BOOM - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the DMC Global 2018 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Geoff High, Vice President of Investor Relations.

Geoff High

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

statements. to results anticipated of subject replay is become certain assumes forward-looking to in the be will materially business could that actual today's at risks of to Our cause subsequent obligation dmcglobal.com call. those differ from our statements webcast update after DMC no that call available events. forward-looking A because untrue

hours are call. the I'll ahead. In to listening Longe. to in after available now for over Kevin addition, And please telephone approximately Kevin, the turn will a Details with replay replay news we today's go release. made call that, the X available

Kevin Longe

detailed capacity very factory-assembled improvement quarter onshore results that from our over Thanks, DynaStage Geoff sequentially delivered in operating pricing, increase detonator increase income of the oilfield a million, gross $XX.X quarter XXX% continued and were financial in expected a million, and X.XX, versus the drivers quarter from both companies and gas performance year's the an XX% The than and forecast. we increase first gross of by declined versus year's quarter first of were XX%, were first an the DynaEnergetics, X% approximately million gross demand with execution generate last demand with fourth $X.X in Backlog quarter. X% XXXX. customer service XX% Improved at margin teams system safe The business improvement hello, the strong last last Improved million new working business result. XX% million first the $XX.X DynaEnergetics operators Sales trailing operating of unconventional were and led our explosion and from exceeded first quarter. favorable better the assured XX% in DynaSelect the last ratio everyone. margin to last Consolidated quarter. product sequentially, while sales quarter. of of fourth investments accelerated coupled strong margin sequential end XX%, XXXX first and an and our a at book-to-bill strong $XX.X call welding the DynaEnergetics first in during NobelClad’s $X.X the industry. a record sales backlog quarter XX% first intrinsically of key in million. versus Consolidated production The quarter. of and versus NobelClad’s order XX-month the operating DynaEnergetics and Consolidated was oil was our increase. our it year's reported $XX.X business was loss drivers of level, primary ended At pricing year's mix XX%. products million $X an in business up

in adjusted in Adjusted in quarter. share. income operating Excluding $X diluted reported diluted million, share, versus or the anti-dumping income first share, $XX.X year-ago net $X.X $XXX,XXX. income income $X.X was first or expenses $X.XX $X.XX and while NobelClad, million, per a of loss accrued DynaEnergetics million $X.XX was Consolidated million, net per in DynaEnergetics adjusted $X.X of $XXX,XXX per net at or NobelClad penalties, million. the income adjusted operating quarter reported of million, $X.X restructuring diluted operating of

NobelClad million, in fourth DynaEnergetics the last and manufacturing business quarter. was July. ramp reported the expansion should quarter its foot $XX.X program XX,XXX EBITDA from global on million in and has raw $XXX,XXX $X.X $XXX,XXX. EBITDA quarter has Blum, progressing adjusted anticipated. the quarter DynaEnergetics by level, adjusted the was operational first chain, of EBITDA are At of adjusted up be and First Texas DynaStage first $XX.X capacity bottleneck year’s a which million, enabled in the square than material In facility of supply up effectively production the faster in addressed end volumes assembly key schedule meantime, DynaEnergetics originally while

sustainable growth. number important progress very our by start by we encouraged business also on business confident NobelClad path the growth. are market Our and operational is XXXX initiatives our a to of long-term making on and prospects financial and healthy a toward is end I'm for

want efforts forecast. the the call of would Mike? extraordinary quarter our I not and our all for commitment that, continued over possible additional to achievements update our of to employees for With turn workforce. our Mike thank on to their first comments financial global be some to I'll results an financial Our without success. DMC the

Mike Kuta

sales good Kevin everyone. from Thanks, or in quarter last or sales the wages. The resulted of of first increase expenses, afternoon, and SG&A versus million million primarily $XX.X salaries and our year. Starting XX% quarter was XX% $XX.X higher first with

X% expense First $XXX,XXX was or of quarter sales. amortization

the case DynaEnergetics and to $X.X XX-Q. present a in scope mitigation. and arguments with duties and U.S. of anti-dumping initiated related brought Kevin has countervailing are for potential intends a accrual reported today's recorded the case the of million mentioned, XXXX. available discussions in relief previously As on penalties Customs Department Details potential DynaEnergetics penalties regarding

growth at million. quarter Blum, XX. of the with The new Texas. from at our working DynaEnergetics sheet, DynaEnergetics $XX.X in as Looking we up facilities million primarily as cash was with ended increase construction million, cash requirements Net equivalents increase relates debt December associated $X $XX.X balance operational of well at first to and capital the

operating we cash quarter, $X the activities. use During from million

be we to in approximately expected in Turning $XX million, a DynaEnergetics sales $XX million, million, sales year's to $XX should last second range second sales be the $XX in of anticipate be will $XX to NobleClad reported we quarter million of million guidance, range $XX.X million. versus while quarter. are to

second investments in between of the the should SG&A range We quarter. XX%, in $XX.X quarter. increase relates second XXXX in increase margin to last expense in the expect last expected of sales commissions expected of consolidated quarter while approximately and expense The up million, $XX is gross $X million should salaries XX% wages, the DynaEnergetics. to year's and second litigation interest $XXX,XXX, to million approximately XX% $XX.X million be year, versus and higher be Amortization in versus higher from expense $XXX,XXX. be headcount,

forecast up $XXX in to our a to million are range sales quarter second business $XXX With $XX million $X raising the million a million. $XX $XXX prior year, from that expect and last EBITDA to year’s million we in at to million, second We chain forecast it’s DynaEnergetics customer respect its rapidly quarter. reflects efforts growing The in increase a more will address to versus fiscal of to the adjusted demand. improvements $XXX full enable range supply confidence of million, capacity-expansion of

Anticipated up now XX%. to The forecast XX%, adjustments versus commence million. scheduled be of expense is year $XX million be million at the SG&A $XX reflects in full $X from The million. which $X.XX. NobelClad’s a expected Amortization approximately per DynaEnergetics’ year We an interest DynaEnergetics, expected capital XX% million, The the expect range share infringement at of our are to be XXXX $XX at XX% to to in million, of relates trial to in expected $XXX is are sales forecast at full $XX $X million, to sales million range of Company’s range prior expense and range prior $XXX $X.XX in expected DynaEnergetics. patent $X.XX prior in to to million to XXXX $XXX expense expected million forecast We $XX expansion unchanged October. our million. is $XX range a diluted increase for a rate We XX%. of is of which to full for approximately gross in million of anticipate to anticipate versus year of to in our tax $XXX million. unchanged effective litigation capacity to XX% margin for of forecast million to a $XX a earnings is expenditures

in penalties, anti-dumping range a share income And million. take million ready with to $XX $XX net expected we're $XX that, We $X.XX in adjusted prior million million, EBITDA per of of from range $XX to to and restructuring adjusted is to a up Excluding $X.XX. now a anticipate any accrued Operator? range of questions.

Operator

[Operator At session. this question-and-answer with be question with Roth Instructions] conducting first your Our Sweeney time, proceed Please question. with a Gerry is we'll Capital.

Gerry Sweeney

quarter. Good afternoon, Kevin, Mike on Geoff. a Congratulations and great

My I demand more type So rest the investments question or intense, X% addresses. XX% revolves coming – is within I maybe think guidance labor are X% constraints on areas. obviously, demand grow. some of of a how the getting in are year. – far I on around, There's certain that North where DynaStage that towards cluster think terms more could we, understand There America. the very is great quarter, maybe positive in perforating to the are

a there's bit where of is demand cycle lot you there market, and are a the it your dynamics around could this we in end little but much of to that provide on maybe a view out could how So thoughts go? where potential

Kevin Longe

years. forecast the rate look year averaging from down we data. American still XXXX. per to anywhere forward, use you stages XX% slow at going And XX% in IHS anticipated quite the the the of but is if three next XXXX frac and total it's increase Well, North over over to increase healthy XX%

feel the so pickup future. we legs will the it foreseeable to for that current some And we has demand in continue and

Gerry Sweeney

but bottleneck concern what the didn’t one? any Also particular little or bit mention that in on permanent terms Maybe material? is it bottleneck could helpful. raw the the it a arrive in That's in You fix was future. that Okay. of

Kevin Longe

prior increase materials first There our well half well in in as. terms over Well. dramatic short ramping year, were a supply of as XXXX half that was outsourced in second a of as the of suppliers the as such lot

component capacity investments line Germany to we mentioned, gun our our manufacturers automated with on we're bringing that in and primarily Texas. that go assembly to As in their

last try we So are September to pickup get began the in it we year looking the starting it's unfolds. to aggressive that capacity making year August, investments last board in in and to really year an back activity. took early stance when as saw of we front this And market out the layer across

Gerry Sweeney

costs some then associated more legal as Got one with But bit but it competitors. is little a of the actually, this packet maybe I Mike. where your you for of with it. Kevin think obviously, the – well for And

$X million, the the of as actual just timing or anything court more Or aggressive? to on the slight next year? $X opposed million. changing into it million, becoming materially call? associated $X dates charge estimated that be I about taking XXXX they We front Is $X step or It's rest would closer be costs to is another that of up thinking about the when did appears quarter million share. for the fourth it’s maybe the

Kevin Longe

It's successfully today to we're don't driven million just that our them, year. I that of for believe the legal your you and court expenses there the in forward. you're seeing defending what to $X timing competitor. with that and it’s stance I going but with done $X And are ourselves it we're of from million dates technology the when things consistent protecting range know, is significant. intend effort The we those on a IP, supporting just company. the underestimate want one comes And being the as

Gerry Sweeney

on cetera, of Okay. obviously, et go some significantly in to next I you you are case? you of but court great it be could company place, better mean, the have going had expenses even against positions How competitor a this position those of many great lay forward. this or – after with cases guidance some quarter, your

Kevin Longe

to relate revenues, it these which in all charges, doesn't perforating relate our shaped our to the of of systems. First initiating book systems are and primarily

end year, more We cases have by optimistic the be two of on. tried which were that will this

Gerry Sweeney

like, with Got of a that revolves $XX a and steady little think how of second, state our terms maybe step the or but half uptick. revenue guess for this you implies belt – expansion quarter potential to than Guidance this – final see Is of about with revenue a question the sort guidance guidance quarter guidance. bit a one big it. just I the it around I way run think that’s fourth for to the up the sort read – in million second looks what… how And third, maybe were in I’d then – – quarter took second

Kevin Longe

get we Well. our driven. both for that's and demand the important that even It's technology our capacity greater for It's pricing creates value us our technology. for value customers’ us. for And important

driven. is half the And that really market so that year we're capacity pursuing is first a values of technology segment this and

will second The start half more in. seeing capacity layer

we've the a in on. are very how years. point optimistic for the of lot cycle on short we going be and about of what is quarter-to-quarter with depends very the fairly so in three to terms the And but evolves year-to-year why the for However the business market in year. year, of that we're constant forecasted confident it it our second a guidance the from It's half next

Gerard Sweeney

quarter was back. you. Got it, great. it. jump Thank appreciate Congrats for I great I’ll And again. really I you.

Operator

is & Company. Marshall Our your next proceed Sidoti question with Edward with with question. Please

Edward Marshall

Hey guys, afternoon. good

Kevin Longe

Good afternoon, Ed.

Edward Marshall

So capacity in capacity and I look the million to delta is walking constraint topic, kind touch second last that I you wanted another in $XX sequentially, about on you half QX. that driven some versus added at capacity know of talked that

in? and all might to volume million price how that One the to specifically of how of was get it much you, sense from been much delta, And taking have DynaEnergetics? $XX kind a

Kevin Longe

exactly. Yes,

So volume. that is delta

Edward Marshall

Well, volume.

Kevin Longe

primarily. Yes,

Mike Kuta

I’ll layering is of to year been year. to and increasing aggressively is the should volume in that half our they the we in more in of that the which related. add restore to And our be Ed, where believe this second first already we’ve prices And half margins

Edward Marshall

confuse. Okay, I

better $XX fourth and we but half pricing increase first by losses? getting driven that your first – volume million quarter quarter in So than less the you're and pricing

Mike Kuta

marketplace being increases pricing, really half portion price on delta we the the a saying out primarily at primarily half. capacity delta than is squeeze first the to $XX price that is that our and the is we quarter versus of it. a able bit million volume. the fourth half But quarter of XXXX I'm which first XXXX that into your When What look significant more adding in you that’s to of first put we've XXXX in that second second we're thought is quarter were more

Edward Marshall

Got it.

of So my I part question. guess that the second

now. when to some not the gross online all do mean, element What with us come to then think margin some equation capacity that ultimately you’re happens – right So you to going and out what on there happens that and pricing they running of is you are the that? be progression

Kevin Longe

not will compression. be There

we're not the and charging are we're on very focused much price. that pricing market the We value for pursuing value on today

to And to try our so half be value offer not who – any in the that the second customers we’re the at ours But in we hopefully. products built the capacity half we're out first going cost. to

Edward Marshall

on materials inflation Got you are any the it. your across then And seeing materials?

Kevin Longe

are Yes. what said I couldn’t, tell today as the I and to here but well and – increases you and we as which cost restore increases the some as percentage, inflation cover definitely margins. some seeing of materials is

Edward Marshall

is as to And find… had as businesses both across NobleClad it. well it Got and in that DynaEnergetics

Kevin Longe

DynaEnergetics so contribution fact real decline is. increases And in will increases. we it's NobleClad the they in a increase across in you have which business, reflected way different Their certain having pricing market margin It and the project products margin mean, material good some pricing product NobleClad in project administered time projects maintained I'm for the line cost has and over as also of for pricing a every put time. target I is a on. and driven and is their board. the had They a on which driven price working and standard we've a very, market is price in then a proud we're usually we contribution the into very are – some goes are their it where baked are contribution very maintaining know, and margin strong of really difficult at application is our activity. been

Edward Marshall

pass through? a just it’s saying, you’re So

Kevin Longe

through. pass a It’s

Edward Marshall

look it and I is your at how was the million projects? of materials much by driven $XX price backlog inflation so, into If take that or be backlog might

Kevin Longe

we'll – that little this Very going more point, if any of see to probably forward.

Edward Marshall

to what’s the growth et then curious, picking about while much pretty book if good that’s of yet slowdown of talk anything… kind going more are it’s curious NobelClad, color it’s should we're you stall your or sequential in related been pretty the I'm I up, still on customer maybe if cetera about, I'm provide decline saw over And that enquiries kind as generally about in been market backlog. some talk you of kind year-over-year

Kevin Longe

we we're that ever but show business sentence in time that optimistic about increase place. actually to that feel the with for long a as I we the our as release, me of kind period you quoting and earnings that that struck need in we we've to have, shareholders. in to demonstrate That our and very strong said taking is that feel a we're activity. I said such

Edward Marshall

I appreciate your comments. much. Thanks very

Operator

Our next Please Capital. Chardan [Operator Instructions] question. with with your McIlree with proceed Jim is question

Jim McIlree

you bit level like just and are afternoon. the assumptions working a understand good expectations my about It the math thank rest Is math to the kind XX% DynaEnergetics. flat through Yes, assuming for correct my that your the gross of I'd like you're year. margins and this correct? seems from or little margin of gross

Kevin Longe

yes. Yes,

Jim McIlree

Okay.

getting back be where And talked Kevin right? of be in this so when margins should where they kind your view you about is should is they to that

Kevin Longe

should than to see be, higher actually them I'd They like that.

our include kind anomalies the statements, as and of development. we in our of of goods of One research sold the cost financial

we for that why and future of normalized as gross have those margin for we’ve that XX% we're included more out relatively business. coming our is that XX% in And year the spending, see range the But margin. XX%. are goods this in this gross sold that focusing got is in to like year on is and reducing margin we'd – constant the for investments ideally so of really to revenues the development step in research gross of step cost to a our significant that's so for And balance – up NobelClad, up

Jim McIlree

size or as Can of percent the range DynaEnergetics sales? of you R&D a amount

Kevin Longe

property employees X% range. the and lower that in percentage than included there to are it been of And sold. X% in what would SG&A been a There's the X% in the in also be are be running SG&A, that's to – is X%. That cost those that's revenues. intellectual pickup would there of we've of but goods an because carried – included in some investment some

Jim McIlree

Okay. Right,

you like year? capital think the is of You had the working – on fairly it rest what current needs capital significant And question a expectation your for investment are the quarter. working guidance, the this what your looks is

Kevin Longe

to you steal that? Mike want

Mike Kuta

Yes.

had capital we see accelerated end. in you guidance billion our faster little bit change of terms we probably growth previous unfavorable We then a $X.X thought. that in we’ve million debt So cap what can million after $XX out we've in out year around $XX are top working said more and that a

working So could capital and requirements but guidance didn't our where a above bit, feel change be. to, I little take maybe there to would no debt substantial need change that we the on

Jim McIlree

And those very stand year, you Okay, at then the restructuring great. year for it? wide but to rest on take for predict it's just next I anti-dumping. might of and know can the a difficult the be what the

Kevin Longe

mean – of On I the start the restructuring.

the negotiation not with there And it I arguments that goes, phase our year operations we've think additional with feel to to be we've customs $X.X like we've – first that where $X.X the we're got at that manufacturing restructuring farewell the anti-dumping feel can million that a that NobelClad. incur accruals. finalize note and French in we the against we're got that so hopeful and group of any what for we'll expecting we then for we will we quarter total penalties anti-dumping or to for the good of in and reserved see did and through closure penalties million about and Mike

Jim McIlree

let's for a balance or anti-dumping current on. time? you amounts guess $X.X that's move over cash liability. and amount so and sheet what – goes that that's million due year Would about the is this well immediately you not your against it say that payable of just be your best So the be If decide stop

Kevin Longe

anti-dumping there's So the remaining accrued. that seeing the we what had couple duties pieces is a on prior you're of underlying sheet that, balance

that on of of which million So is may is will with we anti-dumping prior And that pay depending customs. we $X.X duties that not $X.X million, outcome pay. negotiations then will the the penalties may $X.X Delta million or

Jim McIlree

that's this Okay. that something XX to likely the that's finalized year – Is or something next be and months? in

Kevin Longe

XXXX we we resolve it hopeful – Yes, but could we're year. could XXXX, expect It into push it that. push this can into

Mike Kuta

for and portion that like tariffs penalty Yes, of today. that I would thing duties what it. we've we this accrued that is the themselves to that see important to recognized have quarter feel add in we're the accrued been the we fully And

Jim McIlree

asking Right, first half second with the DynaEnergetics okay. A math be by to the half versus the questionnaire equal to like is quarter the about the half out prior looks of phase second quarter and sales level. about second

in call So half the versus this million in capacity. half me that second topping in a the And quarter? see at of least just out revenues. some revenues wouldn't at confused the increase it you first second little just removal – let's by with the excuse bottlenecks why versus it is $XX-ish flattish, the Why pickup

Kevin Longe

Yes. to and at in $XXX second We're midpoint, million here million half $XXX our so first half about $XXX-ish the the it's and $XXX in in and is DynaEnergetics million the showing million about I'm half. guidance what first in talking

$XX with growth we're we've that a on. we that got worked just believe that we're million get had the good deliver $XX capacity through third you online those, the and – issues in the think strongly but million, in we we provide So we've deliver to those guidance to bottleneck want quarter, [indiscernible]. about and half things We we’ve showing feel second can and we can

Jim McIlree

Okay, very appreciate Thank that’s I fair. you that. much

and good with lot will for Thanks I luck think that me. it do everything. a

Kevin Longe

you. Thank

Operator

received to closing Chief Kevin And over of session. call for to question-and-answer our and Officer I Executive have like would remarks. the we Longe, turn gentlemen, Ladies end back

Kevin Longe

we end quarter. for joining Thank and everybody for of today at call the the you, forward with to our you. you Thank us look second talking

DMC Global (BOOM) 26 Apr 182018 Q1 Earnings call transcript