On August 15, 2024, Shimmick Corp (SHIM, Financial) released its 8-K filing for the second quarter of 2024, revealing significant financial challenges. Shimmick Corp, a leading provider of water and other critical infrastructure solutions nationwide, reported a net loss of $51 million and revenue of $91 million for the quarter ended June 28, 2024.
Company Overview
Shimmick Corp focuses on water treatment, water resources, and other critical infrastructure projects. The company specializes in expanding, rehabilitating, and upgrading water and wastewater treatment infrastructure, building and improving water storage and conveyance systems, and constructing mass transit, bridges, and military infrastructure.
Performance and Challenges
Shimmick Corp's reported revenue of $91 million fell short of the analyst estimate of $124.15 million. The company also reported a net loss of $51 million, translating to an adjusted EBITDA loss of $40 million. This performance is crucial as it highlights the ongoing challenges the company faces, particularly with its Legacy Projects.
The company entered into a settlement agreement involving a federal lock and dam project, resulting in $33 million in additional liquidity but also a $30 million reduction in gross margin. This settlement, while providing immediate financial relief, underscores the long-term challenges associated with Legacy Projects.
Financial Achievements
Despite the challenges, Shimmick Corp achieved several milestones. The company reported a backlog of over $923 million, with more than 80% being Shimmick Projects. Additionally, Shimmick won a new cogeneration system replacement project and completed the sale of its Tracy Equipment Yard, using the net proceeds to pay down debt.
“With our transformation plan progress, the previously announced sale of the assets of the foundation business, the sale-leaseback of the equipment yard, and the Legacy Loss Project claim settlement, we have made progress to a more capital light focused business,” said Steve Richards, CEO of Shimmick.
Income Statement Highlights
| Three Months Ended | June 28, 2024 | June 30, 2023 |
|---|---|---|
| Revenue | $91 million | $155 million |
| Gross Margin | $(31) million | $(0.5) million |
| Net Loss | $(51) million | $(10) million |
| Adjusted EBITDA | $(40) million | $(2) million |
Balance Sheet and Cash Flow
As of June 28, 2024, Shimmick Corp reported total assets of $344.5 million, down from $426.7 million at the end of 2023. The company’s cash and cash equivalents stood at $22.4 million, a significant decrease from $62.9 million. The sale of the Tracy Equipment Yard contributed $17 million in net proceeds, which were used to repay borrowings under the MidCap Revolving Credit Facility.
Analysis
Shimmick Corp's performance in Q2 2024 highlights the ongoing challenges associated with its Legacy Projects. The settlement agreement provided immediate liquidity but also resulted in significant revenue and margin reductions. The company's focus on its transformation plan and new project wins are positive signs, but the financial impact of Legacy Projects continues to weigh heavily on overall performance.
Value investors and potential GuruFocus.com members should closely monitor Shimmick Corp's progress in executing its transformation plan and managing its Legacy Projects. The company's ability to navigate these challenges will be crucial for its long-term financial health and growth prospects.
Explore the complete 8-K earnings release (here) from Shimmick Corp for further details.
