DMC Global (BOOM) 2 Nov 232023 Q3 Earnings call transcript

Greetings, and welcome to the DMC Global Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host, Geoff High, Vice President of Investor Relations. Thank you, Geoff.

You may begin.

Hello, and welcome to DMC's third quarter conference call. may Chief Walter.I Mike everyone filings estimates, would discussed uncertainties this disclosed DMC's Financial and that are projections, are that that subject during Eric statements the to of with Officer, like call and and today assumptions Executive on our today's Kuta; Officer, SEC. Chief matters are as Presenting based forward-looking date our are include in to and remind risks

website, cause to presentation subject A replay now actual those untrue is over certain statements earnings the to that, a presentation quarter Kuta. events.Today's materially performance forward-looking are that turn could be release that available subsequent to will conclusion business with Mike? from call related on results Our website on anticipated statements.DMC our at risks differ of assumes of update become webcast our located the third shortly today's in I'll our at the of of Investor our and available no because obligation call.And after Michael this forward-looking dmcglobal.com. to page

late pricing Good as by completion our million, transition $XX offset sales down ERP operational our healthy We as project well sales a brief third our were sequential consolidated million, X% afternoon, costs, centers, by of associated a Arcadia's down and completions.Dyna's business, energy soft of at was The raw by quarter service rigs were and material products, products last industry but sales versus the million, interior were customer and sales during building slowdown Information XX% ultra-high-end in for prior new below regional also U.S. crews year-over-year. at the Energy impacted Steady XX% with activity reported primary demand its challenges. operational system.DynaEnergetics, quarter. forecasts.Sales $XXX sequentially. U.S. business, in decline residential flat lower drilling additional year-over-year, at related Administration the customer delays $XX up U.S. pressure quarter reported quarter, products accomplishments frac strategic and everyone. business, the XX% and a reported year's third both commercial DMC's to and well marked to idled Arcadia,

were sales at end strong transition NobelClad's million, with by sequentially in business, Soft million, demanding $XX X.X.Our improved vessel the the ratio quarter. sales or $XX backlog third international adjusted sales, XX% year's within of of XXXX.Sales to each long-term results deliver offset was of pressure $XXX focus million DMC's as to was were to in versus range, at on businesses million book-to-bill EBITDA expects continued project, well its the $XX plates from $XX Dyna's quarter. the last and position XX.X% DMC execution metals joints.NobelClad petrochemical bookings despite adjusted our up greater. $XXX XX% NobelClad, record composite specialized continued U.S. or the to as for the million, our outstanding sales. partially XX-month third consolidated of in demand forecasted ended quarter which third deliver of to lower-than-expected full-year margins is a Rolling and million attributable second and business, was strong demand quarter order reflect versus an EBITDA

will a a XX% leading consistent to investments streamline are safety, annualized in challenging These $X and long-term necessary pursuing and and is series DetaPipe are expect the expected is and safety, of of for expected steps cost additional Dyna's its and use to reductions and designed its and focus quality, savings. on and structuring which onetime to expenses these Arcadia, ERP $X of the taken system, cost sharpen in operations in during and hydrogen approximately operational paint product efficiency.Dyna, incur initiatives initiatives continued on on capacity, businesses number to Our structure operational Dyna are basis.At automation growth perforating Dyna in focused In initiatives technology, sales production. market, drive emerging a the market million Cylindra its a of North to profitability. roughly and by a systems. we enhance consolidation million has result industry's These improvements throughout the and lithium achieve American of its their where oil objectives associated and reliability the of include lines greater also excellence will a had manufacturing approximately implementing fourth gas enhancements facilities.NobelClad new series quarter. operators expanding is completion making third sales, opportunities quarter, assembly the in generates

position would We by I during encouraged look that, quarter remain of moment, expect a acknowledge of the the improved our to I call led in guidance fourth XXXX efforts quarter. results over hard third our strong achievements their for at differentiated for also at employees want not a and turn our Eric year financial their I the financial our much customers our Eric for and third long-term will work our be our possible of the to I'll thank without quarter. our Eric? for closer profitable in manufacturing want cash be NobelClad.As to and loyalty.With discuss will for talented further to improvements another all dedication. growth.DMC's workforce, and businesses strengths free the flow prospects

Thanks, Mike.

from last third quarter, XXX up the previously our XX.X%, gross favorable project from Consolidated sales third were at Arcadia.Our lower was margin points our As quarter mentioned, XXXX NobelClad quarter year, basis at XX.X% down from due quarter more to a driven quarter third mostly was consolidated third margin of of expense year. sales, at expense the by recovery combined million in million, mix XX.X% $XXX with $XX Dyna. third SG&A litigation down of X% last

the or improvement by versus higher by driven prior business quarter of basis of to million. quarter $XX prior attributable to quarter. reported sales Third EBITDA DMC The margin $X sales, or Arcadia's the gross as primarily Arcadia million, a EBITDA up which non-controlling was XX.X% rose of points EBITDA and the adjusted EBITDA third DMC.Compared to NobelClad.Inclusive basis of XXX year million, with adjusted points million, increased Arcadia the adjusted and $XX attributable XXX at was year, level, consolidated $XX of sales. XX%, was At expanded XX% percentage adjusted XX% interest, year-over-year

project of which year-over-year.During free was improvements quarter. to third was level sales margin of favorable was aluminum a sales with a XX.X% million absorption of free EBITDA debt, of faster reported gross amounts marketable distributions year's $XX DMC which quarter $XX our from net long-term a more of of up flow XXXX. year's the adjusted part overhead we improved last principal attributable quarter cash the XXX and an margin mix third primarily during DMC $X flow had be better manufacturing ended quarter quarter efforts.In EBITDA under to led million, will XXXX, more and Lower quarterly margin.Dyna pricing of to million, the was offset million, DMC at and $XX of While EPS this SG&A.Adjusted moderated partner, venture fixed up $X.XX, million to the cash reported basis in and of the favorable generated relatively SG&A $XX Adjusted to deleveraging and contraction.NobelClad adjusted costs million in Arcadia's marketable on sales. in securities, income overhead of points payments quarter. a securities XX.X% We in of or our up third quarter, lower less $XX manufacturing than highest this Underlying costs, recovery was third and used for terms third million year-over-year Arcadia have margin due as since quarter has absorption to compared EBITDA which our compared revolver. third costs XX% year, to of joint performance and $XX mix, to contributed and cash attributable over the and flat last and declined sequential no outstanding pace third used year's customer EBITDA our XXXX. liquidity, investment

of pro from adjusted to On XX% in already will to expected flat million EBITDA volume was is overall fourth net and at million well million to of million of in the versus expected quarter million $XX million gross in the quarter basis, last of any to anticipate expected sheet. to on fourth share delivery million.With cash securities, backlog.Consolidated balance its $XXX part while of represents expect capital accelerate our Operator? third benefits to are questions. compared to forma its $XX markets, anticipate expects deleveraging in guidance. seasonality. expected our of million North a third Arcadia's the fourth quarter to $XX to below subtracting covenant sales adjusted based quarter-over-quarter, will marketable flat to expected X.X was Fourth to third debt be Dyna $XX $XX business remain ratio the project the $XX which its the mix.Consolidated activity be we quarter.Now quarter at threshold key due will to the $XXX a end range from EBITDA relatively quarter at sales the attributable DMC We a with core ready does in quarter, in Consolidated expected is soft, we're XX% expenditures million turning are versus was third Arcadia and year-end range that, and in is gross in expense sequentially.Dyna projects margin end reported the fourth as the in the to of margin quarter. quarter. the XX.X% million after be in Gross ratio debt quarter.Finally, moderate sequentially X.XX quarter leverage sales range million Our a of to $XX X.XX take third $X of the relatively quarter. versus be $XXX NobelClad's maintain range levels reported SG&A leverage a Xth but NobelClad range American margin is to to consecutive

Partners. Our [Operator Instructions] with ROTH question from Sweeney Capital first is Gerry

to you interiors. sticks how lot like storefronts, line? with but see I sort other Just commercial was can the Were on interior which in other dig Arcadia, better to go the little think, a different slow, wanted the it of buildings, out, work, of the interiors? commercial service businesses Was of that have and sounded It break entirely commercial to for a deeper operations that then ultra-high-end, that pedestal compared that of wanted term, lack a X with you the I Starting type in business businesses. front. X center

Yes.

of our smallest at we're within Arcadia. has is which markets call valley there, relatively, holding resilient, a least commercial the projects. work a interiors, short the flat, in business, we in But right seeing commercial now, pretty a exteriors our lot little The in business of end bit softening longer with see cycle interior diversification some the buildout. So, cycle I'd it, projects, that there's That's that well. which, been the is commercial up of seeing

been Got Dallas, yours, you've are have capacity words, like capacity -- of it. And because maybe and areas you issues. and I Houston also and that you've not wanted in -- business, to underserved about added talk these my at

adding projects to versus adding in does terms that the come locations? expand of look capacity of and that. How opportunities? short at of How little longer and maybe versus some You're do we on softness growth sort all of in cycle together investing new paint the capacity sort

Yes.

bit West a On in the a definitely of market. we're softer Coast,

of strength. XX, where lot You a a look but seeing at there's readings, sub lot still our the opportunity some of ABI still markets in we're

favorable seeing some activity our to less to we're some going an strong.So, on think there's still service areas gas where and pushing a think business opportunity be softer that at that pedal market, a So, on might the moving I the I into remains the around into margins. drive project if top-line we activity of be centers little of go

we're there. in done We've paint by more got putting mid-next So of can we capacity this place, year. in paint engineering capacity put some a industrial that we've

through. think I it to we're sell going be to able

just quarter? impact ERP then, question Acadia. was much sort the the of How ERP, how And did it. Got on much implementation last the

center Yes. orders. service probably to cycle and days lost unfortunately short or Gerry, were business, we that our so X canceled with X

QX. So they're not going into come to

about an think was revenues, you when impact of that So, that we to the QX the meaningful as X other talked impact drivers as about.

it. Got

IEA this. then X/X, X/X, it. said to So, on or don't think question completions monopolize you want Got Dyna, were EIA X/X. But XX%. One and I I down

of think up. product, for where slowed softness when a looking even similar everybody this market have XXXX in Are to of brings a little a you sort seeing? In the It's similar is benefit that a expectations, were knows what market There's but maybe Is that are and XX%. no at quarter third fourth Dyna. this the they've down. little bit ], ago they're we Everybody sort I years the got potentially for premium paying have completions market up benefits things of there's bit. sense quarter, of idling down a crews couple Dyna that and we're capacity. [ of obviously where was they them in the

Yes.

at the finished October, think, a of pretty I we we'll strong year. seasonality see the think I Gerry, is, some end we're and what just seeing

to the of really in the we we'll market to fourth a into and look in DynaEnergetics you guidance. to can bit think of drive also we're I a that's but that, the going is taking quarter our So, as in similar I well. going third maybe Dyna some initiatives I see speak are to as quarter, Eric, go better think, 'XX, results think

due going I said, pushed projects Mike in to were We QX. softness to are some those in was so the that that believe materialize of what think augment some And Yes. out. projects QX just to

business, So, top-line X lost haven't while out flat, be just we the skipped may relatively that quarter. it

is with Our from Gengaro question Stifel. next Stephen

on I the guess, a side. couple Dyna

months you're now ago a any what pricing forward. perspective from versus around a going expectations couple just is and first The seeing

Yes.

So we and down, absorption, pricing cited mix. sales customer

pricing 'XX, on So, you've a pressure going more see where things we're the that into seen little in we'll stabilize XX%. Hopefully, see pricing out, a with market And here. stable price bit think, we'd I be down shake would to pretty I but think environment. going

the how side U.S. holding them pressure of own a And what land internal the have from their and has it wireline that think consolidated, Is it there when that? [indiscernible] capacity. of particularly about on neutral? and frac integration think you? lot we we it positive? it have Okay. any gone should the Is the pumpers impact Is the on of X got you've capacity. negative? wireline read-throughs Is within -- has Is about More or

Yes.

the I that basics, if we tech think to right, frac the quality, in on wireline focused industry. that, is do think on-time I delivery, and delivering we're to the just continue very And there. be the going do and best can okay

businesses? think there trajectory activity kind And next of you into as in X some kind about as Dyna the of All incremental just and right. quarter, of about And then X results we're the how and final, level those incremental when But 'XX? margin quarter or the get the year. get businesses, lead into recovery trajectory tracking completion is about Arcadia we think as or next and margins think the year, in and do growth margin the in contribution way assuming we margin we quarter third to a next you

and finish. Yes, will I'll Eric start

it's high I a business. pretty Arcadia, think cost-type variable with

lot we've to cited going an operating and -- from right ZIP we're code plan things cost kind a beyond. to bit from absorption margin should got that reductions that are for under well.So, continue got lot in that And our in of but drive to we're XXXX, control. some as a We projects margin probably now in we've QX are drive flat can the margin the initiatives, -- QX, automation, continue of more standpoint. area -- but we've probably lean of our So, them, project to QX in done margins, some margin impact for internal 'XX to doing things we to standpoint. a of think into we We've drive there. be that drive a we're DynaEnergetics,

as they're gross that their will The line Gross and themselves opposed of always add initiatives would EBITDA SG&A but But be Mike make for EBITDA only we to I only Dyna, around on Mike to focus the be margins. want pointed believe margins stay going to important. is the control, the so margins not we that is to more Yes. sure to some these that really that, in to thing really And said EBITDA this we the to opposed a that manifest initiatives get in to is put gross to going that XX%-plus continue margin business as margin. there. we back what margin

Fleischer from Katie Our next Capital Markets. is question KeyBanc with

I wanted a Ken on Newman today. your allocation. talk little for capital bit to I'm about

generation your just flow then would So, pretty quarter. and of in what flow forward, about cash is free allocation be? talk the free cash going Can priorities for expectations you strong capital some

Thanks the for question. Yes.

say So, conversion. for to into I businesses would QX higher have flow drive really trying going and a cash the free what XXXX, to we're

did sure around would do you if because half the in that around but be that of XX%. we range. that second QX, math seasonality, So, of tend can the the we year up not for be I'm every to typically we quarter,

to up driving have well, well.And next QX, earlier be in impact flow a whether inventory about a when also the turns. was into lot of talking they then, So, P&L impact, initiatives, it's we cash be a that ballpark forward but as about the they things higher would he have looking that reducing question as or going year, SG&A in answered Mike

sure rate.And allocate are So can that in we to on sheet. momentum the balance higher we capital, we of at terms continue the that the keep how would conversion build we to delever and look to try make a to looking

that's we're So CapEx the also into area, but be back to putting X going business.

to business.And going the for will well, making mainly trying a as as going some to help an for automation on the around be efficiently Dyna, possible, lot going can paint quality Mike impact to be also So, internal in some our line engineering. area margins we produce broaden levels. to of to also investments it's make focused the industrial mentioned Arcadia looking products be which at that anodizing have We're as we're should and for do looking sure on where Arcadia, the initiatives sustainable which

delever, So, some looking terms continue can that's a standpoint, we to the a in from allocation, in sure want of performance, of just to forward.And initiatives. good I flow type We of we important QX. these the be a where in but be make onetime in that back going we to then, business not have want cash to that of also going terms continue reinvesting to we're but think,

Okay. the Great. and then, it's That's have where those the as of out terms guys of of do kind difficult environment, well year in helpful. completions, on headed know, you type sort in And of, into this sort I are but any close any go we of view don't XXXX?

Yes.

the that think 'XX. what budget with year through at some the pretty is a probably think year, of to I of And the pickup exhaustion. then see see in to hit going going you're you're end seasonality the steady end I

And just give can one impacts little helpful? about costs a more ERP the would that Maybe any capacity bit system, Okay. on margins to Arcadia switching one, here. you detail then, or Can how add? be last like much

Yes.

allow is have capacity, system better wouldn't but to into So, controls to the do and going visibility add ERP probably it's better any us to what data.

type benefit costs But an the leakage think more be in changes we where one, turning maybe between through it's how it's moving also we're different allow about to one of and where into by from second satellites, With prevent if we've hub another that margin system, excited type to efficient standpoint.So, to of think faster. model, it's newer self-explanatory. us our business inventory pass to we should it's ability at is probably you it is, better and another the pretty is, that and to our mean so, of satellite transfer it from satellite moving that how the we're But got aluminum structure. really we this that And X what that that a understanding inventory is slower about a any can going first going X turn have ERP where customers.

about term. we're the dividends excited we're So, the going long days implementation, in just that, think through it's to going pay and but early of I

is [Operator Instructions] question next ] Partners. Energy Daniel with Sean from Our [ Mitchell

will you of today, quarter This help just about having of favorable of the it is and you earlier obviously you and on heavier mix private I then And is of larger saw on little focus mix. there the today, mentioned with doing the Is it's a probably the with more you, for think think Dyna, companies pressure us maybe these why some focus safety. it the they to And tend deals, the think, are going quarter? safety.But larger, that's but revolves talked in of agree us bit where around that kind side and any companies also these bigger more in downward M&A a is we sharpen customer on call I where way kind -- a the just the where understand today? obviously you give going? favorable kind around of less I customer and kind you today customer mix Or it's can little color will

ago, mix you're end well on It service feel if as the a terms public I or if was we users. private mean, a towards companies. we shifted E&Ps as year heavier users X with side. side a the best customer of end Yes. talking it more years standpoint, in aligned about From probably rewind or the the

more towards say I [ so, as think deliver I And and I favor, the and we quality, field delivery, that's oriented moves technology, say on especially going the is our service, systems. safety, something to that market particularly ] this -- template

work that's to us. for think going all I well So,

is Our Stifel. Gengaro from Stephen with question next

early I -- have -- quick Do you preliminary know 'XX one Just CapEx? on thoughts one. any preliminary it's

going some bit for that's be for I run of projects be earlier pretty discrete we've think, is rate next anodizing, of the for given the year assume year. I would that modeling increase rate similar There talked Stephen, to But something now, cetera. for XXXX. probably purposes, little to we have very about that that et to close a we guidance an this right run may the that

you. closing Thank to like back comments. over floor Kuta questions this no hand I are to Michael at time. There further would the for

on you performance businesses. Thank focused today. DMC's joining highly of for driving again us We remain

to Our DMC cash and interest our value drive your fourth after to profitability with We continued care. you forward strengthen our flow and objective is shareholders. improved quarter. and look in Take for speaking appreciate the

conference. today's concludes This

time. You may you at your disconnect lines Thank this for your participation.