Shimmick Corp (SHIM) Q1 2026 Earnings Call Transcript

Good afternoon, and thank you for joining us on today's conference call to discuss Schimmick's first quarter 2026 results. Slides for today's presentation are available on the investor relations section of our website, www.schimmick.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 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 any 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 first 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 Yorala Yal, Shimek's CEO.

Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Schimmick CFO. As always, I would like to recognize the men and women who work at Schimmick, safely and effectively delivering the projects we take on. We're all very proud of the work we put in every day that makes a real difference in communities across the states we operate in. With that, I'm going to start by discussing our financial results for the first quarter of 2026. I'm pleased to report that we are continuing to make progress on our strategy, which centers around growing our topline by bidding and winning work aligned with our expertise, winding down non-core projects, and executing at a high level to deliver consistent margins. For the first quarter, we delivered consolidated revenue of $88 million, 12% gross margin, and adjusted EBITDA of approximately $3 million. We expanded our gross margin on Chimic projects to 11%, an 89% improvement over last year. We're already seeing increasing monthly top-line revenues as the winter weather subsides and new projects start to ramp up. What's important also is the trajectory. We now have secured and continuing to secure backlog that is going to fuel our growth the rest of the year and beyond. We are excited by the progress we're making on our backlog and have achieved our highest book to burn ratio since the company went public, reflecting strong demand and improving project quality at the same time we continue to scale shimic projects as a percentage of the overall portfolio with non-core work now representing less than five percent of total backlog further supporting visibility and execution consistency going forward looking forward we expect activities on existing and newly won projects pick up as we head into the summer months july august and september are when we expect to see more visible inflection and revenue as new projects begin generating consistent burn. Meanwhile, we're continuing to win new work and our teams are well positioned to deliver consistent and growing revenues. For our non-core projects, revenue was $200,000 compared to $29 million a year ago, largely as a result of determination by the U.S. Army Corps of Engineers of the Chickamauga Lock Replacement Project in Chattanooga, Tennessee, which I'd like to address in more detail. From time to time, differences of view arise on projects including scope of work and schedules and in this instance the matter is proceeding through the customary federal process we remain constructive in our approach appreciate our clients focus on project completion and are confident that the parties will be able to reach a mutually agreeable resolution in due course importantly this situation does not affect our broader relationship with the us army corps of engineers who has been a long-term client for us with our first projects dating back to the 1940s through our legacy companies. We currently have two other projects underway with the core, one approximately halfway complete and the other one nearing completion, and these projects continue to progress as planned. As we continue to wind down non-core activities, this development further reduces our remaining non-core backlog to under 5%, allowing us to remain focused on our core priorities. Now I'd like to spend some more time digging into our progress provide an update on market conditions, and discuss our continued focus on execution. We continue to see strong momentum across our core geographies, highlighted by our ongoing success-winning work in Texas and sustained bidding activity across the platform. Importantly, the work we are booking is firm, contracts are signed, visibility is solid, and the projects we've added to backlog are scheduled to begin ramping up this year. This gives us confidence not just in demand, but in timing and execution as we move through the balance of 2026. We're seeing healthy demand across our end markets and improved selectivity in the work we pursue. This momentum reflects the collective efforts of our teams across the organization, and our focus remains on sustaining a book-to-burn profile that supports consistent growth and improved revenue visibility over time. With that backdrop, Axia continues to perform well, and we're encouraged by the growth and momentum we're seeing in the segment. The electrical business remains an important pillar of our long-term strategy, and Axios progress reinforces our confidence in that vertical as we look to further expand capabilities and market share. We're also seeing increasing opportunity in data centers, which remains an attractive and growing end market for us. Today, we have multiple active bids in Reno and in Texas, and we are in regular dialogue with those customers. While still early, the level of engagement and inbound activity reinforces our view that data centers represent a compelling growth vertical over the medium and to long term. From a commercial standpoint, the environment looks very similar to last quarter, with a strong and growing backlog, a healthy pipeline of work, and several pending items we expect to convert over the next quarter or two. Our overall 24-month pipeline remains robust with expected 600 million to a billion in bidding volumes per month. Looking forward, our pipeline continues to be a real strength, allowing us to grow our revenues and margins while being selective and strategic about what we pursue. Our elevated level of bidding activity translated directly into meaningful backlog growth during the quarter, with the total backlog increasing to 944 million at the end of the first quarter of 2026. This represents our highest backlog level in more than two years, reflecting both improved win rates and continued discipline around the work we pursue. This momentum is also evident in our book to burn ratio of 2.6 in the first quarter. During the quarter we booked 289 million in new work. Taken together, these wins enhance revenue visibility and support our expectation for accelerated growth as projects begin to ramp up over the course of the year. These new projects include major flood protection and stormwater infrastructure projects in California, as well as wastewater expansion work in Texas, reflecting strong demand for our core capabilities across our target markets. In California, we were awarded several water resources projects that speak to the critical nature of our work and our in-depth experience in the state. In Northern California, the Vista Grande drainage basin improvements project represents a large-scale modernization of stormwater infrastructure designed to address chronic flooding challenges and improve resilience for the surrounding community. The project involves complex underground construction and integrated civil, mechanical, and electrical scopes aligning well with our core self-performed capabilities. We were also awarded additional flood protection work in Napa, where we will construct new flood walls as part of the county's broader long-running flood management program. This project further expands our presence in Northern California and reinforces our role in delivering essential infrastructure that protects communities and local economies. And in Texas, we continue to see attractive opportunities tied to population growth and long-term infrastructure investment. During the quarter, we were selected for a wastewater treatment plant expansion project in Austin, supporting the city's efforts to to increase capacity and meet rising demand. The scope includes complex concrete structures, underground systems, and process-related infrastructure, and reflects continued demand for our technical expertise in water and wastewater markets. Our strategy is focused on improving execution, so revenue growth translates into stronger and more consistent net income. That starts with operational discipline. We've been implementing targeted enhancements across the business to improve visibility, accountability, and decision making as we scale experience leadership is a key part of that in april we announced the appointment of sarah tacker as executive vice president and chief operating officer we continue to bolster our management team with hands-on operational experience at scale which is driving more disciplined project execution and risk management we're also strengthening our project controls and technology giving us better insight into cost schedule and productivity. This allows us to identify issues earlier and manage performance more proactively. Centralized procurement is improving purchasing efficiency and cost control by leveraging our scale and standardizing processes across the organization. And talent retention and acquisition remain a top priority for us. Having the right people in place is critical to executing our strategy effectively in a competitive labor market. Additionally, we continue to advance our shift towards more collaborative contracting models. Subsequent to Core RAND, we were selected for a project with California Water Service for a wastewater treatment plant in Southern California, delivered through a progressive design-build contract with an estimated construction value of $50 million. While this opportunity is not reflected in our Core RAND backlog, it showcases demand for our capabilities and supports our strategic focus on projects that give us an opportunity to partner with our clients earlier in the project life cycle. These projects support our strategy toward risk-balanced contracts, where we provide value to our clients through our technical expertise. With that, I'd like to turn to Todd, who will review our financials in more detail.

Thank you for joining us today. The Shemitic team has delivered another solid quarter of performance, And we are seeing our strategic changes over the past year continue to drive results, not only drive year-over-year improvements, but more importantly, establishing the foundation for continued growth and profitability moving forward. Before I hit the financials, I just want to echo your role in thanking all of the talented men and women across Chemik. I thank each of you for your continued commitment to executing the strategy, your focus on safety, which is the most important thing we do, your commitment to the quality of the work we deliver to our clients every day, and your dedication to executing with excellence. Your contributions have had a significant impact on the achievements we've made over the past 15 months and put us in a strong position to continue growing the business and winning the right way. Now let's jump into the financial results. I have revenue and gross margin in slide eight, but I will talk about the overall performance for the quarter and reference additional information that is available on our 10-Q filing posted to our website. All comparisons I make will be on a quarter-over-quarter basis as compared to the same period in 2025, unless otherwise noted. Schimmick project revenue for Q1 2026 was $88 million versus $93 million in Q1 of 2025. The net difference of $5 million was driven by prior year projects reaching completion during 2025 or nearing completion and winding down earlier this year, combined with a lower burn on new projects, which we will continue to see ramp up throughout 2026. Non-core project revenue for Q1-26 was $200,000, nearly flat, down from $29 million in Q1 of 2025. The $29 million decrease was driven by the termination of the Chickamauga lock replacement project, as well as a $10 million impact from the continued progress we've made in moving all non-core projects to completion. I've discussed the negative gross margin impact from non-core projects on our total gross margin on prior calls, and I couldn't be more excited to end the quarter with non-core backlog, now less than 5% of our total backlog. This means we will continue to see favorable mix impact on total gross margin moving forward on a year-over-year basis. Chimic consolidated total revenue for Q1-26 was $88 million as compared to $122 million in Q1 of 25. Schimmick project gross margin was $10 million per Q1-26, up $5 million, or 89%, as compared to $5 million in Q1 of 2025. Gross margin as a percentage of revenue was up significantly to 11% per Q1 of 2026, versus 6% per Q1 of 2025. The $5 million increase in gross margin was driven by $3 million from new projects and $2 million from existing projects. The non-core project gross margin was $1 million for Q1-26 as compared to negative $1 million for Q1 of 2025. The $2 million increase in gross margin was driven by a positive outcome from a project closeout, as well as cost overruns on non-core loss projects during the first quarter of 2025 that did not recur this year. Schmidt consolidated total gross margin for Q1 2026 was $11 million of $6 million, or 132%, compared to $5 million of gross margin in Q1 of 2025. Total gross margin is a percentage of revenue improved to 12% from 4% in Q1 of 2025. G&A expense for Q1-26 was $14 million flat as compared to Q1 of 2025. This is as we continue to optimize our overhead while growing the business. Net loss for Q1 was $4 million, favorable $6 million, or 55%, as compared to a net loss of $10 million in Q1 of 2025. Adjusted EBITDA for Q1-26 was $3 million, as compared to negative $3 million in the first quarter of 2025. The improvement was driven by the significant increase in gross margin from Schimmick projects on a year-over-year basis. Turning to liquidity, we ended the first quarter with $34 million of liquidity. The $34 million consisted of unrestricted cash, cash equivalents of $15 million and another $19 million of availability under our credit agreements. New awards booked during Q1-26 were $289 million, a sequential increase of $150 million from Q4 of 2025, giving us a book-to-burn of 2.6 for the quarter, which is the highest book-to-burn achieved since becoming a public company. We ended the quarter with total backlog of $944 million. On slide nine, I have our 2026 full-year guide. As I mentioned on our last call, we expected a slower start to 2026, and largely the first quarter was in line with our expectations. We expect quarter-over-quarter sequential improvement throughout the year as these new project awards start to ramp up. Despite the termination of the Chickamauga Lock replacement project that I mentioned earlier, we are reaffirming our full year 2026 guidance. We expect Chimic consolidated revenue to grow year over year between 12 and 22 percent. That is 17 percent at the midpoint, representing approximately 550 million to $600 million of work put in place for the full year 2026. We also expect adjusted EBITDA to increase year-over-year between 200 and 500 percent. That's 350 percent at the midpoint. So we would finish the year of adjusted EBITDA in the range of $15 to $30 million. So with that, I want to thank you for joining us today and for your interest in Shemek, and I'll turn it back to you, Rob.

Overall, we are energized by our first quarter performance. We delivered our highest book-to-burn ratio since becoming a public company and ended the quarter with the largest backlog we've reported in more than two years. Just as importantly, we continue to make progress winding down non-core work, further improving backlog quality, and positioning the business for more consistent execution and sustainable growth. As we look ahead, we believe the momentum exiting the corridor provides a solid foundation for the remainder of the year. We look forward to updating you on our progress as we move forward in 2026. Operator, you may now open the line for questions.

Thanks for 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 a panelist.

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 to ask your question we'll now pause the moment to allow the queue to assemble our first question will come from aaron sapala with craig hallam your line is open please unmute your audio and video and ask your question yeah hi you're all and todd thanks for taking the questions um hi uh maybe first for for me just on um you know todd you kind of just talked about it on backlog but just wanted to kind of confirm um so chick lock you know out of out of backlog um and then for the guide you know revenue and ebitda um can you just kind of talk about the

the impact there you know reiterating the guidance any other financial impact and then um sounds like you don't expect any impact on your ability to to go out and uh win and bid on new work from from that yeah maybe i'll start and then turn over to todd um thanks for the question so yeah generally uh we're uh even though there's a uh reduction in in revenue from from from chick lock uh we we believe we can uh uh we believe we're gonna hit the uh the the guidance on the revenue side uh we may we may trend towards maybe a little bit on the lower side but uh we think uh based on the

the really strong backlog we got over the over this quarter and and everything that we're uh planning to to to book uh that's pending uh we have a really good start to the year and uh we we expect to see pretty significant revenue growth here the rest of the year yeah i would just add to that um you know in 25 we burned in in non-core um just under 100 million and we didn't expect it to burn anywhere near that and in 26 so it's not as big of an impact as um when you're looking at it on a year-over-year basis and then the second thing

to your all's point with um you know 289 million worth in a new awards book just in the first quarter we have uh we feel very confident that uh the numbers are achievable and and going back to the to the ability to win work we're bidding uh just like we have been uh we don't expect uh uh any uh any slowing down there and uh like i like i said we have some pending awards but we're continuing to bid at about the same clip that we have been for the last six eight months good um thanks for that and then just on you know margins um good performance in the quarter for the core business um q's kind of talk about you know confidence there you know margins that are in backlog and and what you're bidding and then just any you know how you're kind of navigating impact from higher commodity costs uh in that as well yeah we're generally as far as higher commodity costs uh new work we're bidding uh that's all getting built into the uh built into the pricing so if you're going to win win a project that's so the the uh the inflation and and supply chain issues will be built into the to uh to our pricing so we don't expect any issues there same with same with fuel uh and we're managing the rest of it or the for the book of business that we have i expect we're gonna we're gonna continue to grow on the on the gross margin side and start to really get into those 12s and the 13s as we get through and start really burning the work that we have won in 2025 since Todd and I joined.

Yeah, and I would just add to that, you know, when you're modeling it out with the non-core that we did have in backlog ending 2025, right? And that was a significant drag on, even though there are lost projects with zero margin, there's always costs that occur to keep those projects operating. So when you take that kind of drag off of it, you know, it may be a little lumpy as construction business is, right? But an 11% print on shimmick work is very encouraging.

Yeah, good. And then that kind of just the last question, you know, you kind of started to touch on it there. Just, I mean, cash flow and the outlook there sounds like there might be or might have been some drag on, you know, completing some of the legacy work. So just, you know, kind of outlook for cash flows as some of these new projects ramp up to you.

Yeah, the less legacy work we have, the better for our cash flow. Generally, that has been the case. So we expect improvement there as well as not only as we really just burn all of the legacy work, non-core work, but also as these newer projects get online and start generating upfront cash to help with the cash flow. So we're very optimistic about the rest of the year on that side as well.

Yeah, I would echo that very optimistic on liquidity. the rest of the business outside of the legacy projects non-core projects you know or have generated cash and continue to generate cash so very optimistic good that's good to hear um thanks for taking the questions i'll turn it over thanks your next question will come from jerry sweeney with roth please unmute your audio video and ask your question uh good afternoon you're wrong thanks Thanks for taking my call. Hi, Jeremy.

I wanted to talk about gross margins a little bit further. Obviously, I think you highlighted selectivity, your ability to, I guess, be a little bit more selective with projects on a go-forward basis.

And I think you printed 11% for Shimmick projects this quarter. that those projects that you're seeing in that are coming through today when were they bid and what were they bid at versus what you're bidding today um yeah good good question so you know within the shimic portfolio there are projects anywhere between 10 and 20 percent but as we as we get uh in a better position from a backlog perspective uh we're able to be more selective with what we bid because we have the the kind of the the core uh backlog already in place we're now we're now in that position uh we're gonna we're gonna inch that up to about two and a half times as far as you know revenue backlog versus revenue uh so that's our goal as through as the rest of the year unfolds but uh generally having that kind of a strong backlog now now allows us to bid at higher margins or pick the projects to bid that we can get at higher margins so i expect that to to continue to that 11 to continue to go up from there from here and with over 900 million in in backlog you're starting the book business into 27 and later correct yeah our average job is about two and a half years so it's it's we We have a year long job, we have four year jobs, but if you average it out, it's about two and a half years. So we're setting ourselves up really well for 27 and some of it into 2028, yeah.

And then switching gears to data centers, everybody's talking about data centers and obviously you've rebranded Axia, but the way we sort of been dissecting the data center work is it probably takes between two and three years between you say, hey, I wanna build a data center to site selection permitting to maybe shovels hitting the ground. And we're starting to see a lot of dollars come through on some front-end E&C companies on the concrete side. Arguably, the electrical is a little bit further along in that curve. And I know you're going out to data centers, but what I'm trying to say is as that business is starting to accelerate and you're getting into that business, there's probably a dearth of probably qualified electricians. So we should start to see more and more opportunities on the electrical side for you as we move through this year into next year. Is that a fair assumption?

That's a fair assumption. And also, I would say the types of work that we're bidding within the data center world is in the mechanical and the electrical side. So we're not really bidding a lot of the kind of the artwork, concrete pieces of it. that fits this type of work fits us better uh so uh water treatment water purification electrical data center the racks the the switch gear the medium voltage the the and then even the power generation side so uh we have we have a lot of opportunity there that both fits uh our the axia brand the electrical brand business as well as the the core shimic business as well from a water treatment process mechanical piece got it yeah i was just using concrete as like that's sort of the first step in your after that.

Yeah, exactly. At what point would a data center or, I assume you're working with the data centers would be other ENT companies, but how much visibility do you have between bidding and maybe the start of the jobs that are related to the data center?

It's usually, again, it's not that different from our public works projects. So, you know, it's, we bid it And then over the next few months after that, we will know if we want it or not. So we're bidding actively right now. And I think the good news is a lot of these data centers are really shifting towards Texas, which is where we're growing as well. So that has brought in a lot more opportunity. And then on the West Coast, it's Reno. That's kind of the work center in Reno, which also is a great, easy place for us to work. So we're in the right place right now.

One last question. I know the legacy work was only $200,000, and there were some of the Chickamauga negotiations with the Army Corps. How much, if that had not occurred, I'm just curious, you know, how much sort of revenue from Chickamauga would have come through? because you had that $88 million in revenue, you had a weather hit, and you had Chickamauga. Just trying to levelize what happened in 1Q as well, if that makes sense.

Somewhere around $20 million, $30 million this year.

Okay.

So, yeah, it went down more than half.

Okay.

And like we said, I mean, at the end of the day, this helps your margin profile, it helps your cash flow, and it's going to go through the standard federal process. correct yeah that's yeah obviously it's a yeah it's a there's a established process there and we're working we're we're confident we're going to get to an amicable solution it takes a while with the federal process but in the meantime everything you said about backlog and and cash and everything else is very accurate and that's a legacy from like 2017 or 2018 it's it's I think it started in 2004 originally but not with you yeah we did we did that project in 2017 pre-covid you know long time ago uh along with a couple other of these legacy projects so we're looking forward to really getting them done and moving forward new work okay great congratulations i you know very nice quarter on the margins and i understand the weather so thanks for your time and talk to you in a little bit. Thank you.

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

We've had another strong quarter aligned with our expectations and the strategy that we put in place back in 2025. And a lot of the backlog and our margins, gross margins, are reflecting that. We're still in the early phases of our growth, but we expect the rest of the year to continue to improve and have a very strong year and looking forward to the next quarter. Thank you.