Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you explain how Shimmick plans to achieve the projected 9% to 12% gross margins for 2025, given the 2.5% gross margin in the fourth quarter? A: Ural Yal, CEO, explained that the current backlog consists of profitable work, and they are confident in achieving the 9% to 12% margin due to low-risk projects and ongoing discussions for scope growth. Additionally, new high-margin work expected to be won in 2025 will contribute to these margins.
Q: Have you been able to implement any changes to improve existing work since joining Shimmick? A: Ural Yal, CEO, mentioned that while many projects are mature, there are opportunities for risk management improvements. By identifying issues earlier and collaborating with clients, they aim to resolve issues before they impact the bottom line.
Q: What is the expected cadence of gross margin and revenue throughout the year? A: Ural Yal, CEO, stated that the third quarter is expected to be the strongest, with improvements in the second quarter and a flat fourth quarter. This aligns with typical construction business trends.
Q: Are there any concerns about federal budget issues or local market conditions affecting your projects? A: Ural Yal, CEO, noted that there have been no impacts on active projects or immediate pipeline bids. While there may be shifts in funding priorities, the overall funding level is expected to remain stable, particularly for water projects supported by the EPA.
Q: How is Shimmick addressing labor availability as it pursues new projects? A: Ural Yal, CEO, indicated that the West Coast labor market is in good shape, with sufficient qualified labor available. While there may be challenges in other markets, particularly outside California and Washington, they have not seen significant impacts yet.
Q: What is the outlook for free cash flow in 2025? A: Ural Yal, CEO, expressed confidence in maintaining a strong cash position, supported by stringent cash flow controls and a revolving credit facility. Amanda Mobley, CFO, added that they have secured a new revolving credit facility to support operations and growth.
Q: Can you discuss the transition from bid work to more negotiated work? A: Ural Yal, CEO, explained that winning projects now involves a pre-construction phase where contract costs and terms are negotiated. This sets the stage for balanced portfolio growth, with a goal of achieving a 50/50 balance between fixed-price and negotiated work by 2027-2028.
Q: How does Shimmick plan to diversify its client portfolio? A: Ural Yal, CEO, emphasized the importance of diversifying the client portfolio to reduce reliance on a single client type. They aim to increase private client work and achieve a better balance, enhancing long-term resilience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.