Shimmick Corporation

Good afternoon, and thank you for joining us on today's conference call to discuss SHMIC's second quarter 2025 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 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 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 Yoral Yal, SHMIC's CEO.

Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Chimix CFO. Let's get started. I'm going to start by discussing our results for the second quarter and the increasing momentum we are experiencing in our business. For the second quarter of 2025, we delivered revenues of $128 million, the gross margin of $8 million, and a nearly flat adjusted EBITDA of negative $234,000. Of the second quarter revenues, over 88% came from SHIMIC projects, which is a 12% improvement from the first quarter of 2025. We have also tripled our gross margin on SHIMIC projects from prior year's second quarter on the heels of the continued operational improvements we have been putting in place since the beginning of the year. We expect our core business to generate higher margins as we continue to build our backlog. We are now referring to the source of revenue previously defined as legacy and foundations projects within the income statement as non-core projects to better define our vision forward. In this quarter, similar to last quarter, these non-core projects, which are projects that date back to previous ownership or types of projects we no longer intend to pursue, saw losses as we continue to work through that backlog. However, the share of these projects are decreasing both in our backlog and in end revenue, quarter after quarter, and replaced by projects that align with our go-forward strategy and profitable core business. We also strengthened our liquidity position in the second quarter, finishing the quarter with a total liquidity of $73 million, a sequential increase of $2 million compared to the first quarter. As we move through the second half of 2025, I'm pleased to report accelerating momentum in the business. This progress is the direct result of the revamped strategy we introduced at the beginning of the year, one centered on driving better margins through bidding projects aligned with our core competencies, deeper client engagement that drive improved project outcomes, and sharper operational discipline that enhance employee satisfaction and effective execution. We are especially encouraged to see strong positive activity in adding to our backlog, which I will discuss next. We are now seeing our growth strategy take hold, starting with a significant uptick in bidding activity. Both the volume and the quality of opportunities have improved meaningfully over the last two quarters. In fact, we hit our best month of bid volume per month recently, and our 12-month bidding outlook stands at over $4.5 billion, which supports our robust backlog growth based on our historical win rates. This is a strong indication of our ability to pursue larger volumes of work across our geographies and disciplines. Our pipeline is large and well aligned with our core capabilities, targeting complex infrastructure projects where our self-performed model drives profits and adds value for our public and private clients. We are also focused on developing our backlog with projects delivered through integrated risk-balanced delivery models that over time will yield more consistent results for Schimmick. Now with our investment in increased capacity and resources in work winning, we have the ability to pursue and win projects where we can perform, deliver, and scale sustainably and profitably. We are seeing good opportunities across water, electrical, and public transportation fields, which we expect to capitalize on in the second half of the year. In the second quarter, we added a few projects to our backlog, but we've seen greater momentum in the business post quarter close. To highlight a few of the project wins that we added to the backlog in the second quarter, these include an electrical power distribution system improvements project for Orange County Sanitation District, another electrical project for Redwood Materials Battery Recycling Facility in Nevada, and a flood control project for the Sacramento Area Flood Control Agency. Since the end of the second quarter, we've been awarded several projects and have been selected as preferred bidder on two others, which underscores the strength of our new positioning. At the end of July, we announced a $51 million contract for below-the-weir modifications in Stockton, California. This project includes the construction of a gate weir, a surface water intake, and fish screens and ladders within a conveyance system. This project exemplifies how infrastructure can serve both people and the environment. By combining advanced water conveyance with ecological safeguards, we are helping shape the future of water management in California. Additionally, we have been awarded several contracts worth $70 million that added to our backlog in July and have been selected as preferred bidder on two additional projects worth $164 million totaling $234 million across California and Washington spanning different aspects of water, transportation, and electrical infrastructure. These projects are expected to be awarded and commenced in the third quarter and reflect the growing demand for Chimix integrated delivery solutions, which includes civil, mechanical, and electrical self-performed capabilities. These not only reinforce our standing with existing clients, but also opens doors with new partners and agencies that value dependable delivery. And with electrical work, nearly 30% of the contract value, these wins reflect another successful outcome of our strategy of increasing the share of electrical work in our backlog. Turning to our electrical project focus, I'm pleased to share that we've officially announced Axi Electric in the second quarter, a dedicated electrical subsidiary designed to meet the growing market demand for specialized electrical and power distribution solutions. This new brand identity, which means value in Greek, not only aligns with how the market views us today, but also positions us for where we're headed and reflects our vision for Chimek. Axia Electric will serve a range of infrastructure markets including industrial, transportation, commercial, and advanced manufacturing and data center construction, in addition to our core water-related electrical work. The subsidiary's self-performed model, strong safety culture, and the ability to deliver turnkey solutions offer our clients the best possible budget and schedule outcomes. As a reminder, with the investments we're making in estimating and sales and operations, we expect electrical work to continue to grow and share of our backlog with a target of 30% by 2027 from approximately 17% today. Our business operates in a very active segment of the market, with a wide base of existing and potential clients reflecting an addressable market of over $100 billion of annual spend based on our geographic focus and core capability markets. That said, I want to take a moment to address the quickly improving operating environment across our broader pipeline, particularly as it relates to the timing of work. Last quarter, I talked about some of the delays in bidding and award activity by our clients due to uncertainties around the economy. In the second quarter, we have seen these concerns ease substantially and bidding activity recover. We have seen this trend continue into the first couple of months of the third quarter, and the good news is that we're taking advantage of this rebound. We're winning work and improving operationally through disciplined cost and risk management and our efforts towards attracting and retaining talent. We are optimistic about our future and the quarters ahead. In the meantime, we are focused on precise execution of our active work and preserving our ability to scale quickly. I'm excited about the progress we've made so far in 2025. Our business is strong and will continue to get stronger as we burn off our non-core backlog and continue to capitalize on favorable market conditions. Looking ahead, we feel confident about the trajectory we're on. With a stronger pipeline, a growing backlog, and a sharper execution model, we're well positioned to carry this momentum into 2026 and beyond. And with that, I'd like to turn to Todd, who will review our financials in more detail.

Thank you, you're all. It was an amazing second quarter at SHMIC and a very productive first quarter for me. During the quarter, I had the opportunity to visit many of our projects across the country and spend time with the talented men and women who are out on our project sites, making it happen every day. I want to thank all of you for the warm welcome to SHMIC and for the great work that you're all doing to make SHMIC safe and successful. And like you're all, I couldn't be more excited with the momentum and the opportunities we have going into the second half of the year. With that, let's jump into the results for the second quarter. All comparisons made today will be on a year over year basis as compared to the same period in 2024. So to kick off with revenue for the second quarter of 2025, we had $128 million. That's up 42% compared to $91 million for the second quarter of 2024. SHMIC project revenue for the second quarter of 2025 was $113 million, up 35% compared to $84 million last year. The $29 million increase in revenue was driven in part by 18 million of revenue from new water and infrastructure projects ramping up and 18 million of revenue from our California Palisades fire cleanup project. This was partially offset by $7 million of lower burn on a combination of existing projects and projects winding down. Non-core project revenue for the second quarter was $16 million, up 129% compared to $7 million last year. The increase versus the prior year period was driven by the settlement of a claim on a large non-core loss project during the second quarter of 2024, which did not recur during the second quarter of 2025. Gross margin for the second quarter of 2025 was $8 million, up 126 percent, compared to negative gross margin of $31 million for the second quarter of 2024. Gross margin recognized on SHMIC projects was $15 million, up 226 percent, compared to $5 million for the second quarter of 2024. The $10 million increase in gross margin was driven by 6 million from new water and infrastructure projects ramping up and $4 million from our California Palisades fire cleanup project. Gross margin recognized on non-core projects was negative $7 million for the second quarter. favorable $29 million as compared to a negative gross margin of $36 million for the second quarter of 2024, driven by the claim settlement that occurred in the second quarter of 2024 that I mentioned earlier. This is a good time to remind our attendees as non-core projects in a loss position continue to wind down to completion, no further gross margin will be recognized. And in some cases, we could experience additional costs associated with the completion of these projects, all of which will be recognized in the period. Moving on to G&A, expenses for the second quarter of 2025 were $15 million, down 20%, or nearly $4 million as compared to the second quarter of 2024. The lower G&A expense is a testament to our diligence and the continued implementation of our transformation plan. We reported a net loss for the second quarter of 2025 of $8 million compared to a net loss of $51 million for the second quarter of 2024. This $43 million improvement was driven by favorable gross margin of $39 million. and the reduction in GNA expenses of $4 million that I mentioned earlier. Adjusted EBITDA for the second quarter 2025 was nearly flat at negative $234,000 compared to negative adjusted EBITDA of $40 million in the second quarter 2024. Turning to the balance sheet, unrestricted cash and cash equivalents at the end of the quarter totaled $21 million And the availability under our credit agreements totaled $52 million. This results in our total liquidity position of $73 million ending the second quarter. And I'll note that's a $2 million increase from where we ended the first quarter. We feel comfortable that our liquidity position ending the second quarter provides the capital needed to continue executing on our strategic and operational priorities. We ended the second quarter of 2025 with backlog of 652 million. The mix of our backlog continues to improve as Shemek projects now represent 88% of the total backlog as of the end of the second quarter. We are fully committed to winning the right way. One of the three pillars that define our growth strategy is sustainable risk-balanced backlog, which centers around a disciplined approach to how we bid work, what type of work we bid, where we bid work, all of this while remaining focused on risk balance pursuits that align with our core capabilities and strategic growth plan. We are pleased with the second quarter progress and especially pleased and excited about the momentum we have going into the second half of the year. Moving on to slide eight, We experienced stronger revenue burn on both SHMIC projects and non-core projects during this first half of 2025, as well as a slower ramp up of new work as compared to our initial guidance. In our initial guidance, we estimated non-core projects would be approximately 10% of our total revenue in the second half. And we now expect non-core project burn to be in the range of 14 to 18% in the second half of our total revenue. Our first half gross margin for SHMIC projects was 10%, while our gross margin on these non-core projects was a negative 16% for the quarter, for the first half. This creates an overall net negative mix impact on total SHMIC gross margin. We're updating our pool year 2025 guidance, and we now expect SHMIC projects revenue in the range of $405 million to $415 million, up from our initial guidance of $392 million to $410 million, with an overall gross margin on SHMIC projects between 9% and 12%. Non-core projects revenue, we now expect in the range of 80 to $90 million, up from our initial guidance of 50 to $60 million, with gross margin for non-core projects between negative 15% and negative 5%. We now expect to achieve consolidated adjusted EBITDA of between $5 million and $15 million versus our initial guidance range of $15 to $25 million. This is driven by the negative mix impact that I just mentioned earlier. With that, I want to thank those of you who are joining us on the call today. and for your continued interest in Shemek. Now back to you all.