BOOM - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen, and welcome to your DMC Global Third Quarter Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to Geoff High, VP of Investor Relations. Sir, the floor is yours.

Geoff High

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

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

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

Kevin Longe

afternoon that results end reported Oilfield Geoff DMC third shipments well and you, Products driven business, by sales Composite were our good of at improved our than business. customer Metals as quarter DynaEnergetics, Thank at expected better demand high our everyone. guidance. the as exceeded NobelClad, The

customer Tuesday a and field The the of placed XXX service guns order the were The American a American which of components. off improvement a quarter North performed received North base. our to delivered site use deployed. field pushed in Our DynaEnergetics a wellsite to the second were perforating E&P morning, very already our business this orders out evening call DS the customer was was quarter strong well second DS face the E&P to needs that around reflects in our emergency DynaEnergetics and using and leading service completions very a to thousand been demonstrating that from DS delivered the systems of and committed efforts are systems, DynaEnergetics months enabling to efforts markets pleased in increasing the company with who delays very assembled improvement demand. albeit not DynaEnergetics, within North wellsite operations customer's a an and DS North XXX% company intensity systems and gas assembled to for an several have the jam American its quality systems oil service the end in improve of have invested more model. companies and quarter employees from variety project DS challenging of following already performance customers respond third switch at returns align The coupled and systems. NobelClad. America week just-in-time meeting of at activity in their after and the has to people benefited weak on Performance-Assured capital. to well a a just world global exceptionally to increase we also the inventory. with the in the enable of less time The over a They well our deploying sequential customers capital reduce revenue, in led of coming international infrastructure fewer quickly pandemic, require systems and Factory-Assembled, market DynaEnergetics operators and with from sales. for low

programs systems In the performance improves customers' addition, of the and of their the performance our and wells. completion effectiveness safety, our reliability of

completions priced the closer inventory The industry market of back to balance. improvement low improvement in activity will of We by well the behind that we are are We the and the bottom reduction the accelerated be us third cautiously through in is being quarter. and of end year. the the sustained in during saw increase modest market believe is encouraged this the optimistic has the

overhang We to lead DS the improved be expect for demand during the half our will next systems. And of inventory should this first depleted year.

a invest markets. establish particularly during line margins is year. and front, quarter COVID-XX pursuing to of volatility and opportunities deliver core markets. decline within international development pandemic. continues in improved despite in metal the and customer continues our in inherent steady of anticipate and has On the industries. order broad related base NobelClad processing, seasonal alternative profit energy we it large results order sales helped to the improved NobelClad's new the transportation loyal and of applications given industrial NobelClad unique beginning volume This top the a fourth delays several and valuable stable composite to energy impact several early next is an a know-how range production the end

technologies. global and During order resulted the of a costs resins. in corrosive NobelClad first being we clad customers' life high from quarter plates used industry. the maintenance to In our temperatures $XX customer of expanding undrawn call or plates available. over global wood This program. engineered credit third Details to Under it opportunities market Antoine and shipped supplement the now equivalents for are Mike strengthened which our products Total reduce filed has program and third and the the for third its and which program presses, President will by exposed of for a about the the two capital, potential July, stock glues an include developed NobelClad September investments optimistic proceeds ended turn the NobelClad to SEC from review we and are further efforts in during million. been and availability metal of purposes, prospectus The application supplement. the for facility use financial are of strong acumen We has sell to and aggregate our our years cash time-to-time extend wood sheet proceeds prospectus working lead offering to to general may a at-the-market debt corporate Nobili plan our or was I'll and today the we XX during of the to at composite are was quarter industry. with the with NobelClad. cash to the We engineered may debt million instrumental performance. of and expertise establish quarter $XX his plates. in million with Earlier up he wood years period shares to $XX.X Antoine balance and fully XX is million. businesses, repayment in common additional Mike? $XX acquisitions business to promoted revolving

Mike Kuta

Thanks, Kevin.

$XX.X of reported same XX% $XX.X quarter up last million, the quarter XX% a down up and third versus year's sequentially XX% and versus quarter year. decline sales sales Third third DynaEnergetics of were sequentially quarter. million, last XX%

at quarter. of XX% third in were primarily year the mentioned, year-over-year sales versus XX% quarter As quarter and quarter a $XX.X sequentially XXXX XX% international lower margin last which in DynaEnergetics sequentially XXXX. up X% the and year's at and and The by quarter. third XX% to Kevin order increased decline million, NobelClad decline last North in average in second to America XXX% in third gross of XX% offset partially DynaEnergetics. NobelClad year prices relates due timing. Sales from decline versus reported sales XXXX down the second X% reported selling from of sales margin third second up quarter XX%, XX% the gross quarter third ago XX% Consolidated X% down the year's of third in versus gross last in quarter. from quarter the was from quarter margin third and was the

adjusted X% Looking income We ago at $XXX,XXX charges. of quarter quarter. our second declined XX% third SG&A versus restructuring operating consolidated $XX.X year of consolidated quarter reported third expenses, million million, versus and excludes $X.X which the the in

$X.X ended EBITDA the third income $X reported while compared $X.XX million. diluted of million EBITDA diluted adjusted third of end of $XX.X last year's $X.XX the $X.X at second last versus net adjusted $X.X $X.X Third adjusted net net reported in third adjusted cash as net quarter. year's NobelClad million per quarter. income $XX.X DynaEnergetics third $XX.X per million was of million share quarter. versus million with million quarter of cash the quarter with quarter was We million or of Adjusted or in share EBITDA

expected At quarter sales business $XX DynaEnergetics to million million the to $XX in $XX is in versus quarter. guidance, range million reported third in sales report range to be expected at fourth million $XX to $XX.X the $XX.X Looking million of XXXX level, the quarter. are third versus the reported million the of XXXX in

America in North demand third quarter be expect modestly demand. to We above

a versus gross a range in are versus expect However, million the in quarter. third to reported $XX NobelClad we a do seasonality. orders XX% anticipate of up third Consolidated quarter. margin drop XX% sales is in to XXXX. in $XX.X international XXXX due $XX in the in back We the activity to range million expected XX% expected of pick to early international million

selling, expenditures DynaEnergetics. $X range $XX versus million be With $XXX,XXX. versus expected project to due international is expected third expected is $XXX,XXX decline capital is the $X to $X that, be of expense general expected and and sequential is administrative $XXX,XXX. quarter expected to decline million at $XX.X at this approximately last quarter in approximately orders be the Interest expense to expect We while reported amortization mix million NobelClad expense Fourth are to a to over range quarter. Adjusted of million. is turn back in call quarter Kevin. range the a a EBITDA million $X million in in to $X Fourth of XXXX in million I'll the to

Kevin Longe

Thanks, Mike.

to strong true for in capitalize a innovative in on value time our their innovative returns long-term customers strategy value stay have on and and industries generate expected demand. improvement the both difficult that and well-positioned our for is very DynaEnergetics the a respective navigated an diversified DMC leadership focused position products us have customers. that shareholders. solutions their have and superior are industry for NobelClad enabling businesses of portfolio We financial positions in create established in of our our to building developed

outcome thank questions. that, employees the want work and DMC creativity hard I of and With to and dedication. of are entire ready again take their are to accomplishments for team we Our the efforts the our

Operator

ahead. Thank [Operator And Please question Tommy you. from we'll Stephens. with our go Instructions] first Moll take

Tommy Moll

had referenced taking want start business. it Kevin, hearing pricing part quarters of correctly correctly, that can Am I I wanted middle you or that the the Good about the that us through afternoon inventory the but I comments with probably that kind better you've thanks your and get dynamic? to that's your my recent still three kind market? the of out if gotten am pricing I of visibility think is be weeks there? just And DynaEnergetics and have that to margins while questions. being hold maybe Has to able trying you on more about worse? out? I'm next some get an on you're run -- overhang even up really might looking hearing inventory to at inventory before is it And for XXXX, to balance to to you you once visibility may inflicting in any we actually industry to balance for in give year Should that be what for

Kevin Longe

it's bit to Yes, of overhang. mentioned impact consumed XXXX the probably up. I balance, I quarter, first wouldn't that is we a and felt all the is so little first equally. that the before but more before there it's middle half balance. Tommy. the is pulled in It's of going inventory say companies an That of not

Some inventory will others get longer. of rid will faster, take their

for likely And of really would probably it would inventory. the out. most be quarter majority last six-month the of is first indicate But so the to the I come the

down. at. difficult going first for pricing, very improve. pricing, inventory or We It'd to we'll see at it's pricing to do others then don't it start of inventory We expect We come seeing And improve it recover. here. in stabilized. we demand hopefully the marketplace. in starting need quarter excess is see stay to to from -- And down Regarding be go it's down where think where to the from pricing the

guiding would So where of coming we sit to yet recover. to to XXXX expect but XXXX, the pricing see second in back start third now. quarter we the it not quarter We're we for

Tommy Moll

Okay, thank DynaEnergetics to you. margins. That's on second about, helpful context ask wanted which the is point I and leads to

compressed. to downturn the be of phenomenal You've which territory of what a margins have peers resiliency job lot the But and through into sure positive they're the the still able to well this a would done showing be above there show. of

margin incremental or Again us you first through next to frame opportunity in of environment be an year much year; of next taken the a this imagine in year. for out come that's activity back where as and kind would how year industry improving able been part we assuming, are just as comes improving through first So reasonable? scenario levels that's let's of cost next work part the the we're of the into that's we

Kevin Longe

Yes. business were a activity-driven in costs. costs lot our fortunate that Tommy, out were we of a the came position that of

our costs year very minimal, good business variable competition high have restructurings and proud that and than relatively the We particularly in the relative team. other when model, others have costs our based a activity and we've our was of our And low restructured cost market fixed this industry. been the to

of two-thirds overheads, contribution and we 'XX up we NobelClad back like expansion actually in picks our the volume back adding our of little even don't add at we activity so would in and very strong cost should But pricing. costs would absorption the from fixed our be volumes. it to As back the kind our -- is roughly see will on where in any margin model. SG&A little if DynaEnergetics. variable getting not margins. we'll cost ourselves back including And add see an margins Roughly here one-third low in be to It's the we

Tommy Moll

That's helpful turn back. Kevin. it you. Thank I'll

Operator

And Please Taylor Pickering our next Zurcher question with ahead. go comes Tudor from and.

Taylor Zurcher

Hey, afternoon. good thanks, and

First some to well on between it's question there. effort frac an seems costs. It up the save of E&Ps is are to elongate like stages, looking these or distance designs space many out really new

if perf are seeing count potential lower you well all that? on margin counts? shoots kind are more up it then, on stage gun the one, summing to seeing stage of so And per you are trends you count And continue So increase offset average? seeing are clusters reduce those

Kevin Longe

perforating but really on their spacing and and part and the doesn't laterals the does moving save completion it -- on is it, the We per are. it adds add of XX% spacing not longer is with year up more. of closer In We perforating closer or actually total, the the charges. it drilling necessarily more perforation the guns to lateral roughly this but moving needle see

Taylor Zurcher

it. got Okay,

flattish American in America Okay. basically of sort North Embedded towards strong. year-end in was also Dyna. seen how years sales much and of for you've are about is guiding the QX in we we And in quarter then guidance than past, first for North you falloff North the you QX? think such at that exceptionally North last any When the part America or towards sharp think you're performance QX, Dyna, saw that in the the about America quarter should year guidance, that in like in better last contemplating

Kevin Longe

and fall We cut in that I with off don't quarter budget around most of to right anticipate the the do a we in it the this exhaustion fourth exhaustion year fall fourth off. were budgets that slowdown into The holidays. of year the some -- won't second typically and has the But you will can activity quarter we're those this now that assure think we continue budget the that at will that quarter. so see

Taylor Zurcher

Understood.

Kevin Longe

Yes.

Taylor Zurcher

guys. Okay, got I it. That's Thanks all had.

Kevin Longe

thank Okay, you.

Operator

go ahead. And our next with Stephen Stifel. question Gengaro Please comes from

Stephen Gengaro

Thank afternoon, you. Good guys.

But the ramp, third I talked conservatism So, the you wrong assumption. some you fact, some just October could it quarter saw the on third quarter? seasonal North like monthly I was given than this fourth little. correct? feels maybe assume, in was to us if just that the you in I see if assume quarter, prior on fall. to a I building just up process or give any is and you is thought in wanted question, improvements following about And trying was and just America third if months see responded in the just that but the know quarter I better a throughout

Mike Kuta

third XX% in up is actually quarter in North That's think what line top international of or and Mike. Americas back the we're I the quarter we our Stephen. downturn the correct. off seeing range seasonal in in Yes, up America the fourth for on that a you're will seeing on DynaEnergetics early This is probably mean, business business the XXXX. pick

Stephen Gengaro

makes sense. makes That that

the year, to in what as about by expected a think the The were systems. components of gain an about -- for addressed overhang I back one hurt it you systems market you around us I is at to and but earlier, this kind is response classify Tommy's think the earlier the share a can sense feels other -- But that question sooner point? third I shift this you call on too that share of customer. quarter, give or you seeing maybe that are over than question integrated integrated anecdote provided you the things inventory statement strong a like you And was this

Kevin Longe

component too price not statement the were chose price quarter, give not of to and at it's responsibly in our No, strong maintain chase we I look for when order second we low and willing business that to to shareholders. share a think Stephen our value products the up we

have and our moved to support in to compete We come their down it they can't avoid in we to need service because customers We business who've marketplace. the price. systems our have

we that's that people transactional a so in having think operations see operations on is market in quick that into looking of buying we buying on to people detonator system, system and the the they're not having are we're but the And together of of less we're are We're to people easy, build ecosystem based getting that work use happened into putting price in endeavor. wiring haven't quarter moved coming the up on the starting and down to We're got a well. all tied and system -- or components, is, designed intensity to products. -- your factory integrated guns starting no at in and down the move lower when third third in well the to from field the And components, beneficial. components, prices and the our where really putting the seeing the components back down capital is older between the wiring the I field the our fast them where And the based in having in the better and a and the dissatisfaction perforating model continuing go fourth the perforating quality win those and are share wins focused assembling capital-intensive them whole cost people-intensive and together, the fourth. the what's a of capital the quality that assembled, quarter fewer

Stephen Gengaro

Thank you. helpful That's commentary. Great. very

Operator

[Operator Instructions] Gerry Please with ROTH go And ahead. we'll Capital. move next to Sweeney

Gerard Sweeney

for my little I of talk call. good some to Kevin, that afternoon, Thanks products. the Geoff. newer taking Mike, Trinity, see upon wanted the NLine Hey, built original DynaStage. a about DS I

in Just sort of some are And much bringing I'm at get trying What to that? customers term on curious older seeing new they as to to adoption, or uptake been in new driving a new investing DynaStage customers market they new prolific obviously you've is technology. level? how you're are longer along

I out the we keeping translate You're the pedal in the all assume does further How into down, marketing, curve? look market little this etc. a bit on as share

Kevin Longe

an in accuracy, the increase also the excel the seeing in been channel consistency created. the both will, if third the of and a greater be focus also of perforations being perforations very you and line our seems and we and successful has the on in consistency product and accuracy the that's directional We're orientation NLine to perforating quarter. There

is quarter saw and quickly, I able just to week, this would slower complementary a order it. NLine, to we able adopted recent so has we well we've use the and the we expect to Trinity in probably to are in being little that Trinity The and and the NLine, pickup mentioned our in marketplace. a the system what very very feedback where seen the the relative company earlier E&P been embraced we respond from service So but were

Gerard Sweeney

period the my for -- just But for not Newcrest. then, actually a orders that or applications. at pretty on correct And with from an a any And you sizable I front? mining was worked there's memory what's idea also if and applications of some Newcrest. time think Any mean, an serves there on that's provide profile. -- extended margin I front you in look assuming happening opportunity can type How that of it's that? other tasty mining we on update on I'm potential

Kevin Longe

so you are by results industry and mining relatively it's pace of in niche still very in early But NobelClad we're application for very the moving a they're strong stages it's decent the we temperature a have it the it's it customer a be is Yes, high part new and it'd think But only so quarter. adopted moving overall that operations mining industry. being very mining within our it's at in out. just product and of third a -- small the the And sized the a seen would has application margins. that

And really so NobelClad that's not driving what's yet.

to XXXX that be expect XXXX. We stronger in and

Gerard Sweeney

it. Got

me. it. it I Thank from that's you. Okay, appreciate

Operator

from And Galinko Sidoti. our go next Please question ahead. comes Matt with

Matthew Galinko

sort good about you about afternoon. question. market development that? and you Thanks how I my just for taking about on of order. timing think for sounds got NobelClad. from an do think how guess, It initial curious follow-on Hi, you building wood engineered like and But

Kevin Longe

What's interesting of the very large billions it's wood marketplace, of XXs market. dollars a engineered about

product possibly $XX wood. billion there XX companies think globally revenue make and that engineered approximately is I in

by work -- to the with the and applications basically and and service do we operational costs so maintenance their the that lengthening their have operational to that costs developed the we've their lower adoptions improve presses in And plates. they

out is coming other orders to just currently this right We've value at beginning. it's and very for these in worked so marketing the that companies fairly a from we're And strong and with us, a got we customer proposition.

that support more to and also industry the in it to as 'XX, pick up 'XX exist today. just expect that's we So

Matthew Galinko

Got you. it. Thank

Operator

And from with ahead. a we question have Please Stephen go Gengaro Stifel. follow-up

Stephen Gengaro

somebody I internally just Schlumberger that is want would spin and with system sense a be who the to my thing release. Liberty see and up address. One in more any Do with the transaction to you more Thanks. opportunity developed Kevin, one be

Schlumberger competitive the much technology up? leader Is something integrated has that sure but side, You're a Is bit that in game the kind landscape? of the a doing truly opportunity potential little think so on come as that the perf getting business a with they're I'm on about may not a of be the out guns. press we

Kevin Longe

I if of getting Schlumberger Well, don't know is perforating. out

I moved move their will units over or Liberty. think business they've to of one

market it the we Schlumberger and we market like both a selling would from be systems. supply And neutral so and Liberty view broader we on as for standpoint, would our focused

Stephen Gengaro

Okay, you. thank

Operator

And ahead. we Century. have Brilliant Please do a Jim go question from with

Jim Brilliant

Afternoon, guys. How you? are

Kevin Longe

Yes. Hi, Jim.

Jim Brilliant

Kevin, 'XX the the if look bit back as a and products roll we at of 'XX kind developed calendar new you little in and more offerings.

You integrated from with the certainly yourself separated pack the system.

from Now got we But in forward get we've is got characterize inventory maybe and forward in there than perforating this and a also what not going service the do side? the market side front excess but a you past? competitive the we how from see just downturn going and E&P What through. the you side, had to the different that from would market the

Kevin Longe

the technology company company kind attrition the to the the right Well, an of and consolidation is at there the capital I and lower E&P consolidation level market or witnessing think at of the lower is expect just would witnessing to integrated and intensity compelling intensity what a particularly I component level and we service ignore. service and is we're people companies, for lower equipment now E&P too think be for the system

a integrated manufacturing vertically assembling going it's that or that service think would company make the wireline don't side to I be capabilities. have so basic smaller doesn't mostly the impact equipment and you component from to sense manufacturers components it And

Jim Brilliant

issue? that having having a of issue get up And going if problems I is of that industry. Was is do Yes, to ramp dynamics is business is lot how now What guess they're the are picked what slow that about that getting it with you causing the but a field field a time assembled? field that in a not in to ramp, a kind that industry slow-time? in field they fact are in at product the the assembled the problems it's in assembly. is, it labor me a The problems or interesting can't I'm to excited overly eventual was from competitor relatively

Kevin Longe

lot projects of a expertise coming aren't is coordination And a the difficult the and particular considered. perforating case is requires with in that were it kind assembling different there the out in guns products designed and components it Well, so capacity more size chain the together necessarily people process. of that a for and also and for field of supply being go requires industry of to Yes. all this the people of

And so for all together there where to attrition of very is a consolidation, market come is difficult. reduction force in in and that

just And I our the and because were model our we of benefited business feel want that of so we products. integration get don't to into.

Jim Brilliant

up still to the So and think you different there assembled is changes But there say of and the because back coming were this you they XXXX, are market now same there something field people something people all ramping that got in downturn up out different had businesses. those than still things, that? Is when nonetheless, ramped industry that?

Kevin Longe

Yes. Margins lower. are

is and that completion, think down, you working be where integrated of that's have when do first can to to critical larger completion going to are at inefficient may appear good you at are down some the a every margins you are be when and savings higher margins is kind and really competitors volume also to what get so down that on but this And I of favor environment systems. you and DynaEnergetics lower, be its

Jim Brilliant

perforating and in energetics? Are Are been that products in beyond various moving areas. various then at? you're new there guns and terms And looking several contemplating of product degrees you things roadmap, introducing other Okay. you've

Kevin Longe

second Yes, beginning of I mean, well, quarter the a the third. lot of the in -- new we and introduced products late several

majority different new on us with which of been terms setting offering. a that and in the a to The and which market total setting tool we've out safety needle and We systems tool, extensive a quite the released has doesn't of for the It the by a quick have portfolio available our size. tool were lot quarter. fourth product two of And lines number perforating us us. new of in adoption testing an introduced product terms that introductions have we're We interest the more ballistic is the the seeing out a third increases setting quarter in about stronger to of a XX% performance building frankly, have product designed completions. come that just our product we've lot the our tool makes doing tool, and we coming to those move benefits out of types system strong real enables in of we're going and marketplace. around of perforating perforating a did feel and That so in of market our

associated Beyond on we're lower an lower completions in. and DynaEnergetics products completions in interest have obviously we would with focused the that,

However, market also, only few the those terms improving are on our focused and there can own to and those bring of between. our proposition customers value adding we in in value we're for and something that far

Jim Brilliant

I last way your particularly next increased then may one along of And budgeting look But planned like year. efficiency? anything Okay. CapEx it any the know, there early be what's question, next for And for is year.

Kevin Longe

this year, the improve stages dramatically. Yes, would we're start demand for spending early modest budgeting in spending and we We margins be just CapEx until that our expect range of the year. we're see in next to to

Jim Brilliant

I guys. it. thanks Okay, appreciate

Operator

With no further appear to there that questions. be

Longe Kevin I'll to it remarks. So back over concluding turn any for

Kevin Longe

earnings February. nice the and pleased joining that hope will with And you environment. be would are be well for to XXXX put talking this say doing think have in call Just Thank will and record in it conference the XXXX we to forward you. time very an to next books. in you and colleagues look and And the we'll today your like I'm that families thank everybody I difficult to call

Operator

conclude have We this your Please today's day. conference and time lines does attendance. that a And disconnect your appreciate call. great at

DMC Global (BOOM) 22 Oct 202020 Q3 Earnings call transcript