Shimmick Corporation

Good afternoon, and thank you for joining us on today's conference call to discuss SHMIC's fourth quarter and full year 2025 results. Slides for today's presentation are available on the investor relations section of the website, www.shmic.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 materially from our forward-looking statements if any of our key assumptions are incorrect. We identify the principal risk 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 financial measures to comparable GAAP financial measures. With that, it is my pleasure to turn the call over to Yoral Yal-Shimmick, CEO.

Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, SHMIC's CFO. Before I get started, I'd like to recognize the women and men who work at SHMIC, safely and effectively delivering the projects we take on as good stewards of the communities where we work. Our work is supporting our nation's infrastructure, and we are all very proud of it. With that, I'm going to start by discussing our financial results for 2025. We finished 2025 strong and in line with our expectations in what was largely a transformational year for Schumach. We made meaningful progress on the strategic priorities we introduced at the beginning of the year. As a reminder, our strategy remains centered on three pillars. One, growing the top line by bidding, winning, and strategic risk balance work aligned with our expertise. Two, completing and winding down legacy low-margin non-core projects. And three, driving operational improvements to deliver consistent margins and improve G&A leverage. We made substantial progress across all three pillars throughout the year and still believe we are in the early stages of the new Scheme we're building. These priorities have strengthened our business fundamentally, evident by our 2025 results. As we turn to our 2025 results, for the full year, we delivered a consolidated revenue of $493 million, 7% gross gross margin, and adjusted EBITDA of $5 million. Full-year 2025 SHMIC projects revenue was $395 million, a 12% increase year-over-year. These projects now represented 75% of our total revenue in 2025, highlighting the concentration of activity on more strategic work. In turn, we expanded our gross margin on SHMIC projects to 10%, a 400 basis point improvement over last year. For our non-core projects, 2025 revenue was $96 million compared to $125 million in 2024, reflecting our focus on effectively advancing the wind-down of these projects. We also maintain a strong liquidity position, finishing the year with a total liquidity of $44 million. As you can see from our fiscal year results, we've made substantial progress executing our plan, specifically narrowing our focus to projects that leverage our core strengths. Now I'd like to spend some time speaking about that progress, providing an update on our wins, what are we seeing in the market, and the operational improvements we are making. As we look at the market today, our momentum continues to build. Our core markets are continuing to see consistent investment, and we're able to selectively bid projects that advance our strategy. This means we are increasingly able to improve our resilience by diversifying our customer base, focusing on growth markets geographically, and lowering the risk profile of our book of work. Our backlog has grown meaningfully and remains well above a one-to-one book-to-burn ratio, which is an important indicator of the underlying strength in demand and our ability to win. We expect our book-to-burn ratio in the first quarter of 2026 to remain well above one as well, reinforcing the trajectory we've been on. Looking ahead to 2026, our pipeline volumes continue to be a real strength, allowing us to grow our revenues and margins while being strategic about what we pursue. Our wins in this quarter, some of which you are seeing on the screen, continue to be aligned with our strategy and reflect the strength of the market. Our bidding activity has translated directly into backlog growth, which has increased to $793 million at the end of our fiscal year, with $139 million in new awards, and ended up near the numbers we started the year with, which shows the stabilization of our backlog as we continue to complete non-core projects. Additionally, we have been awarded contracts worth $128 million that added to our backlog so far in 2026. And lastly, after the year concluded, we have been selected as preferred bidder on projects totaling $234 million, with projects that are predominantly in our core sectors of water and electrical construction and are mostly located in California and Texas. We are currently negotiating these contracts or waiting for awards from our clients, which we expect to happen over the upcoming weeks and months. From a commercial standpoint, the market environment looks relatively unchanged from last quarter, with a strong and growing backlog, a healthy pipeline of new work, and several pending items we expect to convert over the next quarter or two. Our overall 24-month pipeline remains robust, supporting 600 million to a billion of bidding volumes per month. Last year, we explained our approach to position Shimmick to compete and win in collaborative delivery markets. Those efforts are now paying off. This quarter, we expect to announce our first Progressive Design Build Award since I joined Shimmick, a milestone that reflects the credibility it builds and the value we bring to owners through early engagement and partnership. This project is valued at approximately $55 million, located in Southern California, and will allow us to bring our expertise in wastewater treatment as well as specialty electrical work. Instead of competing through low-bid contracting, we will be working with the client to provide value through the pre-construction phase, building trust and alignment before construction begins. We expect to negotiate the construction contract at the end of 2026, with the construction beginning in 2027. This is exactly the kind of work we want to be doing. It de-risks the business, improves predictability, and aligns our interests with the client from day one. Another collaborative contracting method we are focused on is Construction Manager General Contracting, the CNGC method. We have completed a few of these projects in the past and continue to see strong momentum in our pipeline for these lower-risk projects. One such project, an estimated $200 million effort that supports bus infrastructure as Los Angeles prepares for the 2028 Olympics, is approaching the construction phase. We expect to announce this milestone in the second quarter and start construction shortly thereafter. We're also progressing a number of opportunities and high-growth protocols. The data center market continues to evolve quickly, and while we're not yet in a position to announce a new contract, we are actively pursuing several meaningful opportunities. These include potential engagements with large operators in Texas, Washington, and Nevada, and should any of these materialize, they would represent significant contributions to our pipeline. I've talked about pairing the pipeline improvements with operational improvements over the last year. We are making progress in that front as well. We believe we can support strong top-line growth without significant increases to our SG&A spend, and we continue to adopt and transform how we do business and use those SG&A dollars effectively. We've strengthened our project controls, enhanced our procurement capabilities, and expanded the use of Power BI and other AI-based analytical tools to improve visibility, decision-making, and accountability across the organization, spanning all of our critical functions like safety, quality, and human resources. In project controls, we now have the capability to manage a much larger number of contracts with a higher level of rigor. The structure we put in place allows us to scale without sacrificing control, which is critical as our backlog continues to grow. On the procurement side, we've added expertise and systems that significantly de-risk the business. We are improving risk management over one of the biggest cost drivers in our operations, with more disciplined and transparent oversight across the company. This gives us the ability to manage supply relationships more strategically and ensure we're extracting real value from our spend. We've also made real progress on the talent front. Our attrition rates continue to move in the right direction, which is a direct reflection of the work our teams are doing to strengthen employee experience and create a more supportive and performance-driven environment. Retaining top talent is critical to executing our long-term strategy, and the data we're seeing gives us confidence that we're on the right track. In short, the market remains healthy, our competitive position continues to strengthen, and our backlog and pipeline dynamics are moving in the right direction. We are operating with greater efficiency, executing with more discipline, and building the foundation for sustained growth. With that, I'd like to turn to Todd, who will review our financials in more detail.

Thank you for joining us today. We're pleased to report another solid quarter. and a strong full-year performance that reflects the operational improvements and disciplined execution you're all outlined earlier. Before I dive into the numbers, I want to thank the entire SHMIC team. Your focus on safety, your commitment to quality, and your consistency in executing with excellence have all played a critical role in our results this year. Thank you for everything you do. With that, let's jump into the financial results, beginning with slide 8. As a reminder, all comparisons made today will be on a year-over-year basis as compared to the same period in 2024, unless otherwise noted. SHMIC project revenue for Q4 2025 was $84 million, up 4% compared to $81 million in Q4 of 2024. The net increase of $3 million was primarily driven by our new projects ramping up. Non-core project revenue for Q4 2025 was $16 million, down $24 million as compared to Q4 2024. This is reflective of the fact we have less non-core in our backlog to burn off this year versus prior year. And I will point out that non-core projects in total were close to 90% complete ending 2025. SHMIC consolidated total revenue for Q4 2025 was $100 million as compared to $104 million in the prior year. Moving on to gross margin, Schimmick Project gross margin was $10 million for Q4 2025 of $8 million, or 400% compared to $2 million in Q4 2024. Gross margin as a percentage of revenue was 12% for Q4 2025 versus 3% in Q4 2024. The $8 million increase in gross margin was driven by $6 million from new awards to and $2 million from existing projects. Non-core project gross margin was flat for Q4 of 2025, as compared to negative $23 million for Q4 of 2024. The $23 million increase in gross margin was driven by cost overruns on non-core loss projects during Q4 of 2024 that did not recur this year. SHMIC consolidated total gross margin for Q4 2025 was $10 million, up $31 million compared to a negative $21 million gross margin in Q4 of 2024. Total gross margin as a percentage of revenue improved to 10% from a negative 20% in Q4 of 2024. G&A expense for Q4 2025 was $11 million, favorable 32% or $5 million as compared to $16 million of G&A in Q4 of 2024. The favorable impact was the result of our continued transformation of the business. Net loss for Q4 2025 was $3 million. favorable 37 million as compared to a net loss of 38 million in q4 of 2024. adjusted evita for q425 was 4 million as compared to negative 27 million in q4 of 24. the improvement was primarily driven by the increase in gross margin combined with the decrease in sgna turning to liquidity If you recall, we ended Q3 25 with $48 million of liquidity. We ended Q4 2025 with liquidity of $44 million. The $44 million consisted of unrestricted cash and cash equivalents of $20 million and availability under our credit agreements totaled $24 million. We remain comfortable that our liquidity position provides the capital needed to continue executing on our strategic and operational priorities. New awards booked during Q4 25 were $135 million, a sequential increase of more than $39 million from Q3 2025, giving us a book to burn for the quarter of 1.4 times. We ended the quarter with total backlog of $793 million. Turning to slide 9 for the 2025 full-year results, Schimmick Project's gross margin was $397 million for the year, up 41 million, or 12%, compared to $357 million in 2024. Non-core project revenue was $96 million for the year, compared to $125 million in 2024. SHMIC consolidated total revenue for 2025 was $493 million, up 13 million, or 3%, compared to $480 million in 2024. SHMIC project gross margin was $40 million, or 10%, as a percentage of revenue, This is a $28 million increase compared to $12 million, or 3% in 2024. Non-core project gross margin was negative $7 million, or negative 7% as a percentage of revenue. This is a $61 million increase compared to negative $68 million in 2024. SHMIC consolidated total gross margin was $34 million for 2025. making gross margin 7% of revenue overall. This is a $90 million increase compared to negative $56 million gross margin in 2024. Adjusted net loss was negative $15 million in 2025 as compared to negative $81 million in 2024. Adjusted EBITDA for 2025 was $5 million, favorable $66 million from negative $61 million adjusted EBITDA in 2024. Again, new awards booked during Q4 2025 were $139 million, a sequential increase of $39 million from Q3, giving us the book-to-burn of 1.4. We ended the quarter with total backlog of $793 million. Our backlog mix continues to improve with SHMIC projects now representing close to 90% of our total backlog ending 2025. Additionally, we have $128 million in new awards added to backlog as of the close of February 2026, and we have another $234 million of additional new awards that were pending fully executed contracts as of the end of February 2026. Turning to slide 10 in our 2026 guidance, To set the stage, I want to call out that some SHMIC projects in California and Texas experienced slower burn due to unusual heavy rainfall in California and cold weather in Texas, which limited field activity. In addition, some of our newly awarded contracts have taken a bit longer to ramp up than normal. While these projects experienced some shift to the right, They are back on track. While we anticipate a slower start to the year due to this weather, we expect quarter-over-quarter sequential improvement throughout the year as new project awards ramp up and represent a growing share of our project mix. We expect SHMIC consolidated revenue to grow between 12% and 22%, 17% at the midpoint, representing approximately 550 to 600 million of work put in place for the full year of 2026. Adjusted EBITDA is projected to increase between 200 and 500%. That's 350% at the midpoint, putting adjusted EBITDA in the range of 15 to 30 million for the full year. With that, we are confident 2026 will be a great year for Shemek. I thank you for joining us today and for your interest in Shemek. Now back to you all.

2025 was a pivotal year for Shemek. We delivered results in line with our expectations, executed with greater discipline, and made meaningful progress on the strategic priorities we set out at the beginning of the year. Our focus on bidding and winning strategic risk-balanced work, winding down legacy non-core projects, and driving operational improvements is reshaping the company and setting us up for long-term success. The improvements we're seeing in backlog growth, project execution, talent retention, procurement discipline, and project controls all point out to a business that is operating with more predictability, resilience, and focus than a year ago. Our pipeline remains robust, our market backdrop is healthy, and we're winning the right work, work that is aligned with our expertise and our long-term value proposition. While we recognize there's still more work to do, we are moving in the right direction, and our progress in 2025 gives us confidence in our ability to advance our journey to make Shemek a top infrastructure provider in the market and delivering value to our shareholders. We look forward to updating you on our progress as we move forward in 2026. Operator, you may now open the line for questions.

We will now move to our question and answer session. At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will receive a message on your screen asking to be promoted to panellist. Please accept. Wait a moment. And once you've been promoted, you will hear your name called and you may unmute your video and audio and ask your question. We will pause a moment to assemble the queue. Our first question comes from Jerry Sweeney with Roth. Jerry, is it connecting now? One moment, please. You may now unmute your video and audio and ask your question.

Good afternoon, five-year-old. Thanks for taking my call. Hey, Jerry. How are you? I forgot I was going to be on video. Otherwise, I would have dressed up a little nicer. I'm all good. So, anyhow, congratulations, obviously, making nice progress as, you know, continuously push some of the legacy business behind you. And there's a lot of initiatives on the forefront. So a couple questions around, you know, I'm going to use gross margin as sort of the overlying aspect, but there's some progressive design awards, I think CMCG opportunities and electrical awards.

opportunities you know how does this all play through and how does that impact margins as we go through 2026 yeah no i think i think uh overall gross margins are gonna we expect them to go up um i think it's it's always a um uh it's always a function of the mix of projects obviously so however some some projects tend to be closer in the high teens sometimes Some projects tend to be in the lower end, in the teens. But we're going to – we're watching that balance very carefully to make sure that we're continuously making improvement on the gross margin. But what you'll also see at the bottom line is as we grow the revenues – We're very focused on controlling the SG&A around the levels that it is today for 2026, and that's also going to be contributing. It's not just top gross margin, but it's the more efficient SG&A running a larger book of business.

Got it. Now, I have a question on SG&A, but before I get there, what about just the – I think you mentioned you were bidding $600 million to $1 billion a month, but, you know – How does the backlog look? Obviously, I think Texas has been very strong with some of our other companies. I mean, there's always water projects to do in California. But, you know, what's your visibility and feeling on just the overall spend and sort of the macro environment across your territories?

Yeah, it's great, actually. Great question. So really very focused in California and Texas like we've been along with the Pacific Northwest. Water-wise, Texas is very active. California is always active, like you mentioned. So we're seeing opportunities, like there's really no shortage of opportunities going in the next 12 to 24 months in that kind of volume, which then we don't need all of it at our win rates, but that gets us to be more selective, more strategic about we really want to be California, Texas, Pacific Northwest, and focus on those markets and grow from there. So it really allows us to pick the right jobs with lower competition, maybe higher margins, more strategic for the future. So as far as kind of overall pipeline perspective, it hasn't let up in the last six months at all.

Gotcha. And then circling back, SG&A came in just shy of $11 million. I think you indicated that maybe that's a good number to use at least for 2026. One, I want to see if that's accurate. And then two, how much more revenue can you add prior to maybe starting to invest a little bit more in the SG&A front?

Yeah, so I think what we had in 2025 is a reasonable number to assume for 2026 approximately.

Okay, so that's 54.5 million.

Yeah, somewhere around there. And I think, you know, as we do that, the revenues are going to go up. That's what we're guiding here. And to the second part of your question, I think we're going to be fine kind of in that range, plus or minus, in that mid-50s range up until about 750, honestly.

okay great all right well i appreciate it i'll uh 26 um in the gna for the fourth quarter right it was a little lower than you know in previous quarters but as you model that out for 26 i think that 14 you know number is a good number good run right got it understood okay next time

Our next question comes from the line of Jerry Sweeney with Roth. Please unmute your audio, video, and ask your question. Apologies, this question comes from Aaron Spahala with Craig Hellam Capital Group. Please unmute your audio and video and ask your question.

Yeah, hi, Jeroen and Todd. Thanks for taking the questions. Maybe first for me on the guidance for 2026, can you just kind of talk about some of the puts or takes there, especially on the EBITDA range? And then just maybe how much of non-core revenue and kind of margin gross profit are you looking for for the year?

Yeah, good question. So, yeah, so we've simplified the guidance a little bit this time, but looking at the non-core work, we are expecting to burn through pretty much all of it. It's right now about 11% of the backlog. There's going to be very little left, if any, into 2027. And then that's also kind of along the lines of we've booked forward losses on those, so you're going to assume those at 0%. They're going to continue to kind of impact overall aggregate margin. But I think as far as the gross margin, the real key is how fast can we get the new work to be kind of hitting its stride, all these projects that we want and now starting. How fast can they start generating revenue and margins? That's really the story of 2026 for us. As far as backlog goes, we finished the year almost at where we started. So we really stabilized very close to where we started. And now with the wins that we've announced today, as those contracts come to fruition, we have a clear path to getting over a billion dollars in backlog. And it's just going to be a matter of how do we get those jobs going quickly throughout the summer.

Did I answer your question? Yes. Yeah, no, that was great. Thank you. And then maybe on the electrical infrastructure side of things, you kind of talked about, I think, in the release and the call, some pending awards on the electrical side of things. So it sounds like you're starting to see some traction there. Maybe just a little bit more color. And I think you noted significant kind of potential there. Just what types of projects and project sizes are you looking for there?

Yeah, so electrical business, our electrical business is a low-voltage, medium-voltage electrical business that does a variety of sizes of projects. So we have projects that are very small, you know, $5 million, $10 million, all the way to $200 million, kind of like more of the larger Schimmick projects, and we're able to do a range in that up and down in that range. Texas is extremely strong. We're bidding a lot of work in Texas. We're continuing to bid a lot of work in California, continuing to support the larger SHMIC projects with our electrical capabilities. So there's a lot of activity. And what I'm tracking every month is that the amount of AXIA work we're bidding is becoming a higher percentage of the overall bids pretty much every month. So I think it's just a matter of time. We're really hitting our stride now on the bidding side. We're going to see some serious increase in our backlog for Axia work, and that will translate to revenue in a quarter or two.

Good. And then on the legacy or, you know, the non-core projects, You know, good kind of execution this quarter, and it sounds like they're 90% wrapped up. You just kind of talk about it. It seems like you have a good handle on wrapping those up, but maybe just a little bit of color there would be helpful.

Yeah. Yeah, I mean, we're moving along. You know, it's really two projects at this point that are active that's left, and we're going to get through those this year. You know, the end of these larger kind of more complicated projects, there's always some risk at the end of them to close them out and cost lower runs, but we're managing it, and we're pretty comfortable that we're going to – that's going to really start decreasing as part of our revenue, especially in the second half of this year.

Yeah, it was nice to see, you know, flat gross margin, which, you know, you would expect to see outside of, you know, some minor costs related to legal and other factors. But these are non-core loss projects, right, with zero margin. But when you look at our total gross margin over the year, quarter over quarter, you know, 4%, 6%, 8%, 10%. You see as that, like you all mentioned the mix, right? So non-core is becoming such a small percentage of the mix, and especially given the strong wins, you know, with $330 million in new awards in the second half and already starting just through February, right, with $128 million. 234 pending. So it's a step change, right? And so we'll see that favorable mix throughout 26.

Right. Yeah. Looking forward to it. Great. Thanks for taking the questions. I'll hop back into queue. Thanks. Thank you. See you.

There are no more questions at this time. I'd now like to turn the call over to Ural for closing remarks.

We've had another strong quarter and a strong year to finish 2025. It was a year of change for Shemek, and we've made a lot of operational improvements and made a lot of progress in getting through the non-core projects. So we're very optimistic about 2026 and beyond for our company. And these new awards that we've announced and booked are a good indication of that. As we shift towards more of the work that we've won in a risk-balanced and effective way, our margins are going to improve both bottom line and top line. So we're really looking forward to a great 2026. Thank you all for joining.