DMC Global (BOOM) 22 Feb 242023 Q4 Earnings call transcript

Greetings. Welcome to the DMC Global Fourth Quarter and Full Year Earnings Call. [Operator Instructions] I will now turn the conference to Geoff High.

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

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

thank Hello, you call. for today's and joining us for

a closed free several year for Full included XX,XXXth including accomplishments quarter DMC. for records pivotal financial adjusted flow. year EBITDA new cash metrics, sales, and key Our out

our DMC key value the strategy units costs long-term Board team DMC's to Directors. We portfolio as organization. And X unlock of the across we to for detailed enhanced We leadership of while a made operating also review our additions at reducing seek strategies and business stakeholders. also initiated we

reported year-over-year prices. varying decline, Arcadia, in serves high-end principally which due residential products at and quarter, Looking aluminum businesses a sales lower industrial their the the fourth X% markets. end is manufacturing market conditions which to our commercial reported building

balance this to will expansion, strategic but Current start Arcadia we results market a have of improve paint quarter, believe to the A expansion for led XXXX. the conditions half the a phase Arcadia, of year of second the soft completed first throughout planned is a During year. key back objective. the capacity at

year products international This DynaEnergetics, which in American our In up strong X% quarter of international were oilfield record North sales unit for reported business, another XXXX. quarter its DynaStage increased full sequentially. sales, system Dyna's versus fourth market, markets. our new a solidified flagship XX%

led and to to excellence online overall in initiatives However, our should EBITDA profitability. customer margins pressure XX.X%. pricing reducing operational consolidation XXXX improve Dyna's Automation coming

market our strong In expect efforts. self-oriented Dyna support the addition, compact up end product working generating perforating of is the most which will is demand. X.X to margin is we offerings user new its lightest, premium and new production Gravity ramp system, on system improvement

outstanding reflecting EBITDA NobelClad business up very global markets. joints. composite benefit another at from metals delivered XX% transition year-over-year a quarter production approximately strong capitalizing is also and demand in It came in on mix. NobelClad for XX%, improved continues adjusted end to project Sales cryogenic healthy capabilities activity favorable cylinder were its margins and its

month, we intent to the value. Last effort of enhance part shareholder as broader simplify a DMC portfolio formally to our announced

can help with alternatives sharpen benefits we our Arcadia our profitability of advisers. our at a Arcadia. We've range market. capital our addressable our and structure business strong differentiated broad strengthened flexibility financial growth opportunities and a brand, of a also model as improved on large embark a financial pursuing streamlining separate for we DynaEnergetics are on strategic and By the portfolio, NobelClad We growth focus the and from of which

financial a results of prospects encouraged long-range the for and I'm turn I'll about fourth a guidance. Eric? quarter at closer DMC's now Eric over to strategic by direction review look our our growth. excited our and call for

Thanks, Mike.

margin project quarter XX.X% consolidated to mix quarter consolidated XXXX year. more basis with last with gross Arcadia. a fourth recovery was quarter were due flat Our was -- which margin combined our points at fourth sales relatively $XXX XX favorable fourth up million, from at Gross NobelClad the

$X lower expense debt fourth of and interest, last year, expense. Fourth in $X $X the bad EBITDA mostly a million Inclusive ERP Our consulting includes the fees of in quarter adjusted fourth and aluminum product remained down than fourth to that improvements million at million note EBITDA IT NobelClad decline by Arcadia as to a through million of versus prior DMC. XX.X% XX.X% XXX $XX was up consulting sales, XX% at important Arcadia's attributable At quarter It's to with XXXX of adjusted Arcadia, and of costs, Arcadia prior from SG&A driven $XX quarter level, of of slower SG&A expenses quarter adjusted adjusted expanded XX.X% year-over-year fourth,XXXth year a and pricing or of the offset declined quarter as points drop at reported or the basis XX and also our which litigation Compared Dyna million points was respectively. basis expense DMC business percentage Arcadia EBITDA pace the $XX attributable of miscellaneous SG&A at flat million, noncontrolling Dyna. sales, EBITDA consolidated lower quarter. the fees sales. declined year, XX% was rose also Arcadia's costs. in while other

the of sales of fourth reported of XX.X% to a to due better adjusted reported was absorption year-over-year fixed customer manufacturing compared XXX and which more margin overhead and XXXX. favorable improved adjusted million mix of NobelClad mix and Dyna sales. million, lower a quarter project and or EBITDA sequential costs of $X of costs. Less points favorable EBITDA traction. absorption overhead XX.X% quarter of fourth margin up to basis manufacturing $X EBITDA led

compared million $X year's attributable to quarter quarter. fourth Adjusted was attributable XX% to income of to Adjusted fourth net $X.XX DMC was last XXXX. EPS up during the DMC

an the first prior cash used new $XXX improvement quarter, in free we distributions flow our of $XX closing million, cash debt, XX% year's with generated of We was free principal an following DMC in which used investment quarter, flow on quarter secured this should Arcadia securities the fourth marketable joint our primarily our senior quarter. During venture in partner payments I facility. note our to of the for securities. over investments compared long-term million and year or delevering credit marketable that

of liquidity, terms under $XX outstanding with cash securities million $XX fourth amounts the quarter and and of million In ended our had revolver. marketable no we

debt that Our fourth have the eighth securities, after end EBITDA of at leverage well basis, X.XX was was leverage marketable which to at end X.X. ratio delivered. the our pro fourth a the ratio of and of represents quarter, On was we quarter, net a row quarter our which adjusted threshold debt the in below subtracting the X.XXx cash covenant forma

sales million to $XXX first the range $XXX for guidance to XXXX. are turning of in Now the quarter expected million. Consolidated of

expect markets in mentioned, quarter markets, while we Mike expected slightly improve. in the level As North American key in to Arcadia's market Dyna's to are activity conditions first be soft the

expected anticipate sequential to our volumes adjusted we margins NobelClad's to to more million. quarter the attributable are EBITDA $XX relevant, quarter ready At fourth versus margins expense. levels to from Operator? improve bad that, any we comparisons the where Arcadia expected will moderate First quarter. similar we're is to DMC EBITDA Dyna, believe be EBITDA million first With debt take to sales prior and questions and are due analysts. lower $XX to the in of to range year higher

from has the Capital Our of KeyBanc first Newman Ken Instructions] line Markets. with question [Operator come

despite expecting talk -- on quarter Kevin around Any the that color will XQ prior -- and activity of much can XQ that completely how just where I are what easing of guide from bit all drag? outside of little pricing trending? curious, it? that seeing guess that business? weaker you're And here that an year business be pricing my Arcadia. about just sequentially they're within the within you is you Is volumes Obviously, to just are still to the first first for be X from comp a underlying how

Yes.

So think, in January with of pricing still is challenged seeing with it's but weather. now, also quarter, We're a the was costs. bit abating I first a aluminum drag

had severe and we on Coast, core So flooding our markets. the West rain

softness XQ, I January going a XQ a that bit We're play business. improving. outlook also impacted our We're there see and relatively we're business we out as bit strengthening steady. and the to storefront our seeing that So Volume sure. project in XQ, quarters, seeing for of is think strengthening. But quite

of a -- a bit mixed bag. So it's

bit resis a to of, expect the I'd pick year. also a say, that valley, up in and we throughout We see

to that's the of flattish kind with XX% behind Eric, else? So XX% XQ. premise anything it the, guess, we'd call I

think it, hit Mike. I you

Okay. after Obviously, the And the improve here you significantly that touched follow-up in but just copies on is the confidence it margins Arcadia comfort of pretty a little quarter? the quarter. the bit here, second in first is starting what revenue the is

in pricing we all expect capacity Just some dig here expectations the expansion moving something benefit move for pieces on stabilizing through maybe improvement from quantify that much the as in benefit some can hoping the around year? volume versus how the other to XXXX you or you

Yes.

throughout we think I volume go the as going year. is to help

I the XXs, in project -- think to plus some think there. is business. see revert business, mix mix there's But that's unfavorable in variable we're to XX% QX, in high back of XX%, there's there. what some Arcadia. some going cost good again, a project I historical low project Again, margins it's

throughout will the volume in we step an as residential it as but well. volume-driven, help year entirely not and it's So increase

lighter do you sense kind flow working back first little with the The X cash think of conversion quarter any here jump start -- it. sales volumes -- cash the how beyond with Maybe first How queue. Got capital flow about think on the more a being expectations year. the in free and I bit you before about in or free to benefits quarter? being

is Yes, Ken, Eric. this

conversion the, had do low level. get flow mid-XX% some we free it, be needed. of capital we're slightly think to actually the XX%, tailwinds low going that XXXX, was And for they working what that than So aiming in into of capital. maybe up working XX% XX%. there's year, couple cash the think to a We businesses in to call from XXXX that higher to this We

XXXX, So the and cash think as we go in benefit forward, we're to a unwind be going flow able of of that we line. get free some to

from Stifel. John question next Our Scheibelhoffer comes of the with Alec line

here, update Just the in North how if the of on Yes. just consolidation some kind is we've competitive perforating trending, Any pricing market to seen you start provide on and could an was business. America wondering in I the you provide of landscape could given the us in off color

would it that, around color great. be some Just

Yes.

in we've consolidation pressure some from So seen the market. pricing

So that's driver been a margins. to

we're and on seeing we think of the that's margin -- improvement. some ahead initiatives have of I

and to going we're out our new drive systems, So in automation to got lot frankly, also second quite and here quite our improved of a bit in operational first going that to gun and also there performance implementing better perf I drive margins of that's well. mix We've systems. drive frankly, again, excellence CI quarter quite a some margins cost to of the putting that's think, gun also as going improvements in we're that initiatives, product this year tech is better

we're think out in good quarter. and I here seeing gate January market the of in So a the pretty first

And year. much the should as so we XQ, see and off we improvements expect we better better profile -- throughout a go of

just Arcadia. then shifting if additional just could outlook color business. you And to on the Great. gears some provide was I for wondering the

hanging some the curious, past, well? the you've there's of some to or is going up if for correctly, just I growing fruit and organically. in wondering business kind inorganic as if speaking bit little any that after that Just growth mentioned a the you're sequentially. I'm if CapEx, I'm organic looking going see 'XX of that's after

Yes.

I on of So our Arcadia part luxury I'd pull in is business commercial so SG&A business the side of mean think going that's our custom our organic -- predominant and The people it. is side. and Arcadia And of interiors the residential got some which start exteriors, to commercial through be a storefront. business. We've low-rise I on investment. business, it's

in anodizing I of outsource paint anodizing as volume some are going both some drive as margin on the CapEx to think investments now. as we our additional as well well side, as .

we are for any think growth should other on in, X that I some Got a the initiatives standpoint? -- is the was factoring back business, of business you the some on relatively kind to activity I automation it. you front. of margin was I if actually, That's know Dyna. how that just in And mentioned have I flat more in U.S., about shifting could you squeeze just great. if margin curious, and kind or

Yes.

I a is fairly business. the sizable in growth So what think expecting we're international

we So exited record sales. international XXXX

probably we'll more into good of you? so internationally, growth a full side, but backlog America record a America, didn't have Eric, North wouldn't We off growth guidance, on side, it's North the provide start. say, there. year bunch would but to see the I'd I we put a flattish

augment Yes, I would just saying. was to Mike what

look going kind going a of you forward. be that bit going about about. the think be you Mike to a the flattish years and growth But think there. peel mix it's said, domestic trajectory revenue relatively to little when business, more confident there's I sluggish going components, international a it at Like think a market North I a They're as of back versus But be to bit is there. bit international than flattish the the upward pretty showing we lot probably maybe in feel of to American past. piece, of

also again, margins And piece as part well. of is the the driving what's international

business So XXXX. should in that's that outperform a us for

that, great I'll And color. Got it That's with it. turn back.

closing call our back reached remarks. the [Operator to Instructions] the session. the I'll Kuta the now And . Michael fact end have of for turn over question-and-answer And we

appreciate again May first you following forward updating you and DMC interest look joining your We quarter. Thank our in call. in today's to for

And this for at you disconnect concludes time. may Thank conference, this participation. your today's and lines your you