Shimmick Corporation

Greetings and welcome to SHMIC's second quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. A 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, Anthony Rasmus, Investor Relations. Please go ahead.

Good morning, and thank you for joining us on today's conference call to discuss SHMIC's second quarter 2024 results. Slides for today's presentation are available on the investor relations section of our website, www.shmic.com. During this conference call, management will make forward-looking statements based on current expectations and assumptions, which are subject to risk and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect. We identify the principal risk and uncertainty 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 second 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'm joined by Amanda Mobley, Chimix Interim CFO. We settled one of the two legacy lots project claims for $33 million of cash to be paid sometime later this year, which will improve our liquidity. The settlement also eliminates distractions and continuing legal costs and is key to continuing our transformation. As part of the settlement, the quarter includes a $23 million reduction in legacy projects revenue, an additional $7 million in gross margin, which Amanda will further discuss later. After accounting for the settlement, we delivered second quarter 2024 revenues of $91 million and experienced a net loss of $51 million with an adjusted EBITDA loss of $40 million. CIMIC projects revenue totaled $84 million in the second quarter versus $103 million a year ago. CIMIC project growth margins were 5% for the quarter, a decline from 8% growth margin for the first quarter of 2023, driven by schedule extensions pending change orders, and increased costs. That said, we're encouraged by the 6% sequential margin improvement as compared to the first quarter of 2024 on this front and look forward to building off this momentum. As we did on our last call, we'll provide a breakdown of results between SHMIC projects, projects that began after the AECOM sale transaction, and legacy projects, those that started before the AECOM sale transaction. Peter Haslund, Amanda will provide more details specifically related to the breakdown of these results. Peter Haslund, However, of note, our overall gross margin was weaker in the second quarter primarily related to the legacy project settlement agreement and cost overruns experience, as well as additional legal fees on the legacy last project. Peter Haslund, In order to continue to pursue the contract mods and recoveries from project owners. Although we are experiencing near-term headwinds due to project timing and cost issues with legacy projects, we remain encouraged by the progress we have seen converting our backlog to SHMIC projects versus legacy projects. At the end of the second quarter, SHMIC projects continue to represent a larger portion of our backlog versus legacy projects. Additionally, our overall backlog remains strong at $923 million as of the end of the second quarter. 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. As we described on the last call, we added estimating personnel late in the second quarter to be responsive to this pipeline of work. We're beginning to see the uptick in our bidding efforts bear fruit. Most recently, following the end of the second quarter, we secured a win for a $14.5 million project for Delta Diablo cogeneration system replacement in Antioch, California. The Delta Diablo operates an existing co-generation system at the wastewater treatment plant, once again reinforcing our go-forward focus on water-related projects. The co-generation system improvements project will include the demolition of the existing plant and replace with a new co-generation engine, digester gas, conditioning equipment, exhaust systems, and boiler. This also includes upgrades to the electrical and control infrastructure and demolition of an existing digester gas storage sphere. CIMIC's work will aid the district's resource recovery capabilities, reduce grid power consumption, and promote more efficient and reliable plant performance. More than 75% of our work is generated from repeat customers. Public customers and associated public funding allows for a predictable long-term flow of programs and projects. CIMIC's core market vision is coming to reality with a more asset-light, higher-margin, water-focused company targeting projects that make use of significant insourcing technical skills on projects that average three years in duration. I'd like also to take some time to address the update on CIMIC's transformation. As many of you are aware, CIMIC has a long history of successfully winning and delivering complex water and other critical infrastructure projects in the state of California. The market for water and critical infrastructure projects in California has consistently grown each year with the size and complexity of projects forecasted to grow for decades. Today, the company announced initiatives as part of our transformation plan to increasing our focus on the California water and critical infrastructure market. These initiatives include increasing the bid activity by increasing the number of estimators in Southern Northern California. right-sizing our cost structure by reducing our overheads in non-core areas, and redefining our operating model with a renewed focus on supporting the field to safely deliver projects on time and on budget for our clients across California. Our transformation at Chimic is well underway, and we continue to work towards refocusing our operations to best position ourselves to capture the market we see in the California market. Turning to the next slide, I'd like to take a moment to highlight our recently completed $42 million project at the Richmond Wastewater Treatment Plant, which has been a significant milestone for both CHMIC and the City of Richmond. In 2010, the Richmond facility was identified as needing critical rehabilitation due to its impact on the San Francisco Bay Area. To address this, CHMIC was brought in to execute a series of high priority upgrades designed to improve treatment quality, and meet both current and future environmental regulations. CIMMYT constructed new buildings, upgraded the aeration basins with state-of-the-art forced air diffusion systems, and removed outdated and unused facilities. These strategic improvements have not only enhanced the operational efficiency of the plant, but also reduced its environmental footprint. Now, with the project successfully completed, the Richmond wastewater system operates more efficiently. A new project has significantly reduced energy usage, chemical treatment needs, and greenhouse gas emissions while cutting costs for the city. This means a cleaner environment, reduced orders, and overall improved quality of life for the residents of Richmond. This project is a testament to CHMIC's commitment to delivering sustainable infrastructure solutions that benefit both communities and the environment. We are proud of the outcome and look forward to continuing to work in this vital sector. With that, I'd like to turn the call over to Amanda, who will discuss our financial results.