Shimmick (SHIM) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ural Yal
• Executive Vice President and Chief Financial Officer - Todd Yoder

TAKEAWAYS

• Revenue -- $136 million, representing a decline from $142 million in the prior year quarter due to a $36 million reduction in noncore project volume.
• Shimmick Projects Revenue -- $136 million, increasing 28% year over year as new projects ramping up contributed $69 million in volume.
• Net Income -- $1 million, marking the first quarter of GAAP profitability since the third quarter of 2023.
• Adjusted EBITDA -- $9 million, representing a 106% sequential increase and the fifth consecutive quarter of positive adjusted EBITDA.
• Total Backlog -- $907 million, with Shimmick Projects now comprising 98% of the total portfolio.
• Pending Awards -- $401 million, which management expects to convert into contracted backlog within the next 90 days.
• Total Backlog and Pending Awards -- $1.3 billion, an increase of 33% compared to the prior year.
• Liquidity -- $53 million, an increase of $20 million from the second quarter of 2026 driven by improved receivable timing and project closeouts.
• Cash Flow From Operations -- $10 million, the first positive result for this metric since the fourth quarter of 2024.
• Working Capital -- $11 million, representing the first positive balance for the company since its initial public offering.
• Full Year Adjusted EBITDA Guidance -- $20 million to $25 million, which management narrowed from the previous range of $15 million to $30 million.
• Full Year Revenue Guidance -- $500 million to $525 million, representing 4% growth at the midpoint.
• Shimmick Projects Gross Margin -- 13%, improving from 9% in the third quarter of 2025 due to a favorable mix of higher-margin new work.
• Consolidated Gross Margin -- 12%, compared to 8% in the prior year period.
• Non-GAAP Diluted EPS -- $0.08, compared to an adjusted loss of $0.01 per share in the third quarter of 2025.
• Year-to-Date Book-to-Burn Ratio -- 1.3x, reflecting a total of $614 million in new awards booked over the past four quarters.
• Interest Expense -- $2.7 million, including a $1 million increase primarily from the accelerated recognition of unamortized debt issuance costs.
• SG&A Expenses -- $14.3 million, remaining flat year over year as the company maintained cost discipline during revenue growth.
• Self-Performance Rate -- 77%, representing the average portion of revenue executed by the company's internal civil, mechanical, and electrical crews.
• Electrical Backlog Target -- 30% or more, with management expecting the electrical business to grow from its current high-teens share of total backlog by 2027.
• Refinanced Loan Interest Rate -- 320 basis points lower than the prior rate following the early repayment and refinancing of an equipment loan.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• CEO Yal stated, "Ramp-up timing can still create quarter-to-quarter variability and conversion has taken longer than we had initially expected," referring to the transition of pending awards into active construction revenue.
• Yal noted that while the company passes on or hedges fuel and commodity price increases, high inflation "could cut into especially public sector budgets as far as how much money they have and what they can actually continue to build."
• The company reported that Non-Core Loss Projects may still incur additional costs that could lower gross margins as they wind down to completion.

SUMMARY

Shimmick Corporation (NASDAQ:SHIM) achieved a critical financial inflection point in the third quarter, reporting its first GAAP net income since 2023 and its fifth consecutive quarter of positive adjusted EBITDA. Management reported that the company has largely exited its legacy portfolio, with noncore projects now accounting for less than 2% of the total backlog. This transition has allowed Shimmick to focus on higher-margin infrastructure opportunities in water resources, treatment, and mission-critical electrical work, particularly in high-demand markets like California, Texas, and Washington. The company reported a significant strengthening of its balance sheet, including the first positive working capital balance since its initial public offering and a substantial increase in liquidity. Management expects these operational improvements to translate into positive operating cash flow for the full year of 2027.

• Management reported that approximately half of the $401 million in pending contracts is comprised of mission-critical work, specifically in the data center and electrification sectors.
• CEO Yal stated, "The transformation we seek out to deliver is now visible in our results," noting that the business is now driven by projects structured under current operating disciplines.
• The company is acting as a specialty subcontractor on funded and permitted mission-critical projects, including defense, critical minerals, and advanced manufacturing assets.
• CFO Yoder indicated that the refinancing of equipment debt at a lower fixed rate will have a favorable impact on interest expense in future periods.
• The company reported that its electrical business is expected to grow significantly, supported by data center builds where Shimmick provides specialized electrical subcontracting services.
• Management stated that the current backlog of $1.3 billion including pending awards provides sufficient visibility to allow for selective bidding on projects with higher gross margin potential.

INDUSTRY GLOSSARY

• Shimmick Projects: Critical infrastructure projects started after the prior ownership sale, focused on water, climate resilience, energy, and sustainable transportation.
• Non-Core Projects: Legacy projects started under previous ownership or focused on foundation drilling that the company is currently winding down.
• Book-to-Burn: A financial ratio of new contract awards to revenue recognized, used to measure the growth of a company's backlog.
• Self-performance: The practice of using a company's own employees to complete project tasks rather than hiring external subcontractors.
• Mission-critical Infrastructure: Specialized facilities and systems, such as data centers and defense installations, that are essential for operations and safety.

Full Conference Call Transcript

Operator: Good day, and welcome to Shimmick Corporation's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I'd like to turn the call over to Jeff Grossman. Please go ahead.

Unknown Executive: Good afternoon, and thank you for joining us on today's conference call to discuss Shimmick's third quarter 2026 results. Slides for today's presentation are available on the Investor Relations section of our website, www.shimmick.com. During this conference call, management will make forward-looking statements based on the 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 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 third 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 Ural Yal, Shimmick's CEO.

Ural Yal: Good afternoon, and thank you all for joining us on today's call. I'm joined by Todd Yoder, Shimmick's CFO. For those newer to Shimmick, we are a leading contractor delivering complex water, energy and critical infrastructure with turnkey self-performance across civil, mechanical and electrical work. We focus on 3 markets: water resources, treatment and climate resilience; power and electrification and mission-critical infrastructure. We have more than 900 employees, are active in 10 states and licensed in 21, have delivered over 140 water, wastewater and flood protection projects. And on average, we self-perform 77% of our revenue.

The project pictured is our $116 million River Trunk Realignment and Pump Station in Modesto, California, where we are building a new 40 million gallon per day pump station, enhancing local water supply and reliability. I want to open by acknowledging the dedication of our people across the company. Every day, they bring an unwavering focus to safety and on delivering for our clients, and that focus is the foundation of everything we're building. With that, let me start with the 3 key messages from our third quarter. The third quarter marked an important operating and financial inflection point for Shimmick. There are 3 messages I'd like you to take from this quarter.

First, a profitability inflection, positive GAAP net income for the first time in 12 quarters and a fifth consecutive quarter of positive adjusted EBITDA. Second, growth with visibility, backlog and pending awards of $1.3 billion, up 33% year-over-year with $614 million of awards booked over the last -- over the past 4 quarters. And third, a derisked portfolio that is delivering results. Noncore projects are now under 2% of our backlog, liquidity has improved, and we expect positive operating cash flow in 2027. We delivered total revenue of $136 million with Shimmick project revenue up 28% year-over-year.

Expanded Shimmick project gross margin by 78%, lifting total gross margin to 12.5% from 7.6% a year ago and grew adjusted EBITDA to $8.9 million, up $4.6 million from a year ago, representing our fifth consecutive quarter with positive adjusted EBITDA and brought our trailing 12-month adjusted EBITDA to $20 million. Importantly, we returned to positive net income for the first time since the third quarter of 2023, generating approximately $0.9 million, a $5.2 million improvement from a loss a year ago. This quarter's result reflects improvement in the underlying performance of the business, including stronger Shimmick project margins and the continued wind-down and closeout of noncore work. We've also strengthened our liquidity position.

Liquidity ended the quarter at $53 million, an increase of $20 million from the second quarter. This increase includes certain onetime items related to the timing of receivables and closeout of projects that we have recently finished, but also reflects the growing ability to convert EBITDA to liquidity. We generated $10 million of cash from operations, our first positive quarter since the fourth quarter of 2024, and working capital turned positive at $11 million, the first time since we went public. This is an important proof that the improvement in operating performance is beginning to translate into stronger financial position.

While we still have work ahead of us, we believe the quality of our earnings is improving as a stronger portfolio of Shimmick projects contributes to our results. Overall, our results reflect the priorities we laid out, exiting low-margin noncore work, increasing bidding activity, growing backlog, driving operational improvements and positioning the business for sustainable growth. With that as context, let me address the markets where we see the greatest opportunities ahead and then to our backlog. Turning to our end markets. Our approach rests on the 3 focus areas on this slide. First, scope. We are growing in water and wastewater treatment, flood protection, water resources, electrical and mission-critical infrastructure, the work that aligns with our strengths.

Second, customers and geography. We are expanding in California, Texas and Washington while pursuing strategic opportunities nationwide for trusted customers. Third, risk-balanced contracts. Because our existing backlog gives us long-term visibility, we can choose favorable contract terms, lower our project risk profiles and drive higher margins as we continue to build our backlog. Water infrastructure continues to represent a substantial and well-funded opportunity in California and in Texas, which remains an important growth market. The project pictured, our $51 million Bellota Weir Project for the Stockton East Water District, is nearing completion and is a good example of the complex water work we self-perform for trusted clients. Mission-critical infrastructure represents another significant opportunity.

In this segment, we are generally pursuing projects where we act as a specialty subcontractor. These projects are funded and permitted and already under construction, and we have not seen a slowdown in our pipeline of work. Importantly, the strength of the mission-critical opportunity extends beyond data centers. We continue to see attractive demand in defense, critical minerals, advanced manufacturing and electrification of infrastructure assets. We maintain a robust opportunity pipeline that allows us to remain selective and focus our resources on opportunities offering the best combination of customer quality, project economics, strategic fit and risk-adjusted returns.

Overall, we believe the durability of demand across our target markets, combined with our technical capabilities and disciplined bidding process provides a solid foundation for sustainable growth. Our quarter end backlog was approximately $907 million with Shimmick projects representing more than 98% of that total. This represents a substantially cleaner portfolio and demonstrates how far we progressed in reducing our exposure to noncore work. We booked $48 million of new awards in the third quarter, a 0.4x book-to-burn, which reflects the timing of contract execution rather than demand. At quarter end, we had $401 million in awards pending executed contracts, which brings backlog plus pending awards to $1.3 billion.

We expect the majority of these to convert to backlog over the next 90 days. Over the past quarters, we have booked $614 million in new awards, and our year-to-date book-to-burn is 1.3x. With pending awards I mentioned, we expect our backlog to expand over the next 2 quarters. We remain confident in our underlying demand environment and our ability to convert the opportunity pipeline into backlog, revenue, earnings and cash flow over time. The quality of the backlog is also important. Our focus is not simply on increasing the absolute dollar amount. We are working to build a portfolio of projects with more appropriate risk profiles and the potential for more consistent margins and cash generation.

Conversion of that backlog into project activity has begun, and we are already seeing the evidence. Shimmick project revenue increased by approximately $40 million sequentially in the third quarter, driven by the ramp-up of recently awarded projects. Now as we look ahead, our outlook rests on 3 points on this slide. First, favorable market conditions. Continued state and federal investments in water infrastructure in California and Texas, together with strong demand for data center and electrification work gives us a deep opportunity set, allowing us to be selective about the work we take on and selectivity is what drives our profitability. We pursue projects where we can price risks appropriately and put our self-perform capabilities to work.

The project pictured is a good example. At the Port of Seattle's Terminal 18, our own electrical crews are installing the substations, feeders and vessel connections that will let cargo ships run on shore power while at berth. Second, reliable margin performance. Project margins have stabilized, and we are executing consistently across our portfolio. With noncore projects now less than 2% of our backlog, our results are increasingly driven by work we bid and structured under our current operating discipline. As the projects we won over the last 12 months ramp up, we expect more predictable returns along with better absorption of our overhead. Third, efficient execution.

And that starts with safety, where our performance continues to track ahead of 2025 levels. Beyond safety, process improvements in cost and project controls, in sales and in our use of AI are helping us optimize SG&A, and that gives us confidence we can hold overhead stable as revenue grows. Ramp-up timing can still create quarter-to-quarter variability and conversion has taken longer than we had initially expected. But a higher quality backlog, strong end market demand and disciplined execution position us to deliver progressively higher revenue and more consistent returns. With that, I'll turn it over to Todd to walk through the financials in more detail.

Todd Yoder: Good afternoon, and thank you for joining us today. The Shimmick team delivered another strong quarter of progress, and it's exciting to see the strategic and operational changes we've made translate into improved financial performance. Most notably, we returned to positive net income. We delivered our fifth consecutive quarter of positive adjusted EBITDA and significantly strengthened our liquidity position. All comparisons I make will be on a quarter-over-quarter basis as compared to Q3 of 2025, unless otherwise noted. I will also talk about performance for the quarter and reference information that's not included in the slides, but is available in our 10-Q, which is posted to our investor website. Slide 9 summarizes revenue, gross margin and adjusted EBITDA performance.

To begin with revenue, Shimmick's GAAP revenue for Q3 was $136 million compared to $107 million in Q3 of 2025. This is an increase of $29 million or 27%. The increase was driven by $69 million of revenue growth from new projects ramping up, offset by $26 million of lower burn on a mix of projects that are winding down and a $14 million impact related to the completion of a lower-margin O&M project. Our proportionate share of revenue from joint ventures was approximately $10 million for the quarter. This brings our total revenue, including work put in place to $146 million for the quarter. Moving to gross margin. Total gross margin was $17 million for the quarter.

This is compared to $11 million in Q3 of 2025, representing an increase of $6 million on a year-over-year basis. The improvement was driven by new projects ramping up and favorable mix. Total gross margin on a percentage basis was 12% for the quarter as compared to total gross margin of 8% in Q3 of 2025. SG&A was $14.3 million for the quarter and flat compared to Q3 of 2025. This reflects our continued commitment to cost discipline as we grow the business. Net income was $1 million, or $0.02 of earnings per diluted share. This is compared to a net loss of $4 million, or $0.12 per diluted share in Q3 of 2025.

The $5 million year-over-year improvement in net income was driven by a $6 million increase in gross margin and a $1 million improvement in equity earnings from unconsolidated joint ventures. This was partially offset by higher interest expense. The higher interest expense was driven by the accelerated recognition of unamortized debt issuance costs following the early repayment of an equipment loan that we made during the quarter. We refinanced this equipment loan at a fixed rate of approximately 320 basis points lower than the prior loan. This will have a favorable impact on interest expense going forward.

Adjusted net income was $4 million for the quarter, or $0.08 per diluted share compared to an adjusted net loss of approximately $200,000, or $0.01 per diluted share in Q3 of 2025. Adjusted EBITDA was $9 million compared to $4 million in Q3 of 2025. Adjusted EBITDA also improved 106% sequentially. This quarter was our fifth consecutive quarter of positive adjusted EBITDA. Year-to-date, adjusted EBITDA was approximately $16 million. This is surpassing the low end of our full year guide for adjusted EBITDA. We ended Q3 with $53 million of liquidity. This is up $20 million from our $30 million liquidity position ending the second quarter.

We ended the quarter with cash and cash equivalents of approximately $34 million and cash flow from operations for the quarter was positive $10 million. This is the first positive quarter since Q4 of 2024. As Ural mentioned, backlog, just to cover again, we're really excited about it. Some new awards for Q3 were $48 million. We ended the quarter with $907 million of backlog booked with noncore representing less than 2% of our total backlog. We also had another $401 million of projects that were pending a fully executed contract. So if you take the $907 million and the $401 million on a combined basis, this is near an all-time company high at just over $1.3 billion.

We're encouraged by the quality of our new project awards as well and the favorable gross margin mix we expect as these new projects continue ramping up and become a greater percentage of our total overall burn. Moving on to Slide 10. We're encouraged by the strong momentum we have moving into the fourth quarter. We have greater visibility now into noncore work as of the last quarter, and we are now able to narrow our guidance. We expect full year revenue to come in between $500 million and $525 million, which is a 4% increase on a year-over-year basis at the midpoint.

Because the lower revenue was driven by noncore work that was not expected to contribute any gross margin, it has no impact on our profitability. Thus, we are increasing and narrowing our full year 2026 adjusted EBITDA guidance, and we now expect adjusted EBITDA to come in between $20 million and $25 million for the full year. This represents a 350% increase on a year-over-year basis at the midpoint. Now before I hand it back to Ural, most importantly, I want to thank the talented men and women across Shimmick. Your commitment to our strategy, to safety, to quality and operational excellence continues to drive our success.

Your contributions position us to continue growing the business and winning the right way. Now back to you, Ural.

Ural Yal: Thank you, Todd. Let me close where I started with the 3 messages from this quarter. First, profitability has turned. We are GAAP profitable for the first time in 12 quarters. We have delivered 5 straight quarters of positive adjusted EBITDA, and we have narrowed our full year adjusted EBITDA guidance to $20 million to $25 million. Second, we have growth with visibility. Backlog plus pending awards stands at $1.3 billion, up 33% from a year ago. And much of the work we have won over the last 12 months is only now ramping into active construction. Third, we are derisking our portfolio and the balance sheet shows it.

Noncore is under 2% of backlog, liquidity is up and working capital is positive for the first time since we went public. We expect overall positive operating cash flow in 2027. The transformation we seek out to deliver is now visible in our results. Our job from here is execution, converting backlog, holding margins and keeping overheads stable as we grow into 2027. I want to thank our employees for their focus on safety and on our clients every day and our shareholders for their continued support. Operator, please open the line for questions.

Operator: [Operator Instructions] Our first question comes from Aaron Spychalla with Craig-Hallum Capital Group.

Aaron Spychalla: Maybe first for us on orders. Can you just kind of walk through some of the dynamics there on timing? It sounds like still really nice opportunity with some of what's been awarded, but not yet contracted, kind of more of a fourth quarter, first quarter dynamic. And just talk about the kind of bid pipeline that you're seeing there. You kind of talked about being able to be a little bit more selective and what that might mean for margins?

Ural Yal: Yes. So yes, we -- it's -- there's been a lot of timing issues. Some of the contracts that we showed as pending award last quarter and into this quarter. We were able to convert a good portion of those since the quarter end. So we're feeling much better now around, again, continuing to grow the backlog. And we're adding to those pending awards column as well as we get through this -- the next weeks of this quarter. So generally, bidding environment-wise, we're in great shape, continuing to bid profitable work. The 12- to 24-month outlook is great.

And I think we're confident, we're going to not only get this $1.3 billion into construction -- $1.3 billion into contracts, we also continue to add to it. But the ability to be selective is also really nice because we have a really strong backlog right now where we can go pick the ones that we can make a little bit more gross margin on.

Aaron Spychalla: All right. And then on margins, obviously, good performance this quarter. And can you just kind of talk a little bit about what you're seeing in the market today with commodity costs and what customers are saying on that front and just the outlook as we move into 2027. It sounds like you expect continued improvement with what's in the backlog and kind of what you're seeing in the market?

Ural Yal: Yes. No, it hasn't slowed down. Obviously, there's some pressure on the inflationary side, fuel prices, et cetera. But that's -- we generally either put contingency in our bids to cover those or just directly pass them on to our customers. So from a gross margin perspective, we don't get impacted from that pressure necessarily. It's -- there's always the risk that down the road, that could cut into especially public sector budgets as far as how much money they have and what they can actually continue to build because what they're building right now is costing more money. But we haven't seen signs of that just yet. We have robust outlook.

The -- our 3 focused states are going very robust in California, Washington and Texas. So we haven't seen -- we see good outlook for 12, 24 months. So generally, we're optimistic around keeping and growing the gross margin profile as we get through 2027.

Aaron Spychalla: Good. That's good to hear. And then maybe last for me, just on mission critical. Can you give us an update there and what bidding activity is looking like? I know there was a project last quarter you're hoping to close on. And just what have been some of the gating factors there as you kind of look at that opportunity coming in here moving forward?

Ural Yal: Yes. Yes, great question. It's really been the timing. About the $401 million we showed as our pending contract, about half of that's mission-critical work. So we expect a bunch of those to get added to our backlog here very shortly. And then there's a series of others that are not in that 401 that we are actively pursuing and expect to kind of put in that pending awards column here in the next quarter.

Operator: Our next question comes from Brandon Rogers with ROTH Capital.

Brandon B. Rogers: I'm on for Gerry Sweeney. Aaron asked a good amount of my questions, but just in terms of monthly bidding activity and then overall demand environment for your Axia Electrical (sic) [Electric] division, just given like all the data center noise post election. Any update on that?

Ural Yal: Yes. So I'll start with the second one. The -- we haven't seen any slowdown in the data center. We haven't seen that noise affect our bidding activity so far. A lot of the existing builds are going just as strong, and we are kind of -- we are just a specialty subcontractor there. So we kind of show up after the project is already permitted and funded and not really speculative anymore. So from that perspective, we have a robust set of opportunities that we're working on, and we're hoping we will convert to contracts here in the next -- this next quarter.

So from that perspective, we're -- we feel very optimistic and good about our ability to grow the data center market or mission-critical market in general. And kind of tying back to your earlier question, that is a big -- most of that work that we're pursuing and winning in the data center market is electrical work.

So it's -- as we go forward, we expect the electrical backlog to significantly increase as part of the overall backlog of the company and go from the high teens to 30% or more in 2027, which has been a goal that we had set about a year ago, which we are accomplishing now and very happy to see the growth of our electrical business as we go forward.

Operator: There are no further questions at this time. I will now hand the call over to Ural for closing remarks.

Ural Yal: Thank you. We posted another quarter that reflects our ability to complete noncore work and move into more profitable, higher gross margin work and that generates free cash flow. And we are optimistic about our future and 2027 going into 2027 that our transformation is going to continue to yield good results. So thank you for your interest in Shimmick, and have a good day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.