IRVINE, Calif. - Shimmick Corporation (NASDAQ: SHIM), a prominent water infrastructure firm, has reached a settlement regarding its Golden Gate Bridge Project. The agreement, concluded on October 31, 2024, with the Golden Gate Bridge, Highway and Transportation District, will result in a $97 million payment to the company before the year's end. This settlement addresses the last major legal claim tied to Shimmick’s legacy projects and is part of the company's broader transformation plan.
The settlement includes a $6.0 million reduction in the project's scope and an extension for project completion. Shimmick anticipates substantial completion of its on-site work by the third quarter of 2025, with subsequent tasks involving a subcontractor’s off-site equipment fabrication.
Steve Richards, CEO of Shimmick, expressed satisfaction with the settlement, emphasizing the company's focus on advancing core projects and reinforcing liquidity. He also highlighted the project's installation of a suicide deterrent net system as a significant contribution to community safety.
Shimmick's strategic shift towards a more capital-efficient business model includes the sale-leaseback of its equipment yard in Tracy, California, which is expected to yield a $17 million gain in the third quarter of fiscal 2024. Additionally, the company has opted to upgrade its existing enterprise resource planning (ERP) system instead of replacing it, which is anticipated to incur a one-time, primarily non-cash expense of about $16 million.
Despite these developments, Shimmick expects continued losses on legacy and foundation projects to largely offset the financial benefits of the Golden Gate Bridge Project settlement. The company predicts a breakeven to a slight net loss for the fiscal third quarter of 2024. Full third-quarter results are slated for release on November 12, 2024.
Shimmick is recognized for its expertise in water infrastructure projects, including significant undertakings like California's largest wastewater recycling and purification system and the Hoover Dam. The company's performance and strategic initiatives are closely monitored by investors, given its history and standing in the industry.
This news article is based on a press release statement from Shimmick Corporation.
In other recent news, Shimmick Corporation has made some strategic financial moves. The company has amended its credit agreements with MidCap Financial Services, LLC, AECOM, and Berkshire Hathaway (NYSE:BRKa) Specialty Insurance Company, which has increased its borrowing capacity and extended the maturity date. These amendments are expected to provide Shimmick Corporation with increased operational headroom and liquidity for its ongoing and future projects.
Moreover, Shimmick Corporation has recently experienced a significant adjustment in its price target, which was reduced to $3 by Craig-Hallum due to project delays and increasing costs. Despite these challenges, the company made a one-time charge of $30 million to settle a disputed legacy loss contract and completed a sale-leaseback transaction for an equipment facility in California. These steps have been seen as positive moves towards improving the company's financial health.
The company's recent Q2 results were disappointing, with an adjusted loss of $1.60 per share and revenue reported at $91 million, both significantly missing analyst projections. However, Shimmick Corporation projects a generally flat year-over-year revenue for Shimmick Projects in fiscal 2024, with a gross margin between 4-9%. The company is actively recruiting project estimators, anticipating an increase in project activity, providing investors with insights into the company's future expectations.
InvestingPro Insights
In light of Shimmick Corporation's recent settlement and strategic shifts, InvestingPro data provides additional context to the company's financial situation. Despite the positive news of the $97 million settlement, Shimmick faces significant challenges. The company's market capitalization stands at $66.17 million, reflecting investor sentiment that factors in both recent developments and ongoing concerns.
InvestingPro Tips highlight that Shimmick "operates with a significant debt burden" and is "quickly burning through cash." These factors are particularly relevant given the company's expected continued losses on legacy projects, which may offset the settlement gains. The tip suggesting Shimmick "may have trouble making interest payments on debt" underscores the importance of the recent settlement in bolstering the company's liquidity position.
The company's financial metrics paint a complex picture. With a revenue of $524.16 million in the last twelve months as of Q2 2024, Shimmick has experienced a revenue decline of 24.02% over the same period. This aligns with the InvestingPro Tip that "analysts anticipate sales decline in the current year." The negative gross profit margin of -5.8% further illustrates the challenges Shimmick faces in its operations.
While the settlement and strategic initiatives aim to improve Shimmick's financial health, investors should note that the stock has seen significant volatility. The 1-year price total return of -69.22% reflects the market's concerns about the company's performance. However, the 1-week price total return of 10.06% suggests that recent news, including the settlement, may be viewed positively by some investors.
For a more comprehensive analysis, InvestingPro offers 18 additional tips on Shimmick, providing deeper insights into the company's financial position and market performance.
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