Water District in Southern California, where CEMIC will expand the facility's capacity from 8 million to 12 million gallons per day to meet the area's growing water demand. The project includes two new aeration basins, a membrane bioreactor facility, and a UV disinfection facility, among other work. CEMIC is self-performing more than 80% of this project, including the electrical work required to bring the expanded facility online. We have since installed the dewatering system, relocated conduit, and conducted mass excavation to prepare for the critical facility expansion. With that, I'd like to turn the call over to Devin, who will discuss our financial results.