BOOM - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to the DMC Global 2018 Third Quarter Earnings Conference 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 third 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

after available Details replay now In Kevin to Kevin? the today's the in turn listening to Longe. addition, with telephone two call. the will a for that, are replay release. be news And available over I'll call hours approximately

Kevin Longe

XX%, down $XX.X quarter. third customer thanks up Consolidated sequentially XX% DynaEnergetics versus market million DynaEnergetics, XX% NobelClad, $XX.X from quarter Geoff. sales and XX% of both sequentially. improving composite was of which sequentially. XX% last last this strong resulted third from conditions from quarter which selling higher X.XX up reported DMC gross ratio proportion was year's today record XX% quarter. year's a X% At in and was third second were versus oilfield NobelClad. quarter. a million, quarter and business and a last up periods with year's this an our and quarter business. $XX.X of third metals DynaEnergetics NobelClad trailing from XX% to sales NobelClad up the ended level, gross of the another book-to-bill versus and project Thank third DynaEnergetics business XX-month our of you, year's XX% from reported from higher from products financial quarter second demand increase and third year's this million margin quarter of reported at at an X% Consolidated record second and quarter backlog up last $XX.X results, DynaEnergetics, record mix last margin sales reported quarter The year's at sales million. year's prices both versus year's average order improved at third flat down

mentioned we expect components we DynaEnergetics' margins last As we up income year at end in the the quarter accrued excludes the DynaStage was a performance-assured impairment million. penalties and million. third excludes in two key in XX% in $XX.X million NobelClad $X.X penalties, factory-assembled operating production operating shipped million at margin our year NobelClad quarter. DynaEnergetics. third call, upward reported of NobelClad the gross NobelClad restructuring and XX% of in last operating quarter of a $XXX,XXX $XX.X million, of accrued trend the Adjusted quarter and to $X.X goodwill third $X.X of charge income DynaEnergetics Adjusted gross was antidumping of system. operating internal year's income XX% second in income antidumping reported $X.X towards expense as ago which of used the while includes million reported and at from

$XX in million per million or the per quarter. net ago comparable versus of net adjusted quarter adjusted share $X.X share, income was Third income or $X.XX $X.XX year diluted diluted

while this expense million. of NobelClad EBITDA EBITDA, quarter. $XX.X the year's million litigation million adjusted which million $XX.X includes $X.X in reported At third year's reported adjusted million $X.X was quarter quarter in business of second versus $X.X level, last EBITDA DynaEnergetics third-quarter Third in and adjusted $XX.X million,

million DynaStage unit mark results part and growing the across the $X.X to large prior customer to in America. system customers DynaStage in recently exceeded basins adoption Our of continues our North for consolidated DynaEnergetics due onboard system. new third surpassed quarter the forecast sales

perforating success performance. level service their has for on a a XX.XX% completion DynaStage and Our in for improving a leading and production considerable Texas. A There state rate in customer that the in America's units been international sets about a performance. significantly onshore large slowdown oil South best-in-class company The company recently well than project, standard is operating a new achieved discussion customers sector exploration North operating XX,XXX deployed DynaStage activity. gas more

breadth immune base helping diversity geographic entirely its the is this While mitigate of is growing DynaEnergetics situation. and customer to the situation,

Permian we addressing XXXX the this to As customer Blum, center anticipated and will in DynaEnergetics budgets new from increases demand activity. year, manufacturing are benefit be fully refreshed operational first capacity next in to will an DynaEnergetics' positioned assembly of is and in November. strong takeaway believe state-of-the-art quarter in Key be which Texas, later rebound the in ideally

industry. reporting activity, facility is maintenance oil also our gas business repair including increased work into be The of by improving operations manufacturing NobelClad's of year. [indiscernible] the NobelClad consolidation downstream the Our European and demand complete from the Germany will for and end

initiated DynaEnergetics will accrued the an penalty the $X and behind during million are On has of put the quarters full us. first penalty the to outcome this the the resolved quarter. this end for year's and at by legal case third in We disappointed we phase, penalty the and antidumping and issue XXXX process we been tender appeals fully front, decided while

recently patent competitor. made DynaEnergetics through brought of the I'm announced a the won third first progress we've infringement the substantial defense by nine of We its consecutive a allegation the by months encouraged year. also

year. the over to cooperation strong believe we forward XXXX to continued and performance. quarter of hard look coming Mike? finish the a call for are Our Mike on well positioned growth I'll financial our in DMC the are detail accomplishments to everyone on for and turn the additional third attributed I team. now work to

Michael Kuta

everyone. and Kevin hello Thanks

sales. $XX in expense. year's consolidated litigation Looking at sales expenses, $X.X million SG&A quarter was of XX% SG&A our last was of third quarter million $XX.X XX% or included and third in or million

X% million at at and million quarter was the $XX.X Third sales. the or We associated DynaEnergetics' third XXXX. $X December of with requirements during to end quarter of million DynaEnergetics $X.X $XXX,XXX of cash $XX ended well to at fund debt amortization with generated expansion. second activities cash from quarter. the quarter as higher versus capacity relates continued growth and third principally increase working million We was equivalents Net The million. borrowings expense $XX.X XX, operating as the cash capital in

the last sales $XX million million reported quarter guidance, sales be we $XX.X $XX versus million $XX be the versus sequential earlier range North American The basins. fourth to of $XX.X fourth million should million to the NobleClad in slowdown the the in fourth be $XX.X at fourth expected that last reported Kevin quarter, referenced versus quarter. to relates in third in last $XX decline of year's well are the from Looking to anticipate million Permian in DynaEnergetics as quarter. reported sales in as a range exhausted a approximately year's Basin in we expected million million year's quarter. $XX.X customer million will other DynaEnergetics in budgets $XX reported

in of a margin versus expect XX% XX% the We XX% gross year's quarter. last to range fourth in consolidated

in be million inclusive from $X expense be year's the expected $XX adjusted a should approximately Interest last litigation million million expense approximately $X $XX of range million last $XXX,XXX. in up quarter. from of quarter Fourth fourth of $X.X to $XXX,XXX EBITDA, fourth $XX.X Amortization include is quarter. quarter to in in is will year. last expense expected million million million, SG&A million the year's was $X $XX.X down expect litigation approximately fourth would be expense. SG&A We which approximately in

share, of end share to diluted higher net We rate. is a in year at a up per and SG&A second volumes the income which are with of to third financial $X. now expect and maintaining range range prior the we quarter $X.XX stronger-than-expected the exception The This full earnings a increase share our of the tax were $X.XX. provided by primarily lower quarter, a per our from sales income guidance to expense. adjusted relates $X.XX We of per

previously XX%. antidumping due full-year costs and is now XXXX, of a forecasted Our rate the to to in is incurred XX% range tax-deductible. penalties not are tax higher expected The which than range in restructuring

within normalized questions. we we're is range the charges, Operator? adjusted XX% expected to XX% these forecasted. to ready any that Excluding take or With the previously tax rate

Operator

Sidoti first Our from Please Company. comes Instructions] [Operator Marshall, proceed Edward and with question your question.

Edward Marshall

guys. afternoon. Hey Good

Kevin Longe

Good afternoon, Ed.

Edward Marshall

differently breaks other expected there? larger a on that down. what before guys I service guidance, the What you of be specifically said for and guide start, start the about as maybe DynaEnergetics about, wanted mean hearing into So think talking peers I quarter look out fourth may than XXXX. Hearing about would've might and even one take the they're some talking Thanksgiving. to at I to the customers, you and customer step the customers think When

Kevin Longe

upon I we're the the more think it's things components. basins is are Ed. our market those revenue in And and dependent systems Permian we over and an two seeing so that versus spread increase in less

Edward Marshall

And in of as of then help we kind step out what production up see a maybe I the do of lot it's look takeaway the at think capacity. the -- to cadence, think when due recovery, we XXXX first How when I cadence second of about about half the repeat do or can we quarter of into kind rates there DynaEnergetics? seeing us with the half we first may Do we're the be kind at a fourth that? versus

Kevin Longe

we turning standpoint. out believe a is a very is to to going a of good from to down year first is I flat very XXXX The think year good and all be be fourth quarter also. XXXX completion

so of market of concerned to the basis if on expecting. next very we're we're are in Some into going may and year-over-year, I we of XX% carry our guess out the a which I XXXX that expecting the plus expecting up less the year. the data first but we're industry over analysts, a association, quarterly some good for than year be quarter, reference that's we're

Edward Marshall

second be -- the you saw you half versus much would in And first a would 'XX stronger surprised half? you if

Kevin Longe

second than stronger I a would expect the first half half.

Edward Marshall

Okay. a was DynaEnergetics, was Dyna's in that about there seeing? anything on just And Is there step something while or happened a that quarter? litigation in much that run to lower in might saw talk do a change to wanted be rate. I I the you with to what we're else SG&A

Kevin Longe

$X.X believe quarter. I was the the in in DynaEnergetics litigation number million there in Well, third

that primarily we the programs but going investment of other do it's have down. forward, some have expense litigation they're step Some the -- a of changes little with to marketing in

Edward Marshall

and results somewhat control. this of And might fixed talk even also then cladding I be when about the you're this it. showing increasing of maybe a am in but I your Got basis? Maybe right SG&A what somewhat sales SG&A that cost, a SG&A think the fixed think kind of doing is kind fixed are can you a to about on

Kevin Longe

example of an 'XX, as I the gas investing the Well, and a our when about business excited our think in downturn both of flat. down into we the years, in over NobelClad and last went oil couple DynaEnergetics we're business kept kept drifted SG&A we the relatively in and businesses industry as SG&A

we of We treated team. invested that In health to also in it relatively in fact, in fixed that over and our belief business and up the of revenues we NobelClad SG&A our longer-term will and couple past SG&A pick people see frankly quite increased percentage start in based see NobelClad, as our the in down. investment you years on so come

Edward Marshall

Got it. just of question a clarification. point And final the

about you or for them anticipate think know QX I cash now. QX out duties Do accrued I curious? just the I

Kevin Longe

Cash out QX.

Michael Kuta

behind very happy us. we're add get to And issue that that may I

Edward Marshall

Of very much it. course. I Thanks guys. appreciate

Operator

question Stifel. Gengaro, Our question. with next your from proceed Please comes Stephen

Stephen Gengaro

A Thank mind. afternoon, Good couple you. things don't you if gentlemen.

you year-over-year the a we forward average side, price mentioned DynaEnergetics sequential that here? the on how that first outlook higher selling as or currently is release go comment press The Is in a or and the both -- comment was prices your

Kevin Longe

to It And pricing activity see bit or a and slows year-over-year. little seen pressure on is in we the as the starting both are quarter. sequential fourth some

we're the are of seeing important sales. is is who much selling so price system it we're the to on And to pricing most challenging our not component all that note -- on sales, component. not the at a compared selling system However, that the competitors if premium price

Stephen Gengaro

Can percentage you the DynaEnergetics' rough is give versus systems components? revenue, a of which

Michael Kuta

It's XX% systems. plus of

Stephen Gengaro

they side, the time acquisition [ph] think their Okay. to on This about would me compete system Guardian. revolves to that maybe enhance morning of one over seemed an your competitors the I on talked company ability made

that I change you have that how landscape think at sense could that for any Do [indiscernible] competitive Guardian. or bought and the all?

Kevin Longe

small Guardian is a company.

being the seeing small founder, half components was addressable market its perforating Ian a today that's part in setting the Its percentage in market switch respect we They used the of switch an of than a basically increase. those of quite Beckstead We're However, switch. greater addressable is more market. one years ago. the An and tools where bit. market more addressable the make

addressable on that looked behalf when area. at our And a so decision Guardian speak about they to and buy switch made DynaStage order our is of complete competitors in addressable our The good necessary, of the not system. so switch terms our versus this in compete DynaStage I but sufficient very with can't they we with feel and make investing clearly position system in

Stephen Gengaro

That's DynaEnergetics you three How the are color in business trend think then lawsuits will and three we those Great. useful in expenses finally the as for and 'XX? litigation, just recent the as about judgment.

Kevin Longe

our before expect it the legal but We to first to quarter hopeful XXXX. Germany trend we XXXX and significantly that can down expenses trial that have one in we resolve goes in more we're patent in defense

Stephen Gengaro

you, Great. Okay. Thank gentlemen.

Operator

Roth comes next with your from Our Please question Gerry question. Capital. proceed Sweeney,

Gerry Sweeney

Mike circle talking I the completions Obviously in afternoon, Thanks for curious more different as look we slowdown call. to you wanted as to my market. talk at their the the back Geoff. Kevin, what what taking and you're extrapolating am your Good customers guys you something about they're always what I market the than telling views is implying? to potentially because are, market, and to

Kevin Longe

keep fourth somewhat of quarter sense significantly a or but from in about XXXX. as in the anticipating we a activity just just was see it's we're Gerry view and very good we're prior this it year do on lot a is We temporary year situation the discussion me overall there but first, the a as a slowdown at a maybe XXXX that up and looking very is to good mind, --

Gerry Sweeney

point and weeks week they're at customers a well what if so it? be before, to or would Would Okay. X two customers exhausted had budgets system plan even order if How -- a some with they this so a today, -- they would say DynaStage use X drilling our your would but before? it of amount DynaStage we're us puts out QX, done go are our of order we're and schedule doing systems is set they wells, now, prepared? hey or two month even and on at this at budgets looking of for looking need

Kevin Longe

are majority the Our range to also guns are inventorying and an so advance. they rely or lead our customers them on not to they're efficient ability one and of very our the week serve times ordering and quickly in three so

fact and the guns of and the of capital time that is to components working In the and to focus DynaStage lead take shortens system one responsibility to we compared themselves, the buying it benefits the the on that that and on DynaEnergetics DMC. assembling moves

inventory. to to order more operate it's needs so customers enabling their much and and market And our in rather than efficiently demand

Gerry Sweeney

bit a so? sort visibility more more I little you they schedules, of And bit planning get if fill obviously a just certainly it's I drop what little they so to into but that were have completion ship, to their gave inside was you curious look actually as

Kevin Longe

and prefer make that we're we things sure our we're all doing people, inside their but we and to so business customers that want not trying to us partner to Well with to are be get things all we to all activity. to

the perforating However, guns. the to is our ordering of very close consumption

Gerry Sweeney

Okay.

else? budget a into as is does you year So next to also insight and give opposed that issue, confidence just potentially to just budget expended that this activity partnering not anything

Kevin Longe

very we confident feel Yes, XXXX. of in terms

Gerry Sweeney

Can board Just new changed the additional existing maybe how the regions talked either to on out looking still onboard to qualitatively or quarter-over-quarter I'll that remarks base in companies if of it. are even that and there expanding third Got base quantitatively get about are maybe and discuss there then looking you etcetera? much there an or companies idea how there penetration? much opportunity has question, market another it customers get to or companies leave customer so in how new demand is you quarter. even to prepared much

Kevin Longe

our when gun the that they is assured and redeploy a people customers assembly doing benefits of factory-assembled that to because they of performance capital other a and perforating we the system, have Well both the we're it's activities. one on operational to can bring the customer

that sure with place. those make is back part comes to resources have so that And our to they on put in a don't responsibility

And can not very we there's so what that bring than customers serve we careful more we've We to been can feel on. that more bring customers on properly. many

sure We the we're and excited needs to our also we explaining production it has product. and that at and see our company feel their we need need so this still timely time front ability and benefits that make to don't customer the when growing spend that very the about leave fashion business but growing, in empty-handed to opportunities we them it's the of that a they base in more meet we exploration

customers And me, excuse and into the roughly so brought part of on year. confidence going we more new the quarter, giving in third a us that's what's third quarter the fourth

Gerry Sweeney

then great. color. in and up, gets milling as forward Germany. main margins a TSA integrating that Got savings That's it. importing comes we And DynaEnergetics, from move the from in well in-house there's That's charges on or as board work good you're I ramped freighting think the as bringing on Blum cost are drivers

from may that still mentioned on gross I but had upwards just be the margins incorrect, XX% above you memory. think call. an my getting I two items? think that's I those last opportunity Is

Kevin Longe

Very much so.

that Our XX% business above gross objective the margins and management are for team. an

new our added TSA addressed charge week production. actually there of being inefficiencies are We three and Texas. as with this in starting shaped Blum, the dissipate to those facility production All in expect immediately. are manufacturing get our assembly We capacity both

the production the accomplishments in of assembly so capacity. addition other our the quarter, for new completed to we've And

Gerry Sweeney

appreciate very thanks in Got it. I'll jump it. back Greatly much. queue,

Operator

Edward with Sidoti Company. next from Marshall, question Instructions] comes Please & your [Operator Our question. proceed

Edward Marshall

variance follow-ups trying I two Just thought just for? about, relatively why about a curious prepare are process I with there? am the quarter quick may. to as -- the The you so fourth if through just am curious gap what just October I of the what wide shows wide to XX%. What's is wide

Kevin Longe

terms revenue? in of Gap

Edward Marshall

The fourth in $X.XX $X.XX quarter. a earnings to of the math range in implies

range you quarter? $X.XX to of considering the wide, coming So a know about XX% $X.XX just fourth I trying variance. kind on understand already so why much am pretty for what's a

Kevin Longe

normal side, DynaEnergetics Yeah Ed, than the the range certainly on that volume business. because a on wider in we put just on

Edward Marshall

then seeing do been taking your I price pricing you elements pressures? your a you of that are recently. any or competitors, And the or Okay. curious saying equipment? expect know are that there are any that the been that unfavorable. you customers lot you've Is if in you I'm price any hear price have from affecting from market

Kevin Longe

selling of and our for product customers. our where that and to were competitors creates selling we it so value apples-to-orange the majority is bit it's comparison an other premium a over -- for the Again than a less system our but of little components our are and objective alternatives

ours proposition economic we them against limit is and is service to the buying in a supply-chain and and is that will if component company on compete a keeps of an component the can tolerate cost service end-user the versus an whose kind company differential said you And marketplace. upper assembling is comparison. Having so what value proposition a of that, kind a that

Edward Marshall

first of Guardian a kind brought your your curious, a Is closer the was you And switch a offerings? get what the detonator and competitor that. an it. Got meaningful Does turning I to little switch, earlier of Just between was two the addressable bit addressable thought switch. to up about bring there this sense difference question produce? I'm

Kevin Longe

in There is offerings. the difference a significant

itself, It key straight digital a fire. the think Guardian packaged a in switch on a or I I've voltage which It's way the the integrated a with frequencies it current, switch. board requires circuit XX includes Version detonator switch DynaSelect, that We're is that don't seen microchip in detonator, is straight Our includes the addressable detonator radio X and a marketplace. saved. to

two. of So between world there's difference the a

Edward Marshall

to kind the gap the one, offerings, between what of this between any go last offer one what "narrowing you defensive is somewhat in and towards way or And they offer?" aggressive two

Kevin Longe

thought We're of pleased again move technology, we frankly they system into and has price more that a a if value them quite for to part expand welcome to marketplace. companies see can higher higher help system systems, the the add, and the process component-driven market higher

Edward Marshall

appreciate I it. much. it guys. very Got Thanks

Operator

comes question from Aria proceed next Cole Our with your question. Please Cole, Capital.

Aria Cole

call your And question with the have. with DynaEnergetics Thank due to the your their on with the a again, One us even your innovation update in products on and products you this maybe customers about us innovation, side you. version we products next-generation an introducing higher would diverse even the is provide increased appreciate result that give reason doing in clearly functionality of returns your leaders this for Can wells? roadmap today. possibly industry use you you in of for

Kevin Longe

I product To years Ian give is you roadmaps improvements. Graves, we've very last that increased two market and IP led component it's It's to the proud measure and than strong they coupled McNelis the and roadmaps, years that insight Liam [indiscernible], last are its you portfolio a the and technology both doubled more probably the DynaEnergetics introduction best quadrupled have of team with related in four in by our and I'm give can significantly. very -- they

we in this during over one new of somebody pony. as we an downturn technologies. capability that years we're the us various improvements intact in couple I think We in versions down reasons I SG&A call of to that a we're is in market SG&A, and for don't version those of in that DynaStage over the and are it's product of our many one the earlier asked want on invested DynaSelect iterations our but multigenerational to important -- trick on not it's our share it's kept next This of earlier a and preannounce to is the organizational there's the coming one continue several we mentioned invest them, system years.

Aria Cole

been understand better could just why essence, reduced I activity just bit new longer in maybe as product better you on understand Okay. opened, on there's but terms wanted than in DynaEnergetics, this customers been of prior follow-up sales capacity sequentially in -- at in product for a facilities boosted. to the lot before shipped and bit DynaEnergetics Thank just little couple U.S. new are question, the weeks that you've first declining mentioned least customers in a in in completions, of as have constrained And the calls manufacturing you or to I'm customers demand being lot a for quarter the terms just spite new deliver. time? here trying you. of of trying understand one hick-up has short-term fact more months a you December the of your bringing maybe you're I'm

Kevin Longe

customers the coming question. constrained and from that good will timing onboarding education very us gun with over training is and fourth that new a We do years assembly is improve. our to the customers this moved for effort and come. a It's quarter and fast to and just hopefully this first the are we benefit to a we how and Part quarter week capacity has onboard facility year for capacity of of really literally capacity the starting past with our

Aria Cole

you. Best Great. Well luck. of it. thank Got

Kevin Longe

you. Thank

Operator

Please Stifel. Gengaro, Stephen from comes question next your question. with proceed Our

Stephen Gengaro

and a and we has issues the about not growth relative quarter or in think rate Gentlemen, would and can revenue but if next growth you the But growth follow-up Thank year at we activity in got not, fourth about year-end system you see you. completions? lot activity completion the of sure XXXX your always grow you the seasonality and on shed think if obviously in look this as at one headwinds your Permian general, from you completion I'm DynaEnergetics how light in look to oilfield. or in

Kevin Longe

-- We finishing year. we're yet focused have on this not

We We than would have that our yet next will grow rate. revenue certainly in hope guidance the not for our approach system prepared completion year. faster

Stephen Gengaro

grown and rapidly taken somebody you've think Because from That's I and you've about share as Okay. helpful. right. obviously

changing but market forward? imagine would about to the So curious don't or that? seen growth was of of go growth as sort I how I thought the curious you had it would overall as is all you rate signs we rate, outpace there I think just if was any continue at

Kevin Longe

We don't see it.

competition, have smart a they so are a that more would involved but we it's quite segment with, just in lead and we're pursuing but interested am We and competitors. I we've time, this that it's sure on got over premium product. selling market the that completions feel we expect not this we're systems additional also

our expect faster. we revenues to So grow

Stephen Gengaro

Thank would much. I you agree. very

Operator

question. James Century with Our Brilliant, Management. comes proceed from next question Please your

James Brilliant

Hi guys.

Kevin Longe

Hi Jim.

James Brilliant

the So if we between were this about Wall fact setting article in $XX. Journal their price expected a when there think about think time year of last crude I EMP budgets, talking Street guys is being somewhere $XX and

of early was blew process. crude $XX at budgets pretty in through that with the So their XXXX and coming they kind into expectation the

got left now get so here are but you cash of constrained, I would to here we've So we it's anything the on with the oil on their kind spend budgets $XX, the base $XX with hearing and Are inability and your beyond are we customer in flows yet XXXX hedging. based increase from budgets be raised to on crude budgets expected the into higher current that based price? XXXX, expect going

Kevin Longe

oil forward. be budget fourth -- I volatility a hearing a gas optimism we're general in seeing expect this going to the that price in and in counterintuitive going larger the actually their of helps think greater unconventional that budgets 'XX is we're quarter way, the to 'XX versus get land-based in what are of a that We and share

that to going it's quite a feel good we be confident So year.

James Brilliant

Okay.

you mentioned think growth. so XX% about estimated industry the expectation market of And is I if the so -- market earlier, growth

Kevin Longe

Correct.

James Brilliant

Okay.

Kevin Longe

For land-based unconventional.

James Brilliant

Okay.

beyond it of So the you're actually budget get one rest the fixed do issue Permian happens the the -- but is you the that'll side with there throughout just since the to got year, on Permian increases.

for better it So half first you XXXX, you the year, wouldn't any in do coming the first -- reason of be than of be half would see XXXX? why the

Kevin Longe

to. I would it expect

James Brilliant

than better be growth? Would year-over-year. to it except expect would You year-over-year you

Kevin Longe

we've first number the in of exceeds far projected the first compared sold to the quarter, the fourth of the systems in that number In were we fourth quarter. in the systems perforating or quarter sold perforating quarter

James Brilliant

while what clarify see issues quarter to of some because first Just in that's the you're your may for the business? industry a still not Permian expecting weaker

Kevin Longe

business. our for Not

James Brilliant

are then got new Great. a that, you industry many, the for about that than And NobelClad talked cash have work? been many you years. higher we Okay. on bid Are since in haven't seeing in funnel change they flows significantly project

Kevin Longe

the also engineering We're seeing We're going we're a next the and firms do downstream improve activity. work in relatively pickup also. that a backlogs code for is confident year that that seeing of so capacity to pickup business in feeling petrochemical the

James Brilliant

Going significant change how be? together guess, I can the

Kevin Longe

their are Geoff and heads. Mike shaking

So to now. with go right no I'll have for

James Brilliant

Mike got the maybe you way room. that get no. you Geoff, can out answer of to and

Okay, at but think year you're questions around one see too cost shouldn't the cost of we looking inflationary earlier bases a was better the I and there and much pressure.

expect you'd better hope. margins would So some I

Kevin Longe

supply I of our going be I going own control would into the and new more chain we're and hope to year.

James Brilliant

$XX for Okay. what year million, think to is the going be? expense that And litigation I cumulatively then was it's around

Kevin Longe

the in be got $X range. $X million probably million It's to

James Brilliant

Okay.

for rate a next year what's run So good then?

Kevin Longe

-- of half conservatively of that? third that probably to half It's

James Brilliant

assembly lines, Okay. with the you've Blum, additions added added the TSA then And in lines. you've

I put in. was I we are think Where centers machine XX along if that? there remember correctly

Kevin Longe

gun to all to that with have capacity something machining XX do not TSAs towards directed be and centers, we more installed. six were our There Okay. had

James Brilliant

you around the there? was And had that what investment TSA, the Okay.

Kevin Longe

machines. approximately be million $XX would CapEx the The TSA for

James Brilliant

in issues are all so And the and first to house cost? that had of the TSA in you higher issues with supply able Okay. now have half chain year that you the the bring we

Kevin Longe

inventory don't at see quarter a that inventory deplete still We quarter, to them due for capacity on any the and chain expect first to out purchased through we is starting working supply value the some we with longer additional what that but but will have a coming improvement TSAs in margin the issues stream. this we go we're can higher than and to make

James Brilliant

basis? the in and between What outside? on apples-to-apples having What is an buy delta that to sourcing

Kevin Longe

in points A gross margin. couple XXX basis

James Brilliant

Great it. appreciate me. for all quarter. I That's Okay. Thanks guys.

Kevin Longe

Thank you.

Operator

end and reached gentlemen, have question-and-answer we Ladies of the session. the

Kevin Now back call to for closing turn I would remarks. Long to like the

Kevin Longe

forward for when We everybody we in joining quarter you. report Xst fourth to Thank our of us you our talking year-end. year the after XXXX with the today. you, look Thank

Operator

This conference. concludes today's

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

DMC Global (BOOM) 25 Oct 182018 Q3 Earnings call transcript