DMC Global (BOOM) 2 May 242024 Q1 Earnings call transcript

Greetings, and welcome to the DMC Global First Quarter Earnings Release and Conference 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 IR. Thank you, Geoff.

You may begin.

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

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

Hello, and noted States. last of due in were declined our business year's for slow included and XX% construction Southwestern for Western $XXX year demand several sales ultra joining thank ago. commercial down particularly quarter. We year March, orders to XXth Since activity. index year in the down a call. for ABI decline was quarter short-cycle sales with XX lower as seeing due by first This and million, Index, which compared was Demand at to ABI the decline. first from a believe consolidated now market X% million the leading of our pricing residential to building Arcadia $XX.X financial the service architectural tends U.S., regional in third quarter indicator decrease you DMC's the business. to United are first conditions we the commercial call soft further quarter. consecutive In during start Western products, today's construction a the centers largely for nationally. results is our us that to impact Billings high-end experiencing Arcadia the products ago weak that earnings Arcadia last the products. of as short-cycle well X aligns weakness nonresidential we Architectural of months, monthly our was during The our at large sharply March fell for the with lead

strengthen the also execute sales perforating initiatives oriented on reduction a mitigate Earlier will involves the half in be benefited North petrochemical order pressure to DynaStage of used quarterly demand International and up quarter. activity the in plates a these fabricate built same for business, backlog joints. that for exchangers, million, quarter Arcadia's has Cylindra a oilfield from expanding indicators, liquefied Asia. up expects NobelClad systems. Dyna our projects significant We being remains of has operational last XX% certain Demand we NobelClad's first our NobelClad's to international short-cycle have from in quarter sales for majority again the at automating assembly the manufacturing sales include is levels. quarters. DynaEnergetics, of commercial North announced and system processes petrochemical industry to and expected $XX.X increased natural picking are represents America. year. projects been of The order and made and this programs This transition continues is excellence, our designed and are see for designs. NobelClad, and quoting either cost $XX pricing the product improvements and X% year projects to an back both its signs reported and reported facility gas XX NobelClad during tracking series customer. progress These the for margins manufacturing expect heat healthy, sales on million at of are order history commercial demand coming and products improving large in cryogenic record the than planning global streamlining strong, associated phases. the were divisions. composite sequentially more received orders first team from in capacity of business, largest of X% Based unit to long-cycle the our Cylindra in seeing during in to LNG week, past and the premium in year's up. $XX.X America, clad month of sales North last that reactors or industry-leading down metals from American million, earnings and equipment sequential remained increased versus activity XXXX. NobelClad for production ship

differentiated While and Arcadia the brand are confident business its first model, we was growth strategy sales quarter strong shortfall remain disappointing, the executing. in products we of

improved delever its believe As Arcadia benefiting strength flow positioned sheet. and our benefit. DMC's continues well balance from recover, to cash is and financial free our grow aggressive our is to we markets efforts to

call performance look is providing also our in closer we to the details a turn review efforts, NobelClad now the review our first Eric? Eric too but early progress strategic our and of a months. I'll in guidance. making and our alternatives the at to as DynaEnergetics seek of to for are shareholder value. of to quarter update an unlock We over for look we It discuss coming forward financial

Michael. Thanks,

down industry consolidation partially margin year. Our offset a by quarter consolidated first quarter X% project $XXX due was Dyna, at at primarily mix from favorable Consolidated sales million, XXXX more down gross in to quarter first were last the XX.X%, XX.X% which was NobelClad. from first the

sales, of were from quarter by at The partially $XX or approximately quarter primarily Excluding litigation onetime first our XXX Dyna. a lower basis expenses $XXX,XXX at which charge Dyna, was net debt driven year. first expenses, points down offset also SG&A was million XX.X% the last of improvement expense by bad

attributable sales the XX% and prior adjusted compared which million Inclusive to DMC explained At to approximately in $XX noncontrolling XX.X% in compared previously level, quarter or the First due sales with driven the lower margin The adjusted or X.X% mentioned of million year EBITDA million Arcadia DMC. million with consolidated to gross prior Arcadia sales Dyna. EBITDA the quarter. business EBITDA the EBITDA of that $XX.X sales was year $X quarter. or of was earlier. mostly reported million XX% of first at sales, of adjusted Arcadia's Michael was declined by contraction Arcadia interest, XX.X% quarter at decline was of $XX adjusted lower year-over-year attributable $X.X

EBITDA to of XX.X% year was adjusted average SG&A. DynaStage which quarter lower units Dyna's than with adjusted fourth quarter, reported $XX.X a XX% of higher to price. and Compared volume lower of quarter Dyna to or million EBITDA improved selling the -- in first due a decline sales, prior the due

EBITDA due quarter adjusted overhead of XX.X% favorable $X of was of margin a to project reported XXXX. compared sales EBITDA NobelClad almost mix XX.X% with in the improved manufacturing costs. of fixed and which absorption million, more first of sales better

$X.X DMC DMC in attributable year's EPS First quarter. $X.XX quarter $X.XX attributable was million, adjusted adjusted while last versus income to first was to net

distributions for double free debt joint quarter. generated than DMC quarter the to delevering the use $XX.X and our more prior this venture which During voluntarily flow We flow first on cash free partner. million, year our was Arcadia primarily quarter, year's of cash

well we our a was quarter. covenant terms threshold with of of basis ninth X.X the of delivered. the first quarter after forma the On pro ratio In net approximately debt first $XX X.XX quarter and debt quarter below leverage liquidity, at row of our subtracting ratio million a cash, million. $XX EBITDA in the ended have ended which of with X.X, and represents of leverage we the adjusted end a cash We debt that was first to

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

in expect versus activity markets to remain flat Dyna's is Arcadia's expected remain in activity quarter. We to quarter, soft first relatively the the in second American markets while North primary

will million attributable EBITDA range and EBITDA adjusted SG&A. from first expected less to favorable quarter we to mix. With margins due a that, take any anticipate remain margins DMC in are analysts. a quarter while improve ready to forecasted flat project quarter-over-quarter, stronger At Arcadia moderate million. EBITDA NobelClad's to we're are questions be $XX Operator? relatively the our to to volumes margins Second expected due to EBITDA of is $XX lower Dyna, to from

question Our [Operator Ken first is Markets. Instructions] Capital with KeyBanc from Newman

went versus improving that can with or size revenue Maybe sales channel the expecting? in bridge that short-cycle could this hoping sales you idea quarters. Arcadia. you're of through the just on starting comments segment your help the you Eric, us Just just sequentially coming Michael project-related

Yes.

Ken. thanks, So

centers service in what seen couple storefront decline a So our work. regional or business. our that We a our we've of branches short-cycle is call for

that's sales commercial centers, of so business on XX% And that service those And is or of rest construction activity. about the side our the the to branches, resi it's XX% project-based track whether side. commercial general regional with our

of So -- broader markets. project range it's end to exposed a our and business,

more in our So that's featured education, earnings seeing you're that things where government, civic, deck. like

up necessarily business. don't as they So much wind short-cycle with the

business as half of we're currently. coming the significantly we've a what well. improved I'd a improved seeing project cycle quite first back quarter, so seeing quoting we good in And got of And -- we're on saw dip and see through short bit is say, the some we

valley the now, we got right think we're Ken. in think we So to

Okay.

if on is capacity the Arcadia know this side year. paint So later bringing transitory short-cycle on I the on this you're volumes,

absorption? muted, the that there to assuming are under mitigate Just you volumes stay that levers can relatively pull

that. Yes, absolutely, on Ken, and of I'd couple things a say

think couple we middle through demand, quarters of I capacity we certainly lot of investments standpoint And we where We off think see CapEx. out can the here of north cost of a save so from on a we've in current sustained a as initiatives march from and in back can drive EBITDA increase a I we're push environment. can got there's pull QX. operational until we this

projects some got in we've works there. So the

that our are leverage volume picks up. So -- and any we event as outside there then a from can sources capacity standpoint, in

Okay. range for revenue confidence to to of of or Dyna conservatism? specifically? mean it the assuming And as Maybe at Arcadia, the the segments. what's levels relates just in XQ you beyond I switching kind maybe guide what the the of other lower are level end expecting

stable, what I in market steady fairly we're mean activity. is seeing Dyna's

soft modestly had see we think or maybe pretty as flattish. so And we that a I say decent I'll April. QX

a in well. steady seeing and the now, front-view we're We But pretty in April see in we what pretty right decent that's levels Arcadia as just Dyna, also activity had mirror.

Got I'll half The in year? the move do for jump more, one gross of ask through a as line. across segments view all margins it. you -- back we back the and Maybe I'll have the

of some the as you're DynaEnergetics, going projects in we're much we Arcadia think only see some in we're it's but and new there products new product to things I automation and not plant marketplace. consistency And that in NobelClad, new our as but also expect putting with not would doing say. I the design, well products improvements the as

Stephen Our next from Stifel. question Gengaro is with

just side, and about think we The move -- the cost as you kind the DynaEnergetics margin initiatives on of of out progression we how the quarters? through next talk can couple about should

Yes.

which track. can I -- relatively you at to progression, on in I'll year. speak the have we most our is I think in think now, flat speak end for part, in are the of we'll Eric those can to Most the progress initiatives place of right have that the guidance. that And the margin

large our list assembly items automating on biggest a Blum or I of facility. on our our item one, our list couple think in is, the

to So our base. going quality. to going That's improve improve cost that's our

see supply And purchase projects so I better some can got we where also to think a can that. chain from together benefits on we're purchases we management metal. of going how standpoint, think from we We've pull

this, just, think I smaller So then DynaEnergetics. it, then sure a design. a as on a execute want And projects don't make another big savings are of I'd them more on operational is we product, forget the product excellence in of we maybe bit quite there. And I in to lot program call there's one,

metal take cost. of taking out takes a we're our bit metal products, doing and out quite So of to lot a out

that's perforating design together. systems our and -- package So enabled and how by we our

progression? maybe, you the Eric, So talk little margin can a bit about

Yes.

at as But get you we of this year initiatives, mentioned, being now. when right the We're is, that year. full probably expect so be XXX implemented an basis there's going to these a to EBITDA to the Stephen, points up going So are get us should impact mid-teens what into year, second the from benefit standpoint. Michael would to half probably level, not margin XXX take

Got you.

given from is mean next what's one And the the year-end, on Good. on following maybe going the the I well? should flattish we maybe is activity? can Okay. count driver in say, assuming to completion through just and -- rig be of the there these the that about levels -- Or it other market let's bump of as or count that? laterals seems rig then kind kind longer for think of is Dyna the and some what's that it as top line technology

think stable about more steady, it as probably I'd now.

win the of One is ways key our we with customers.

so then customers partnering the E&P. with, the they're at our aligned how customers is the technology and site, And right quality we're key our that well with with service delivering delivery and performing

the right we're think with there. I So aligned customers

what in doing a to we there, So do outperform rig I the here. we market to pretty environment, even our good control feel can count we think And probably we're about, flat destiny so stable to tend steady.

And -- well, your on any kind not business? Are guess. And I share it. like pricing any environment one the stands? one quick Got final But guess. look is guess for Great. What's -- perf current of the just not guess just one. guess where a

of in a of we've environment a right I environment of bit share, I it's stable as is. XX%-ish, a frankly. the XX% between and kind challenged north quite of been couple XX%. And been bounce It's now. think, We that, pricing pricing remains couple over say, XX%. years So -- the we're of last -- relatively I'd But think fairly kind maybe

Partners. from with Gerry ROTH Our Capital Sweeney is question next

just I I maybe of investment sticking lower Or Obviously, some, strategy are was curious their with level. that think storefront if a you. is anything Arcadia. like a market? or -- But adjusting [indiscernible]. sounds there guess, It weakness this that little at [indiscernible] was after the the some happening bit is anyone competitors Just on strictly I'm

improving. it competitive think much we don't pressure business, Gerry, I great as commercial really which question. backdrop see it's the the as is in

anything we high-end our in also slowdown a So there's don't competitors we is second think see doing But a I item, which different. any division. saw ultra resi

reducing a a overall was, the in And which Arcadia. was It mature small work lead in a lot done of I'd not so operations, piece improve work back we've of a end times. terms business, And business. to of lot our say, the that really done we've of

the I business, the at a valley we in first first the particularly quarter. think, So see hit that quarter, end of

what driving all So rigor business the performance. we're of front these processes to pipeline, dealer our now, on end of the improvements place, a front end of and the rates, we're with in doing lot in and close there's add doing we're to sales terms

through going So start favorably that the think we year. is to we track as moving business

residential market residential. on So specific whammy well really, we're kind more side to of the commercial double on as seeing storefront as But it's related a and than our customer. also business

it. Got

Or competitor.

to you taking gauge have trucks that of hard just every up Or know just business? that storefront replacement it's "sticks" how business because there day. much build lining you new type Do versus is like is --

[indiscernible] build or to have too is not may new tell? hard or -- if you replacement a You it curious

certainly of a We're about hard build start a remodel. too now getting little mix not there that quarters, of the repair new ERP months, that. it's and to yet, visibility actually It's Gerry. tell system. good a But can more Hopefully, now. and we our coming right in bit on talking out of lot We're

[ inventory ERP move prices out there? of And through There's did concern been coming they Or system, between sort past you. ERP a product out, right? that going looked bit Got system. we then little the a beyond -- Any bit I little of with mismatch of or... the quick kind spiked ]. a sort to speaking actually of like aluminum April

to I in there. don't see Hopefully, a any some aluminum. there concern we there. might able There's up tick be margin even capture

So the year. I there concerned bit Maybe through as to about. even be don't move little of think anything a kind we upside

year. that, we've were I'd say, more costs how through visibility into what Yes. our to system And to time production we I move versus last aluminum Gerry, add this those just where got think

to handle this increases a how much can those on we're pass we a So manner. in have I going cost to better and handle customers think timely on

jump And the last back I'll one question. line. then

mentioned accretive as the line was there anodizing You there Or but it. was front? pull sticking CapEx, margins, with paint or you CapEx Are but that positive could you you margin on changed however well. has anodizing on was back that And that? to say to want with

that opportunities was we're be looking to loaded back-end so different at we're There's mean in Yes. sources that. I there. evaluating XXXX and going anyway,

leaving where on So money the we're with at, here. lot market's I don't now, right of table a the think

continuing Gerry. that, we're evaluate to So

And to how look as would we I for can do, we get think Yes. evaluate what ROI. we it, highest the is

actually bringing capacity spending party. it some be that the be Where the is in-house? capabilities Or industry, to get way. those some looking is to third able outsourcing a return this CapEx we and might in So overcapacity at it of better there may a

to analysis. on at we So day, different And the what approaches. return do that's going of be end the of we get part from we'll determine based the the the

fair? And year back the to ] not things [ I that adding at on -- -- better get anodizing that or return that a anodizing front front. Is So mean, you theoretically, lead X, rate? and There's time change. least could you. if Got what's a that you later for on a always -- outsourcing, on go

to. -- could couple if Yes. needed that mean, -- something we quarters put like you could we put a I could of it We in in,

So -- not a it's project. that is not multiyear -- not something yes,

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

early progress to results our joining Thank you. today. forward and strategic initiatives look discussing QX on for in call August. Thanks I

conference. concludes This today's

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